Since the genesis block was first mined, bitcoin has evolved to become the most popular decentralized currency all over the planet. It promotes a level of anonymity that helps users send transactions to anyone, anywhere in the world, while keeping their identities hidden in most cases. The security of your coins mostly depends on your private keys; thus, protecting your coins’ private keys is a pivotal issue, because they represent the only means for spending you coins and if lost, it becomes impossible to recover your funds.
Keeping an encrypted backup for your private keys is a conventional, yet effective means for avoiding coin loss, and there are multiple ways that render the backup hard to be deciphered and phished by hackers. A recently published paper introduced a novel backup scheme which can guarantee protection, in case an attacker succeeds in phishing, or obtaining, the backup. The new backup scheme is based on the bitcoin protocol and the ECDSA signature scheme.
The most prominent difference between this scheme and previously proposed schemes is that the processes of creation and recovery of the keys’ backup are linked to multiple unique bitcoin transactions on the blockchain. The backup storage process leaks no info regarding the accounts. On the other hand, as per bitcoin’s privacy protection scheme, even if an adversary somehow succeeds in obtaining the backup files, it will take him/her much more time to successfully recover the keys, when compared with the time needed by an honest user, who usually has a specific aim, so only a small number of trials will be executed. Oppositely, it is considerably hard to recover the key by an adversary who succeeds in obtaining the backup pair, due to the fact that the anonymity of bitcoin’s blockchain conceals the relationship between users and their corresponding accounts, and the backup pair will not ever leak information regarding the accounts.
The gap between honest users and attackers, or adversaries, to recover a private key is determined by the number of transactions and accounts on the blockchain; in other words, the gap will naturally enlarge as bitcoin popularity increases.
Moreover, the innovators of the new backup scheme provided in the published paper three improvements to enhance its security even more, and simplify the process of its storage, which denotes that the combination of the new scheme and previously proposed techniques can render it extremely hard for hackers to phish backups and to recover their corresponding private keys simultaneously.