Deterministic Sub-Wallet for Cryptocurrencies

Abstract

A big challenge in cryptocurrency is securing a user key from potential hackers because nobody can rollback a transaction made by an attacker with a stolen key once the blockchain network confirms it. One solution to protect users is splitting the money between super-wallet and sub-wallet. The user stores a large amount of money on her super-wallet and keeps it safe; she refills the sub-wallet when she needs while using the sub-wallet for her daily purchases. In this paper, we propose a new scheme to create sub-wallet that we call deterministic sub-wallet. In this scheme, the seed of the sub-wallet keys is derived from the super-wallet master seed, and therefore the super-wallet can build many sub-wallet addresses and refill them in a single blockchain transaction. Compared to existing approaches, our mechanism is cheaper, real-time, more secure against man-in-the-middle attack and easier for backup and recovery. We implement a proof-of-concept on a hardware wallet and evaluate its performance. In addition, we analyze the attacks and defenses of this design to demonstrate that our proposed method has a higher level of security than existing models.