New Secure Approach to Backup Cryptocurrency Wallets

Abstract

Bitcoin and other cryptocurrencies have become popular and motivate more hackers to steal digital funds. Users protect their private keys using crypto wallets to keep their funds safe from hackers. While the most secure option is hardware wallet, it suffers from lack of a secure and convenient backup and recovery process. Almost all existing wallets use mnemonics to back up the private keys, and a user must write down these words on a piece of paper. This approach is not only inconvenient but also problematic since the paper could be lost or stolen, resulting in a hacker recovering the keys. In this paper, we propose a new digital scheme to securely back up a hardware wallet relying on the side-channel human visual verification enabled by display screen on a hardware wallet. Using this method, we transfer the root of private keys from one hardware wallet to another wallet securely even via an untrusted terminal, such as a smartphone. At the end of this process, the user has two hardware wallets with the same private keys while she may use one of them as the main wallet and another one as a backup wallet.