The ‘Bitcoin Secret Vault’: Are hackers blocked once and for all?

Cryptsy, Shapeshift, Gatecoin, Bitfinex… What connects these crypto exchanges? More than 130,000 BTC ( 73,818,875 US-$ or approx. 66.1 billion € according to today’s price) were collectively stolen by them in 2016. Hacks and attacks on Bitcoin stock exchanges have become so frequent that it is no longer surprising when one happens.

Although the frequency has brought with it a certain sensitivity, it does not make these incidents any less bad. If there is a robbery, investors will still face huge losses, bad news will scare away customers and new pressure will be exerted on entrepreneurs trying to bring new products to market.

CoinCenter Executive Director Jerry Brito told CoinDesk that such incidents would make his job a lot harder. The non-profit group researches crypto currencies and provides advice in this area. He said they are repeatedly forced to explain the differences between a restricted intermediary and the security of the core network.

Brito explained the Bitcoin secret

“The big hacks are putting pressure on the consumer protection authorities, those who have had little contact with digital currencies […] and this pressure could lead to a situation where easy solutions will not be accepted”. Reviews such as “Bitcoin secret has been hacked” help entrepreneurs and consultants not to inform the authorities about the technology.

Due to the unchangeable nature of Bitcoin secret transactions and the transparency of the blockchain, Bitcoin unfortunately remains a target for hackers, scammers and criminals. Bitcoin’s Blockchain makes it easy to find out how many Bitcoin are stored on a stock exchange. Once these devices change hands, it is impossible to confiscate them.

And yet that doesn’t mean that you haven’t done any research about it yet.

To mitigate the effects of such hacks, researchers Malte Möser, Ittay Eyal and Emin Gün Sirer have proposed the idea of ‘Bitcoin Vault’. They believe that this Bitcoin attack will make much more difficult.

Sirer said CoinDesk: “If the criminals realize that they can’t get away with their booty, we could see a drop in Bitcoin hacks.”

In the Vault

The main function of this idea is to allow users to recall their Bitcoin in case of a hack.

The function is simple in itself: a user creates a new address to store Bitcoin, which is then called “the vault”. This address is just like any other address, except for one difference: the users can’t immediately issue or transfer their Bitcoins.

By incorporating this speed reduction, you have something like a “second key”. The team also calls this function “recovery key”. “(“rescue key”). In the event of a hack, the owner of the Vault can reverse the transaction and the Bitcoin will be returned to the owner.

If a user wants to spend his Bitcoin, he starts with a transfer. Then you have to wait for a pre-determined time – which is determined by the creator of the vault – and then you can spend the bitcoin.

In this waiting time it is possible to use the Recovery Key.

Suppose a hacker gains access to the wallet and starts the transfer of Bitcoin. He has to wait for the time that has been set before – which can be a different time for everyone. Only then can he access the Bitcoin.

As long as the victim uses the recovery key during this time, the hacker is excluded and will not get access to Bitcoin. And each time the hacker tries to restart the transfer, the user can use his recovery key again, making it impossible for the hacker to ever gain control over the assets.

The ability to reverse transactions has been negatively received by some technology enthusiasts. Originally, Bitcoin was created specifically to ensure that transactions were not reversible.

The team behind the Vault’s proposal has no concerns. Their solution simply prevents Bitcoins from being issued while they are in the Vault. This prevents someone from buying something with Bitcoins in the Vault, receiving the product and reversing the transaction.

This forces users to first get their Bitcoin out of the Vault (wait a certain time), transfer Bitcoins into a ‘Hot Wallet’ and then buy the goods.

Action required
While this proposed solution sounds like a simple way to stop the hacks on stock exchanges, the poor media coverage makes it difficult to get a clear picture of the situation.

Bitcoins challenge: 100 million users

Michael Jackson is former COO of Skype, venture capitalist at Mangrove Capital Partners and board member of Bitcoin Wallet provider Blockchain.

Here he explains why it is so important that in 2016 interesting applications and services are developed to make Bitcoin appealing to users around the globe and confirm the value of the technology.

Crypto trader growth is also very impressive

As a lifelong technologist, engineer and now crypto trader partner at Mangrove Capital Partners, I often think about how transformative developments affect my environment as shown in this review. Throughout my career I have observed how the World Wide Web has provided hidden information to the whole world.

There are not many revolutionary technologies and they only occur very rarely, so it is important to be on the right moment. Currently it is almost impossible to enter a FinTech company without hearing about the blockchain.

The blockchain is omnipresent and as many readers know, unfortunately often misunderstood. Just to say that a company can use the blockchain doesn’t mean anything. Companies strive to build long-term relationships with their users and to create communities. You can have a good team with a lousy product or a brilliant idea but a bad execution. Success requires constant fresh energy, a strategy, perseverance and vision. And most importantly, you need a product that people really appreciate.

Bitcoin and Blockchain companies need to focus on solving problems first and then develop software that pleases their consumers.

Despite our slow progress, we have something precious

As the COO of Skype, I’ve been at the forefront of the biggest quantum leap in the telecommunications industry. Interestingly, most people don’t even know that almost all calls are already VoIP-enabled. The switching of the copper wires happened in the background. Phones and their interfaces have changed, but the human desire for telecommunications has remained. Peer to peer connections allow communication at the touch of a button and almost free of charge. The same applies immediately to transactions that are processed via the Bitcoin blockchain.

Just as with VoIP technology, it takes time for Bitcoin and the blockchain to be accepted. But this is already happening. It happens just like in the communications industry in the background. Just as all call centers today use the VoIP method, at some point transactions will increasingly be handled via the blockchain and take over the dominance.

I can’t remember a back-end system that ran 7 years, 365 days a year 24/7 without any problems. The Bitcoin blockchain has proven its resilience. A quick look at the statistics shows that the entire network is clearly maturing.

In recent months, the hashrate of the Bitcoin network has tripled to 650,000,000 GH/s.

According to publicly available information, there are already more than 10 million Bitcoin Wallets. The most meaningful statistic, however, is that of transaction volume: the number of transactions has risen from 80,000 to more than 200,000 per day and is growing steadily.