Bitcoin Contract - Preventing Bitcoin from being stolen

The Bitcoin Contract is a new effort in the defense of Bitcoin theft that promises to turn the tables on Bitcoin thieves. Developed by Professor Emin of Cornell University, the contract exhibits features of Bitcoin vaults and poison transactions, thus thwarting any attempt to steal Bitcoin.

Do we remember Mt Gox? It was the Pompeii of the Bitcoin market, and it almost wiped out the cryptocurrency. If you don’t know, Mt Gox was a Japanese Bitcoin exchange that was the largest Bitcoin trader in the world in 2013. Soon after, the exchange shut down, claiming that their Bitcoin reserves were stolen by hackers. Investigators are still trying to figure out what happened to 650,000 of the 850,000 Bitcoins that were allegedly stolen from the exchange.

Since the Mt Gox tragedy, there have been several thefts of Bitcoin from Bitcoin wallets, various Bitcoin exchanges, and Bitcoin wallet providers. Bitcoin has become a currency of interest to many hackers for a variety of reasons. Because of its anonymity, the whereabouts of this digital currency are not easy to track. Although Bitcoin transactions are recorded in real time on the blockchain, it takes a lot of time and resources to find the true identity of the owner through the wallet address. It is even more difficult if you use legitimate proxy and VPN services.

In addition, once a Bitcoin transaction is successfully executed, it cannot be reversed unless the recipient manually authorizes its wallet. Therefore, once the hacker transfers Bitcoin from the victim's wallet, the victim has no way to ask for it back. At least it is impossible under current conditions. However, according to Professor Emin Gun Sirer's plan, things may change soon. Professor Emin from Cornell University has created a library by using available scripts in the existing Bitcoin protocol. The library can prevent Bitcoin owners from losing their Bitcoins and help them recover stolen Bitcoins. This library will become the ultimate defense against Bitcoin theft.

Bitcoin Contract Library and Poison Transactions

The new library developed by Cornell professors is called Convent, and it creates special transactions using built-in Bitcoin scripts. By using this special transaction protocol, users can securely transfer their bitcoins to a vault for safekeeping. This Convent vault is similar to a regular Bitcoin vault with a recovery key. However, unlike traditional Bitcoin vaults, this vault is a savings account, not a storage locker. All bitcoins in the Convent vault are marked by this protocol. In this way, all bitcoins spent from this vault can be recovered immediately through the blockchain. In addition, users can destroy stolen bitcoins in case his or her Bitcoin vault and recovery key are stolen at the same time.

By default, the vault delays transactions by enforcing a waiting period, which gives Bitcoin holders ample time to take remedial measures to prevent unauthorized transactions. Bitcoin holders can block upcoming Bitcoin transfers from the vault by using the recovery key. Users can use this mechanism to prevent hackers from trying to transfer funds. In the worst case scenario, when the hacker has both the vault password and the recovery key, the user can choose to initiate a poison transaction, which is to remove the blocks of stolen Bitcoins, and then repeat this deceptive method over and over again. Eventually, the blockchain will detect and treat it as a fraudulent transaction, and the Bitcoin block involved will be permanently disabled.

The Bitcoin contract developed by Professor Emin also uses Bitcoin NG script, which is likely to become a solution to prevent Bitcoin theft. Once the solution is implemented to prevent Bitcoin theft, Bitcoin companies and wallets will be greatly reduced from being attacked by hackers.

Original article: http://www.altcointoday.com/bitcoin-theft-defense/
Author: Gautham
Compiled by: Kyle
Source (translation): Babbitt Information (http://www.8btc.com/bitcoin-convenant-theft-defense‎)