Chapter I - Introduction | Cybersecurity Research

Chapter I: Introduction

Chapter I: Introduction

Introduction

Nowadays with technology, people are changing their ways of doing online transactions; they are seen using Cryptocurrency Wallets. With the prosperity of human economic activities and the development of science and technology, the currency pattern has been constantly changing. Investing Cryptocurrency is like putting money in the bank. After the 1980s, under the support of modern information technology, new currency forms such as electronic money, virtual currency, and digital cryptocurrency emerged one after another. Bitcoin is the most well-known cryptocurrency, and has been in existence since 2009, invented by Satoshi Nakamoto while publishing it in 2008. It has experienced different stages such as physical currency, silver standard, gold standard metal currency and credit currency.

Cryptocurrency wallet is a software program that stores the public and private keys and interacts with various blockchain to enable users to send and receive digital currency and monitor their balance. The use of Cryptocurrency has been rising in Africa which has been one of the largest economies. According to Statista on “How Common is Crypto” mentioned that Nigeria, one of the African Country has been using and owning Cryptocurrency in which they send or receive money all around the world. They have been using Cryptocurrency in their daily lives. There has been a statistical growth since Nigeria began using Cryptocurrency more. There have been a higher rates not only in Nigeria but numerous other Countries such as Vietnam, South Africa, Turkey, United States, Peru, Spain, Germany, and Japan (Buchholz, 2020). Below is the list of Countries and their percentages of used and owned Cryptocurrencies.

Table 1 List of Countries Using and Owning Cryptocurrencies and the Percentages of Use

Figure 1 Countries Using and Owning Cryptocurrencies Percentages

The great thing about it is that you can see the records of the transactions, how they increase and how they decrease based on the assets and is stored in one’s digital wallet. It can be stored using a web-based (hot) wallet or a large cryptocurrency values are at stake than in a more secure offline (cold) wallet like a USB Drive.

The private key allows you to have access to your funds through the crypto wallet. it is used to send Bitcoin and must be protected and secured. As for the public key, it is used to receive Bitcoin and can be published anywhere safely. As we noticed last decade, centralized exchanges such as MT. Gox and Binance have reported loss from hackers (Young, 2019). There has been an increased number of security breaches that lead to the loss of users’ funds. As a result, investors may become reluctant to rely on centralized exchanges to store funds (Young, 2019).

In this paper, I will focus on the security and protection of the cryptocurrency’s wallets from hackers; finding related articles on blockchain and cryptocurrencies wallets; gaining an understanding of blockchain and cryptocurrencies wallets security; understanding the different types of wallets and the one that is most safe and secure.

Problem Statement

A lot of people are interested in cryptocurrency, and would like to do some trading online, however, a lot of security and privacy issues are there. Furthermore, Myriads of incidents were reported in the past few years and individuals should do something about these incidents, and what really causes them. An article that was published in 2018 spoke about the numerous attacks that have been described in different aspects of the systems such as double spending, netsplit, transaction malleability, networking attacks, attacks targeting mining, and mining pools (Conti et al., 2018). We know they have been having a lot of incidents lately, they do not know how to protect themselves and trade safely online.

Nature and Significance of the Problem

There are a lot of security breaches that affects cryptocurrency wallets; this is evidenced by the articles published in newspapers, and research. People are becoming victims of digital wallets cybercrimes as they lose money from their crypto wallets. An article that was published in 2019 discussed about Binance, one of the largest cryptocurrency exchanges, which lost approximately $41 million in Bitcoin which was the largest hack to date (Kumar, 2019). The studies show that this is the case of what has been going on in the past years.

Objective of the Study

Security of cryptocurrency wallets users is a big problem nowadays. In this paper, I present framework to enable users to evaluate the security and privacy of these cryptocurrencies’ wallets. This method or tool will have a list of attributes that will define the degree of protection and prevention in these wallets. This work aims to improve security in cryptocurrency trading.

Study Questions/Hypotheses

The main research questions that this paper include:

What are the security measures needed to protect users of online cryptocurrency trading platforms?
Can these cryptocurrency wallets be stolen by hackers?
What are the different types of cryptocurrency wallets?
How can we evaluate security in cryptocurrency wallets?

Limitations of the Study

The limitation of the study is that the conclusion or information provided on this paper is not the final say meaning there are still many more things to know or say about Cryptocurrency. There are certain aspects of Cryptocurrency Wallet that this paper did not cover. This field of Cryptocurrency is an evolving one. They are still development, new research that are coming on the field daily. It is tentative, it is not conclusive, it is not the end. This paper left things unset, that was not cover which needs to be discussed in depth. I only covered what was useful for this research. The future of Crypto, as much as it is predictable, we never can tell.

Definition of Terms

This paper discusses about the cryptocurrency wallet which is a device that stores the public and private keys and can be used to track users’ funds by receiving and spending cryptocurrency. My plan is to enhance the security of the users as well as protect users’ funds from hackers. Moreover, one can make the apps and devices more secure for users to use by protecting their digital wallets. Below are some terms and their definitions:

Cryptocurrencies: are a type of currencies that are relying on cryptographic proofs for confirmation of transaction (Lansky, 2018).
A Cryptocurrency wallet: is a piece of software that keeps track of the secret keys used to digitally sign cryptocurrency transactions for distributed ledgers (Mearian, 2019).
Bitcoin: a piece of digital currency, otherwise known as BTC. As a general concept, Bitcoin is a system for securely buying, storing, and using money digitally.
Blockchain: a digital ledger of economic transactions that is fully public, continually updated by countless users, and considered by many impossible to corrupt. It is a list of continuous records in blocks (Zhang et al., 2019).
Cryptocurrency mining: the process in which transactions between users are verified and added into the blockchain public ledger (IT, 2020).
Hash rate or Hash Power: the measuring unit that measures how much power the bitcoin network is consuming to be continuously functional (Coinsutra, 2019).
Proof-of-Work: the validation of the work that happened and proving it is correct. It currently account for more than 90% of the total market capitalization of existing digital currencies (Gervais et al., 2016)
Proof-of-Stake: it confers decision power to minters that have a stake in the system. Unlike the Proof-of-Work in which everyone can become a miner, not everyone can join the network in the POS system (Seang & Torre, 2018).
Address: a destination where a user sends and receives digital currency.
Blocks: Many digital currencies make use of blocks, which contain transactions that have been confirmed and then combined (Zhang et al., 2019)
Cryptography: the process of encoding and decoding information so that would be observers are unable to understand the information being sent (Hartnett, 2019).
Fiat currencies: are currencies that have value because they are minted by a central bank. Fiat means “by decree”, and these currencies have value because some central authority have decreed that they have monetary value like British pound, Euro and Japanese Yen (Gobry, 2013).
Exchanges: are just marketplaces where traders can make digital currency transactions. If a person wants to buy bitcoin, going to an exchange is the fastest way to accomplish this objective (Kharif, 2019).
Private key: a piece of information, presented as a string of numbers and numbers that an investor can cause to access their digital currency.
Public key: an address where an investor can receive digital currencies. This public key, like the private key, is a combination of numbers and letters.
Satoshi Nakamoto: the pseudonym for the creator of bitcoin, and more than one individual has claimed to be Nakamoto.
Token: it is a unit of digital currency, such as a bitcoin.

Summary

This paper will aim to educate people about the cryptocurrency wallets; it will present the identification of threats or attacks as well as security measures needed to protect users of online cryptocurrency trading platforms. This essay will present a literature review and will relate to methodology and the future work based on the evaluation of cryptocurrency wallets.