Tag Archives: cryptocurrency

Ransomware Profitability

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2021/02/ransomware-profitability.html

Analyzing cryptocurrency data, a research group has estimated a lower-bound on 2020 ransomware revenue: $350 million, four times more than in 2019.

Based on the company’s data, among last year’s top earners, there were groups like Ryuk, Maze (now-defunct), Doppelpaymer, Netwalker (disrupted by authorities), Conti, and REvil (aka Sodinokibi).

Ransomware is now an established worldwide business.

Slashdot thread.

Cryptocurrency Pump and Dump Scams

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2020/06/cryptocurrency_.html

Really interesting research: “An examination of the cryptocurrency pump and dump ecosystem“:

Abstract: The surge of interest in cryptocurrencies has been accompanied by a proliferation of fraud. This paper examines pump and dump schemes. The recent explosion of nearly 2,000 cryptocurrencies in an unregulated environment has expanded the scope for abuse. We quantify the scope of cryptocurrency pump and dump schemes on Discord and Telegram, two popular group-messaging platforms. We joined all relevant Telegram and Discord groups/channels and identified thousands of different pumps. Our findings provide the first measure of the scope of such pumps and empirically document important properties of this ecosystem.

Chrome Extension Stealing Cryptocurrency Keys and Passwords

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2020/01/chrome_extensio.html

A malicious Chrome extension surreptitiously steals Ethereum keys and passwords:

According to Denley, the extension is dangerous to users in two ways. First, any funds (ETH coins and ERC0-based tokens) managed directly inside the extension are at risk.

Denley says that the extension sends the private keys of all wallets created or managed through its interface to a third-party website located at erc20wallet[.]tk.

Second, the extension also actively injects malicious JavaScript code when users navigate to five well-known and popular cryptocurrency management platforms. This code steals login credentials and private keys, data that it’s sent to the same erc20wallet[.]tk third-party website.

Another example of how blockchain requires many single points of trust in order to be secure.

Dark Web Site Taken Down without Breaking Encryption

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2019/10/dark_web_site_t.html

The US Department of Justice unraveled a dark web child-porn website, leading to the arrest of 337 people in at least 18 countries. This was all accomplished not through any backdoors in communications systems, but by analyzing the bitcoin transactions and following the money:

Welcome to Video made money by charging fees in bitcoin, and gave each user a unique bitcoin wallet address when they created an account. Son operated the site as a Tor hidden service, a dark web site with a special address that helps mask the identity of the site’s host and its location. But Son and others made mistakes that allowed law enforcement to track them. For example, according to the indictment, very basic assessments of the Welcome to Video website revealed two unconcealed IP addresses managed by a South Korean internet service provider and assigned to an account that provided service to Son’s home address. When agents searched Son’s residence, they found the server running Welcome to Video.

To “follow the money,” as officials put it in Wednesday’s press conference, law enforcement agents sent fairly small amounts of bitcoin­ — roughly equivalent at the time to $125 to $290­ — to the bitcoin wallets Welcome to Video listed for payments. Since the bitcoin blockchain leaves all transactions visible and verifiable, they could observe the currency in these wallets being transferred to another wallet. Law enforcement learned from a bitcoin exchange that the second wallet was registered to Son with his personal phone number and one of his personal email addresses.

Remember this the next time some law enforcement official tells us that they’re powerless to investigate crime without breaking cryptography for everyone.

More news articles. The indictment is here. Some of it is pretty horrifying to read.

Cracking Forgotten Passwords

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2019/09/cracking_forgot.html

Expandpass is a string expansion program. It’s “useful for cracking passwords you kinda-remember.” You tell the program what you remember about the password and it tries related passwords.

I learned about it in this article about Phil Dougherty, who helps people recover lost cryptocurrency passwords (mostly Ethereum) for a cut of the recovered value.

Stealing Ethereum by Guessing Weak Private Keys

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2019/04/stealing_ethere.html

Someone is stealing millions of dollars worth of Ethereum by guessing users’ private keys. Normally this should be impossible, but lots of keys seem to be very weak. Researchers are unsure how those weak keys are being generated and used.

Their paper is here.

This Is My Architecture: Mobile Cryptocurrency Mining

Post Syndicated from Annik Stahl original https://aws.amazon.com/blogs/architecture/this-is-my-architecture-mobile-cryptocurrency-mining/

In North America, approximately 95% of adults over the age of 25 have a bank account. In the developing world, that number is only about 52%. Cryptocurrencies can provide a platform for millions of unbanked people in the world to achieve financial freedom on a more level financial playing field.

Electroneum, a cryptocurrency company located in England, built its cryptocurrency mobile back end on AWS and is using the power of blockchain to unlock the global digital economy for millions of people in the developing world.

Electroneum’s cryptocurrency mobile app allows Electroneum customers in developing countries to transfer ETNs (exchange-traded notes) and pay for goods using their smartphones. Listen in to the discussion between AWS Solutions Architect Toby Knight and Electroneum CTO Barry Last as they explain how the company built its solution. Electroneum’s app is a web application that uses a feedback loop between its web servers and AWS WAF (a web application firewall) to automatically block malicious actors. The system then uses Athena, with a gamified approach, to provide an additional layer of blocking to prevent DDoS attacks. Finally, Electroneum built a serverless, instant payments system using AWS API Gateway, AWS Lambda, and Amazon DynamoDB to help its customers avoid the usual delays in confirming cryptocurrency transactions.

 

Blockchain and Trust

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2019/02/blockchain_and_.html

In his 2008 white paper that first proposed bitcoin, the anonymous Satoshi Nakamoto concluded with: “We have proposed a system for electronic transactions without relying on trust.” He was referring to blockchain, the system behind bitcoin cryptocurrency. The circumvention of trust is a great promise, but it’s just not true. Yes, bitcoin eliminates certain trusted intermediaries that are inherent in other payment systems like credit cards. But you still have to trust bitcoin — and everything about it.

Much has been written about blockchains and how they displace, reshape, or eliminate trust. But when you analyze both blockchain and trust, you quickly realize that there is much more hype than value. Blockchain solutions are often much worse than what they replace.

First, a caveat. By blockchain, I mean something very specific: the data structures and protocols that make up a public blockchain. These have three essential elements. The first is a distributed (as in multiple copies) but centralized (as in there’s only one) ledger, which is a way of recording what happened and in what order. This ledger is public, meaning that anyone can read it, and immutable, meaning that no one can change what happened in the past.

The second element is the consensus algorithm, which is a way to ensure all the copies of the ledger are the same. This is generally called mining; a critical part of the system is that anyone can participate. It is also distributed, meaning that you don’t have to trust any particular node in the consensus network. It can also be extremely expensive, both in data storage and in the energy required to maintain it. Bitcoin has the most expensive consensus algorithm the world has ever seen, by far.

Finally, the third element is the currency. This is some sort of digital token that has value and is publicly traded. Currency is a necessary element of a blockchain to align the incentives of everyone involved. Transactions involving these tokens are stored on the ledger.

Private blockchains are completely uninteresting. (By this, I mean systems that use the blockchain data structure but don’t have the above three elements.) In general, they have some external limitation on who can interact with the blockchain and its features. These are not anything new; they’re distributed append-only data structures with a list of individuals authorized to add to it. Consensus protocols have been studied in distributed systems for more than 60 years. Append-only data structures have been similarly well covered. They’re blockchains in name only, and — as far as I can tell — the only reason to operate one is to ride on the blockchain hype.

All three elements of a public blockchain fit together as a single network that offers new security properties. The question is: Is it actually good for anything? It’s all a matter of trust.

Trust is essential to society. As a species, humans are wired to trust one another. Society can’t function without trust, and the fact that we mostly don’t even think about it is a measure of how well trust works.

The word “trust” is loaded with many meanings. There’s personal and intimate trust. When we say we trust a friend, we mean that we trust their intentions and know that those intentions will inform their actions. There’s also the less intimate, less personal trust — we might not know someone personally, or know their motivations, but we can trust their future actions. Blockchain enables this sort of trust: We don’t know any bitcoin miners, for example, but we trust that they will follow the mining protocol and make the whole system work.

Most blockchain enthusiasts have a unnaturally narrow definition of trust. They’re fond of catchphrases like “in code we trust,” “in math we trust,” and “in crypto we trust.” This is trust as verification. But verification isn’t the same as trust.

In 2012, I wrote a book about trust and security, Liars and Outliers. In it, I listed four very general systems our species uses to incentivize trustworthy behavior. The first two are morals and reputation. The problem is that they scale only to a certain population size. Primitive systems were good enough for small communities, but larger communities required delegation, and more formalism.

The third is institutions. Institutions have rules and laws that induce people to behave according to the group norm, imposing sanctions on those who do not. In a sense, laws formalize reputation. Finally, the fourth is security systems. These are the wide varieties of security technologies we employ: door locks and tall fences, alarm systems and guards, forensics and audit systems, and so on.

These four elements work together to enable trust. Take banking, for example. Financial institutions, merchants, and individuals are all concerned with their reputations, which prevents theft and fraud. The laws and regulations surrounding every aspect of banking keep everyone in line, including backstops that limit risks in the case of fraud. And there are lots of security systems in place, from anti-counterfeiting technologies to internet-security technologies.

In his 2018 book, Blockchain and the New Architecture of Trust, Kevin Werbach outlines four different “trust architectures.” The first is peer-to-peer trust. This basically corresponds to my morals and reputational systems: pairs of people who come to trust each other. His second is leviathan trust, which corresponds to institutional trust. You can see this working in our system of contracts, which allows parties that don’t trust each other to enter into an agreement because they both trust that a government system will help resolve disputes. His third is intermediary trust. A good example is the credit card system, which allows untrusting buyers and sellers to engage in commerce. His fourth trust architecture is distributed trust. This is emergent trust in the particular security system that is blockchain.

What blockchain does is shift some of the trust in people and institutions to trust in technology. You need to trust the cryptography, the protocols, the software, the computers and the network. And you need to trust them absolutely, because they’re often single points of failure.

When that trust turns out to be misplaced, there is no recourse. If your bitcoin exchange gets hacked, you lose all of your money. If your bitcoin wallet gets hacked, you lose all of your money. If you forget your login credentials, you lose all of your money. If there’s a bug in the code of your smart contract, you lose all of your money. If someone successfully hacks the blockchain security, you lose all of your money. In many ways, trusting technology is harder than trusting people. Would you rather trust a human legal system or the details of some computer code you don’t have the expertise to audit?

Blockchain enthusiasts point to more traditional forms of trust — bank processing fees, for example — as expensive. But blockchain trust is also costly; the cost is just hidden. For bitcoin, that’s the cost of the additional bitcoin mined, the transaction fees, and the enormous environmental waste.

Blockchain doesn’t eliminate the need to trust human institutions. There will always be a big gap that can’t be addressed by technology alone. People still need to be in charge, and there is always a need for governance outside the system. This is obvious in the ongoing debate about changing the bitcoin block size, or in fixing the DAO attack against Ethereum. There’s always a need to override the rules, and there’s always a need for the ability to make permanent rules changes. As long as hard forks are a possibility — that’s when the people in charge of a blockchain step outside the system to change it — people will need to be in charge.

Any blockchain system will have to coexist with other, more conventional systems. Modern banking, for example, is designed to be reversible. Bitcoin is not. That makes it hard to make the two compatible, and the result is often an insecurity. Steve Wozniak was scammed out of $70K in bitcoin because he forgot this.

Blockchain technology is often centralized. Bitcoin might theoretically be based on distributed trust, but in practice, that’s just not true. Just about everyone using bitcoin has to trust one of the few available wallets and use one of the few available exchanges. People have to trust the software and the operating systems and the computers everything is running on. And we’ve seen attacks against wallets and exchanges. We’ve seen Trojans and phishing and password guessing. Criminals have even used flaws in the system that people use to repair their cell phones to steal bitcoin.

Moreover, in any distributed trust system, there are backdoor methods for centralization to creep back in. With bitcoin, there are only a few miners of consequence. There’s one company that provides most of the mining hardware. There are only a few dominant exchanges. To the extent that most people interact with bitcoin, it is through these centralized systems. This also allows for attacks against blockchain-based systems.

These issues are not bugs in current blockchain applications, they’re inherent in how blockchain works. Any evaluation of the security of the system has to take the whole socio-technical system into account. Too many blockchain enthusiasts focus on the technology and ignore the rest.

To the extent that people don’t use bitcoin, it’s because they don’t trust bitcoin. That has nothing to do with the cryptography or the protocols. In fact, a system where you can lose your life savings if you forget your key or download a piece of malware is not particularly trustworthy. No amount of explaining how SHA-256 works to prevent double-spending will fix that.

Similarly, to the extent that people do use blockchains, it is because they trust them. People either own bitcoin or not based on reputation; that’s true even for speculators who own bitcoin simply because they think it will make them rich quickly. People choose a wallet for their cryptocurrency, and an exchange for their transactions, based on reputation. We even evaluate and trust the cryptography that underpins blockchains based on the algorithms’ reputation.

To see how this can fail, look at the various supply-chain security systems that are using blockchain. A blockchain isn’t a necessary feature of any of them. The reasons they’re successful is that everyone has a single software platform to enter their data in. Even though the blockchain systems are built on distributed trust, people don’t necessarily accept that. For example, some companies don’t trust the IBM/Maersk system because it’s not their blockchain.

Irrational? Maybe, but that’s how trust works. It can’t be replaced by algorithms and protocols. It’s much more social than that.

Still, the idea that blockchains can somehow eliminate the need for trust persists. Recently, I received an email from a company that implemented secure messaging using blockchain. It said, in part: “Using the blockchain, as we have done, has eliminated the need for Trust.” This sentiment suggests the writer misunderstands both what blockchain does and how trust works.

Do you need a public blockchain? The answer is almost certainly no. A blockchain probably doesn’t solve the security problems you think it solves. The security problems it solves are probably not the ones you have. (Manipulating audit data is probably not your major security risk.) A false trust in blockchain can itself be a security risk. The inefficiencies, especially in scaling, are probably not worth it. I have looked at many blockchain applications, and all of them could achieve the same security properties without using a blockchain­ — of course, then they wouldn’t have the cool name.

Honestly, cryptocurrencies are useless. They’re only used by speculators looking for quick riches, people who don’t like government-backed currencies, and criminals who want a black-market way to exchange money.

To answer the question of whether the blockchain is needed, ask yourself: Does the blockchain change the system of trust in any meaningful way, or just shift it around? Does it just try to replace trust with verification? Does it strengthen existing trust relationships, or try to go against them? How can trust be abused in the new system, and is this better or worse than the potential abuses in the old system? And lastly: What would your system look like if you didn’t use blockchain at all?

If you ask yourself those questions, it’s likely you’ll choose solutions that don’t use public blockchain. And that’ll be a good thing — especially when the hype dissipates.

This essay previously appeared on Wired.com.

EDITED TO ADD (2/11): Two commentaries on my essay.

I have wanted to write this essay for over a year. The impetus to finally do it came from an invite to speak at the Hyperledger Global Forum in December. This essay is a version of the talk I wrote for that event, made more accessible to a general audience.

It seems to be the season for blockchain takedowns. James Waldo has an excellent essay in Queue. And Nicholas Weaver gave a talk at the Enigma Conference, summarized here. It’s a shortened version of this talk.

EDITED TO ADD (2/17): Reddit thread.

Major Zcash Vulnerability Fixed

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2019/02/major_zcash_vul.html

Zcash just fixed a vulnerability that would have allowed “infinite counterfeit” Zcash.

Like all the other blockchain vulnerabilities and updates, this demonstrates the ridiculousness of the notion that code can replace people, that trust can be encompassed in the protocols, or that human governance is not ncessary.

The Evolution of Darknets

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2019/01/the_evolution_o.html

This is interesting:

To prevent the problems of customer binding, and losing business when darknet markets go down, merchants have begun to leave the specialized and centralized platforms and instead ventured to use widely accessible technology to build their own communications and operational back-ends.

Instead of using websites on the darknet, merchants are now operating invite-only channels on widely available mobile messaging systems like Telegram. This allows the merchant to control the reach of their communication better and be less vulnerable to system take-downs. To further stabilize the connection between merchant and customer, repeat customers are given unique messaging contacts that are independent of shared channels and thus even less likely to be found and taken down. Channels are often operated by automated bots that allow customers to inquire about offers and initiate the purchase, often even allowing a fully bot-driven experience without human intervention on the merchant’s side.

[…]

The other major change is the use of “dead drops” instead of the postal system which has proven vulnerable to tracking and interception. Now, goods are hidden in publicly accessible places like parks and the location is given to the customer on purchase. The customer then goes to the location and picks up the goods. This means that delivery becomes asynchronous for the merchant, he can hide a lot of product in different locations for future, not yet known, purchases. For the client the time to delivery is significantly shorter than waiting for a letter or parcel shipped by traditional means – he has the product in his hands in a matter of hours instead of days. Furthermore this method does not require for the customer to give any personally identifiable information to the merchant, which in turn doesn’t have to safeguard it anymore. Less data means less risk for everyone.

The use of dead drops also significantly reduces the risk of the merchant to be discovered by tracking within the postal system. He does not have to visit any easily to surveil post office or letter box, instead the whole public space becomes his hiding territory.

Cryptocurrencies are still the main means of payment, but due to the higher customer-binding, and vetting process by the merchant, escrows are seldom employed. Usually only multi-party transactions between customer and merchant are established, and often not even that.

[…]

Other than allowing much more secure and efficient business for both sides of the transaction, this has also lead to changes in the organizational structure of merchants:

Instead of the flat hierarchies witnessed with darknet markets, merchants today employ hierarchical structures again. These consist of procurement layer, sales layer, and distribution layer. The people constituting each layer usually do not know the identity of the higher layers nor are ever in personal contact with them. All interaction is digital — messaging systems and cryptocurrencies again, product moves only through dead drops.

The procurement layer purchases product wholesale and smuggles it into the region. It is then sold for cryptocurrency to select people that operate the sales layer. After that transaction the risks of both procurement and sales layer are isolated.

The sales layer divides the product into smaller units and gives the location of those dead drops to the distribution layer. The distribution layer then divides the product again and places typical sales quantities into new dead drops. The location of these dead drops is communicated to the sales layer which then sells these locations to the customers through messaging systems.

To prevent theft by the distribution layer, the sales layer randomly tests dead drops by tasking different members of the distribution layer with picking up product from a dead drop and hiding it somewhere else, after verification of the contents. Usually each unit of product is tagged with a piece of paper containing a unique secret word which is used to prove to the sales layer that a dead drop was found. Members of the distribution layer have to post security – in the form of cryptocurrency – to the sales layer, and they lose part of that security with every dead drop that fails the testing, and with every dead drop they failed to test. So far, no reports of using violence to ensure performance of members of these structures has become known.

This concept of using messaging, cryptocurrency and dead drops even within the merchant structure allows for the members within each layer being completely isolated from each other, and not knowing anything about higher layers at all. There is no trace to follow if a distribution layer member is captured while servicing a dead drop. He will often not even be distinguishable from a regular customer. This makes these structures extremely secure against infiltration, takeover and capture. They are inherently resilient.

[…]

It is because of the use of dead drops and hierarchical structures that we call this kind of organization a Dropgang.

New Attack Against Electrum Bitcoin Wallets

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2019/01/new_attack_agai_3.html

This is clever:

How the attack works:

  • Attacker added tens of malicious servers to the Electrum wallet network.
  • Users of legitimate Electrum wallets initiate a Bitcoin transaction.
  • If the transaction reaches one of the malicious servers, these servers reply with an error message that urges users to download a wallet app update from a malicious website (GitHub repo).
  • User clicks the link and downloads the malicious update.
  • When the user opens the malicious Electrum wallet, the app asks the user for a two-factor authentication (2FA) code. This is a red flag, as these 2FA codes are only requested before sending funds, and not at wallet startup.
  • The malicious Electrum wallet uses the 2FA code to steal the user’s funds and transfer them to the attacker’s Bitcoin addresses.

The problem here is that Electrum servers are allowed to trigger popups with custom text inside users’ wallets.

Nicholas Weaver on Cryptocurrencies

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2018/07/nicholas_weaver_2.html

This is well-worth reading (non-paywalled version). Here’s the opening:

Cryptocurrencies, although a seemingly interesting idea, are simply not fit for purpose. They do not work as currencies, they are grossly inefficient, and they are not meaningfully distributed in terms of trust. Risks involving cryptocurrencies occur in four major areas: technical risks to participants, economic risks to participants, systemic risks to the cryptocurrency ecosystem, and societal risks.

I haven’t written much about cryptocurrencies, but I share Weaver’s skepticism.

Regulating Bitcoin

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2018/06/regulating_bitc.html

Ross Anderson has a new paper on cryptocurrency exchanges. From his blog:

Bitcoin Redux explains what’s going wrong in the world of cryptocurrencies. The bitcoin exchanges are developing into a shadow banking system, which do not give their customers actual bitcoin but rather display a “balance” and allow them to transact with others. However if Alice sends Bob a bitcoin, and they’re both customers of the same exchange, it just adjusts their balances rather than doing anything on the blockchain. This is an e-money service, according to European law, but is the law enforced? Not where it matters. We’ve been looking at the details.

The paper.

Canonical on trust and security in the Snap Store

Post Syndicated from corbet original https://lwn.net/Articles/754502/rss

Here’s a
posting from Canonical concerning the cryptocurrency-mining app that
was discovered in its Snap Store. “Several years ago when we started
the work on snap packages, we understood that we could not instantly
implement an alternative that was completely safe from all perspectives. In
addition to being safe, it had to be useful. So the challenge we gave
ourselves was to significantly improve the situation immediately, and then
pave the road for incremental improvements that could be rolled out
gradually.”

Securing Your Cryptocurrency

Post Syndicated from Roderick Bauer original https://www.backblaze.com/blog/backing-up-your-cryptocurrency/

Securing Your Cryptocurrency

In our blog post on Tuesday, Cryptocurrency Security Challenges, we wrote about the two primary challenges faced by anyone interested in safely and profitably participating in the cryptocurrency economy: 1) make sure you’re dealing with reputable and ethical companies and services, and, 2) keep your cryptocurrency holdings safe and secure.

In this post, we’re going to focus on how to make sure you don’t lose any of your cryptocurrency holdings through accident, theft, or carelessness. You do that by backing up the keys needed to sell or trade your currencies.

$34 Billion in Lost Value

Of the 16.4 million bitcoins said to be in circulation in the middle of 2017, close to 3.8 million may have been lost because their owners no longer are able to claim their holdings. Based on today’s valuation, that could total as much as $34 billion dollars in lost value. And that’s just bitcoins. There are now over 1,500 different cryptocurrencies, and we don’t know how many of those have been misplaced or lost.



Now that some cryptocurrencies have reached (at least for now) staggering heights in value, it’s likely that owners will be more careful in keeping track of the keys needed to use their cryptocurrencies. For the ones already lost, however, the owners have been separated from their currencies just as surely as if they had thrown Benjamin Franklins and Grover Clevelands over the railing of a ship.

The Basics of Securing Your Cryptocurrencies

In our previous post, we reviewed how cryptocurrency keys work, and the common ways owners can keep track of them. A cryptocurrency owner needs two keys to use their currencies: a public key that can be shared with others is used to receive currency, and a private key that must be kept secure is used to spend or trade currency.

Many wallets and applications allow the user to require extra security to access them, such as a password, or iris, face, or thumb print scan. If one of these options is available in your wallets, take advantage of it. Beyond that, it’s essential to back up your wallet, either using the backup feature built into some applications and wallets, or manually backing up the data used by the wallet. When backing up, it’s a good idea to back up the entire wallet, as some wallets require additional private data to operate that might not be apparent.

No matter which backup method you use, it is important to back up often and have multiple backups, preferable in different locations. As with any valuable data, a 3-2-1 backup strategy is good to follow, which ensures that you’ll have a good backup copy if anything goes wrong with one or more copies of your data.

One more caveat, don’t reuse passwords. This applies to all of your accounts, but is especially important for something as critical as your finances. Don’t ever use the same password for more than one account. If security is breached on one of your accounts, someone could connect your name or ID with other accounts, and will attempt to use the password there, as well. Consider using a password manager such as LastPass or 1Password, which make creating and using complex and unique passwords easy no matter where you’re trying to sign in.

Approaches to Backing Up Your Cryptocurrency Keys

There are numerous ways to be sure your keys are backed up. Let’s take them one by one.

1. Automatic backups using a backup program

If you’re using a wallet program on your computer, for example, Bitcoin Core, it will store your keys, along with other information, in a file. For Bitcoin Core, that file is wallet.dat. Other currencies will use the same or a different file name and some give you the option to select a name for the wallet file.

To back up the wallet.dat or other wallet file, you might need to tell your backup program to explicitly back up that file. Users of Backblaze Backup don’t have to worry about configuring this, since by default, Backblaze Backup will back up all data files. You should determine where your particular cryptocurrency, wallet, or application stores your keys, and make sure the necessary file(s) are backed up if your backup program requires you to select which files are included in the backup.

Backblaze B2 is an option for those interested in low-cost and high security cloud storage of their cryptocurrency keys. Backblaze B2 supports 2-factor verification for account access, works with a number of apps that support automatic backups with encryption, error-recovery, and versioning, and offers an API and command-line interface (CLI), as well. The first 10GB of storage is free, which could be all one needs to store encrypted cryptocurrency keys.

2. Backing up by exporting keys to a file

Apps and wallets will let you export your keys from your app or wallet to a file. Once exported, your keys can be stored on a local drive, USB thumb drive, DAS, NAS, or in the cloud with any cloud storage or sync service you wish. Encrypting the file is strongly encouraged — more on that later. If you use 1Password or LastPass, or other secure notes program, you also could store your keys there.

3. Backing up by saving a mnemonic recovery seed

A mnemonic phrase, mnemonic recovery phrase, or mnemonic seed is a list of words that stores all the information needed to recover a cryptocurrency wallet. Many wallets will have the option to generate a mnemonic backup phrase, which can be written down on paper. If the user’s computer no longer works or their hard drive becomes corrupted, they can download the same wallet software again and use the mnemonic recovery phrase to restore their keys.

The phrase can be used by anyone to recover the keys, so it must be kept safe. Mnemonic phrases are an excellent way of backing up and storing cryptocurrency and so they are used by almost all wallets.

A mnemonic recovery seed is represented by a group of easy to remember words. For example:

eye female unfair moon genius pipe nuclear width dizzy forum cricket know expire purse laptop scale identify cube pause crucial day cigar noise receive

The above words represent the following seed:

0a5b25e1dab6039d22cd57469744499863962daba9d2844243fec 9c0313c1448d1a0b2cd9e230a78775556f9b514a8be45802c2808e fd449a20234e9262dfa69

These words have certain properties:

  • The first four letters are enough to unambiguously identify the word.
  • Similar words are avoided (such as: build and built).

Bitcoin and most other cryptocurrencies such as Litecoin, Ethereum, and others use mnemonic seeds that are 12 to 24 words long. Other currencies might use different length seeds.

4. Physical backups — Paper, Metal

Some cryptocurrency holders believe that their backup, or even all their cryptocurrency account information, should be stored entirely separately from the internet to avoid any risk of their information being compromised through hacks, exploits, or leaks. This type of storage is called “cold storage.” One method of cold storage involves printing out the keys to a piece of paper and then erasing any record of the keys from all computer systems. The keys can be entered into a program from the paper when needed, or scanned from a QR code printed on the paper.

Printed public and private keys

Printed public and private keys

Some who go to extremes suggest separating the mnemonic needed to access an account into individual pieces of paper and storing those pieces in different locations in the home or office, or even different geographical locations. Some say this is a bad idea since it could be possible to reconstruct the mnemonic from one or more pieces. How diligent you wish to be in protecting these codes is up to you.

Mnemonic recovery phrase booklet

Mnemonic recovery phrase booklet

There’s another option that could make you the envy of your friends. That’s the CryptoSteel wallet, which is a stainless steel metal case that comes with more than 250 stainless steel letter tiles engraved on each side. Codes and passwords are assembled manually from the supplied part-randomized set of tiles. Users are able to store up to 96 characters worth of confidential information. Cryptosteel claims to be fireproof, waterproof, and shock-proof.

image of a Cryptosteel cold storage device

Cryptosteel cold wallet

Of course, if you leave your Cryptosteel wallet in the pocket of a pair of ripped jeans that gets thrown out by the housekeeper, as happened to the character Russ Hanneman on the TV show Silicon Valley in last Sunday’s episode, then you’re out of luck. That fictional billionaire investor lost a USB drive with $300 million in cryptocoins. Let’s hope that doesn’t happen to you.

Encryption & Security

Whether you store your keys on your computer, an external disk, a USB drive, DAS, NAS, or in the cloud, you want to make sure that no one else can use those keys. The best way to handle that is to encrypt the backup.

With Backblaze Backup for Windows and Macintosh, your backups are encrypted in transmission to the cloud and on the backup server. Users have the option to add an additional level of security by adding a Personal Encryption Key (PEK), which secures their private key. Your cryptocurrency backup files are secure in the cloud. Using our web or mobile interface, previous versions of files can be accessed, as well.

Our object storage cloud offering, Backblaze B2, can be used with a variety of applications for Windows, Macintosh, and Linux. With B2, cryptocurrency users can choose whichever method of encryption they wish to use on their local computers and then upload their encrypted currency keys to the cloud. Depending on the client used, versioning and life-cycle rules can be applied to the stored files.

Other backup programs and systems provide some or all of these capabilities, as well. If you are backing up to a local drive, it is a good idea to encrypt the local backup, which is an option in some backup programs.

Address Security

Some experts recommend using a different address for each cryptocurrency transaction. Since the address is not the same as your wallet, this means that you are not creating a new wallet, but simply using a new identifier for people sending you cryptocurrency. Creating a new address is usually as easy as clicking a button in the wallet.

One of the chief advantages of using a different address for each transaction is anonymity. Each time you use an address, you put more information into the public ledger (blockchain) about where the currency came from or where it went. That means that over time, using the same address repeatedly could mean that someone could map your relationships, transactions, and incoming funds. The more you use that address, the more information someone can learn about you. For more on this topic, refer to Address reuse.

Note that a downside of using a paper wallet with a single key pair (type-0 non-deterministic wallet) is that it has the vulnerabilities listed above. Each transaction using that paper wallet will add to the public record of transactions associated with that address. Newer wallets, i.e. “deterministic” or those using mnemonic code words support multiple addresses and are now recommended.

There are other approaches to keeping your cryptocurrency transaction secure. Here are a couple of them.

Multi-signature

Multi-signature refers to requiring more than one key to authorize a transaction, much like requiring more than one key to open a safe. It is generally used to divide up responsibility for possession of cryptocurrency. Standard transactions could be called “single-signature transactions” because transfers require only one signature — from the owner of the private key associated with the currency address (public key). Some wallets and apps can be configured to require more than one signature, which means that a group of people, businesses, or other entities all must agree to trade in the cryptocurrencies.

Deep Cold Storage

Deep cold storage ensures the entire transaction process happens in an offline environment. There are typically three elements to deep cold storage.

First, the wallet and private key are generated offline, and the signing of transactions happens on a system not connected to the internet in any manner. This ensures it’s never exposed to a potentially compromised system or connection.

Second, details are secured with encryption to ensure that even if the wallet file ends up in the wrong hands, the information is protected.

Third, storage of the encrypted wallet file or paper wallet is generally at a location or facility that has restricted access, such as a safety deposit box at a bank.

Deep cold storage is used to safeguard a large individual cryptocurrency portfolio held for the long term, or for trustees holding cryptocurrency on behalf of others, and is possibly the safest method to ensure a crypto investment remains secure.

Keep Your Software Up to Date

You should always make sure that you are using the latest version of your app or wallet software, which includes important stability and security fixes. Installing updates for all other software on your computer or mobile device is also important to keep your wallet environment safer.

One Last Thing: Think About Your Testament

Your cryptocurrency funds can be lost forever if you don’t have a backup plan for your peers and family. If the location of your wallets or your passwords is not known by anyone when you are gone, there is no hope that your funds will ever be recovered. Taking a bit of time on these matters can make a huge difference.

To the Moon*

Are you comfortable with how you’re managing and backing up your cryptocurrency wallets and keys? Do you have a suggestion for keeping your cryptocurrencies safe that we missed above? Please let us know in the comments.

*To the Moon — Crypto slang for a currency that reaches an optimistic price projection.

The post Securing Your Cryptocurrency appeared first on Backblaze Blog | Cloud Storage & Cloud Backup.

Cryptocurrency Security Challenges

Post Syndicated from Roderick Bauer original https://www.backblaze.com/blog/cryptocurrency-security-challenges/

Physical coins representing cyrptocurrencies

Most likely you’ve read the tantalizing stories of big gains from investing in cryptocurrencies. Someone who invested $1,000 into bitcoins five years ago would have over $85,000 in value now. Alternatively, someone who invested in bitcoins three months ago would have seen their investment lose 20% in value. Beyond the big price fluctuations, currency holders are possibly exposed to fraud, bad business practices, and even risk losing their holdings altogether if they are careless in keeping track of the all-important currency keys.

It’s certain that beyond the rewards and risks, cryptocurrencies are here to stay. We can’t ignore how they are changing the game for how money is handled between people and businesses.

Some Advantages of Cryptocurrency

  • Cryptocurrency is accessible to anyone.
  • Decentralization means the network operates on a user-to-user (or peer-to-peer) basis.
  • Transactions can completed for a fraction of the expense and time required to complete traditional asset transfers.
  • Transactions are digital and cannot be counterfeited or reversed arbitrarily by the sender, as with credit card charge-backs.
  • There aren’t usually transaction fees for cryptocurrency exchanges.
  • Cryptocurrency allows the cryptocurrency holder to send exactly what information is needed and no more to the merchant or recipient, even permitting anonymous transactions (for good or bad).
  • Cryptocurrency operates at the universal level and hence makes transactions easier internationally.
  • There is no other electronic cash system in which your account isn’t owned by someone else.

On top of all that, blockchain, the underlying technology behind cryptocurrencies, is already being applied to a variety of business needs and itself becoming a hot sector of the tech economy. Blockchain is bringing traceability and cost-effectiveness to supply-chain management — which also improves quality assurance in areas such as food, reducing errors and improving accounting accuracy, smart contracts that can be automatically validated, signed and enforced through a blockchain construct, the possibility of secure, online voting, and many others.

Like any new, booming marketing there are risks involved in these new currencies. Anyone venturing into this domain needs to have their eyes wide open. While the opportunities for making money are real, there are even more ways to lose money.

We’re going to cover two primary approaches to staying safe and avoiding fraud and loss when dealing with cryptocurrencies. The first is to thoroughly vet any person or company you’re dealing with to judge whether they are ethical and likely to succeed in their business segment. The second is keeping your critical cryptocurrency keys safe, which we’ll deal with in this and a subsequent post.

Caveat Emptor — Buyer Beware

The short history of cryptocurrency has already seen the demise of a number of companies that claimed to manage, mine, trade, or otherwise help their customers profit from cryptocurrency. Mt. Gox, GAW Miners, and OneCoin are just three of the many companies that disappeared with their users’ money. This is the traditional equivalent of your bank going out of business and zeroing out your checking account in the process.

That doesn’t happen with banks because of regulatory oversight. But with cryptocurrency, you need to take the time to investigate any company you use to manage or trade your currencies. How long have they been around? Who are their investors? Are they affiliated with any reputable financial institutions? What is the record of their founders and executive management? These are all important questions to consider when evaluating a company in this new space.

Would you give the keys to your house to a service or person you didn’t thoroughly know and trust? Some companies that enable you to buy and sell currencies online will routinely hold your currency keys, which gives them the ability to do anything they want with your holdings, including selling them and pocketing the proceeds if they wish.

That doesn’t mean you shouldn’t ever allow a company to keep your currency keys in escrow. It simply means that you better know with whom you’re doing business and if they’re trustworthy enough to be given that responsibility.

Keys To the Cryptocurrency Kingdom — Public and Private

If you’re an owner of cryptocurrency, you know how this all works. If you’re not, bear with me for a minute while I bring everyone up to speed.

Cryptocurrency has no physical manifestation, such as bills or coins. It exists purely as a computer record. And unlike currencies maintained by governments, such as the U.S. dollar, there is no central authority regulating its distribution and value. Cryptocurrencies use a technology called blockchain, which is a decentralized way of keeping track of transactions. There are many copies of a given blockchain, so no single central authority is needed to validate its authenticity or accuracy.

The validity of each cryptocurrency is determined by a blockchain. A blockchain is a continuously growing list of records, called “blocks”, which are linked and secured using cryptography. Blockchains by design are inherently resistant to modification of the data. They perform as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable, permanent way. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority. On a scaled network, this level of collusion is impossible — making blockchain networks effectively immutable and trustworthy.

Blockchain process

The other element common to all cryptocurrencies is their use of public and private keys, which are stored in the currency’s wallet. A cryptocurrency wallet stores the public and private “keys” or “addresses” that can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger (blockchain), effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet.

What is a cryptocurrency address?

Cryptocurrency “coins” can be lost if the owner loses the private keys needed to spend the currency they own. It’s as if the owner had lost a bank account number and had no way to verify their identity to the bank, or if they lost the U.S. dollars they had in their wallet. The assets are gone and unusable.

The Cryptocurrency Wallet

Given the importance of these keys, and lack of recourse if they are lost, it’s obviously very important to keep track of your keys.

If you’re being careful in choosing reputable exchanges, app developers, and other services with whom to trust your cryptocurrency, you’ve made a good start in keeping your investment secure. But if you’re careless in managing the keys to your bitcoins, ether, Litecoin, or other cryptocurrency, you might as well leave your money on a cafe tabletop and walk away.

What Are the Differences Between Hot and Cold Wallets?

Just like other numbers you might wish to keep track of — credit cards, account numbers, phone numbers, passphrases — cryptocurrency keys can be stored in a variety of ways. Those who use their currencies for day-to-day purchases most likely will want them handy in a smartphone app, hardware key, or debit card that can be used for purchases. These are called “hot” wallets. Some experts advise keeping the balances in these devices and apps to a minimal amount to avoid hacking or data loss. We typically don’t walk around with thousands of dollars in U.S. currency in our old-style wallets, so this is really a continuation of the same approach to managing spending money.

Bread mobile app screenshot

A “hot” wallet, the Bread mobile app

Some investors with large balances keep their keys in “cold” wallets, or “cold storage,” i.e. a device or location that is not connected online. If funds are needed for purchases, they can be transferred to a more easily used payment medium. Cold wallets can be hardware devices, USB drives, or even paper copies of your keys.

Trezor hardware wallet

A “cold” wallet, the Trezor hardware wallet

Ledger Nano S hardware wallet

A “cold” wallet, the Ledger Nano S

Bitcoin paper wallet

A “cold” Bitcoin paper wallet

Wallets are suited to holding one or more specific cryptocurrencies, and some people have multiple wallets for different currencies and different purposes.

A paper wallet is nothing other than a printed record of your public and private keys. Some prefer their records to be completely disconnected from the internet, and a piece of paper serves that need. Just like writing down an account password on paper, however, it’s essential to keep the paper secure to avoid giving someone the ability to freely access your funds.

How to Keep your Keys, and Cryptocurrency Secure

In a post this coming Thursday, Securing Your Cryptocurrency, we’ll discuss the best strategies for backing up your cryptocurrency so that your currencies don’t become part of the millions that have been lost. We’ll cover the common (and uncommon) approaches to backing up hot wallets, cold wallets, and using paper and metal solutions to keeping your keys safe.

In the meantime, please tell us of your experiences with cryptocurrencies — good and bad — and how you’ve dealt with the issue of cryptocurrency security.

The post Cryptocurrency Security Challenges appeared first on Backblaze Blog | Cloud Storage & Cloud Backup.

No, Ray Ozzie hasn’t solved crypto backdoors

Post Syndicated from Robert Graham original https://blog.erratasec.com/2018/04/no-ray-ozzie-hasnt-solved-crypto.html

According to this Wired article, Ray Ozzie may have a solution to the crypto backdoor problem. No, he hasn’t. He’s only solving the part we already know how to solve. He’s deliberately ignoring the stuff we don’t know how to solve. We know how to make backdoors, we just don’t know how to secure them.

The vault doesn’t scale

Yes, Apple has a vault where they’ve successfully protected important keys. No, it doesn’t mean this vault scales. The more people and the more often you have to touch the vault, the less secure it becomes. We are talking thousands of requests per day from 100,000 different law enforcement agencies around the world. We are unlikely to protect this against incompetence and mistakes. We are definitely unable to secure this against deliberate attack.

A good analogy to Ozzie’s solution is LetsEncrypt for getting SSL certificates for your website, which is fairly scalable, using a private key locked in a vault for signing hundreds of thousands of certificates. That this scales seems to validate Ozzie’s proposal.

But at the same time, LetsEncrypt is easily subverted. LetsEncrypt uses DNS to verify your identity. But spoofing DNS is easy, as was recently shown in the recent BGP attack against a cryptocurrency. Attackers can create fraudulent SSL certificates with enough effort. We’ve got other protections against this, such as discovering and revoking the SSL bad certificate, so while damaging, it’s not catastrophic.

But with Ozzie’s scheme, equivalent attacks would be catastrophic, as it would lead to unlocking the phone and stealing all of somebody’s secrets.

In particular, consider what would happen if LetsEncrypt’s certificate was stolen (as Matthew Green points out). The consequence is that this would be detected and mass revocations would occur. If Ozzie’s master key were stolen, nothing would happen. Nobody would know, and evildoers would be able to freely decrypt phones. Ozzie claims his scheme can work because SSL works — but then his scheme includes none of the many protections necessary to make SSL work.

What I’m trying to show here is that in a lab, it all looks nice and pretty, but when attacked at scale, things break down — quickly. We have so much experience with failure at scale that we can judge Ozzie’s scheme as woefully incomplete. It’s not even up to the standard of SSL, and we have a long list of SSL problems.

Cryptography is about people more than math

We have a mathematically pure encryption algorithm called the “One Time Pad”. It can’t ever be broken, provably so with mathematics.

It’s also perfectly useless, as it’s not something humans can use. That’s why we use AES, which is vastly less secure (anything you encrypt today can probably be decrypted in 100 years). AES can be used by humans whereas One Time Pads cannot be. (I learned the fallacy of One Time Pad’s on my grandfather’s knee — he was a WW II codebreaker who broke German messages trying to futz with One Time Pads).

The same is true with Ozzie’s scheme. It focuses on the mathematical model but ignores the human element. We already know how to solve the mathematical problem in a hundred different ways. The part we don’t know how to secure is the human element.

How do we know the law enforcement person is who they say they are? How do we know the “trusted Apple employee” can’t be bribed? How can the law enforcement agent communicate securely with the Apple employee?

You think these things are theoretical, but they aren’t. Consider financial transactions. It used to be common that you could just email your bank/broker to wire funds into an account for such things as buying a house. Hackers have subverted that, intercepting messages, changing account numbers, and stealing millions. Most banks/brokers require additional verification before doing such transfers.

Let me repeat: Ozzie has only solved the part we already know how to solve. He hasn’t addressed these issues that confound us.

We still can’t secure security, much less secure backdoors

We already know how to decrypt iPhones: just wait a year or two for somebody to discover a vulnerability. FBI claims it’s “going dark”, but that’s only for timely decryption of phones. If they are willing to wait a year or two a vulnerability will eventually be found that allows decryption.

That’s what’s happened with the “GrayKey” device that’s been all over the news lately. Apple is fixing it so that it won’t work on new phones, but it works on old phones.

Ozzie’s solution is based on the assumption that iPhones are already secure against things like GrayKey. Like his assumption “if Apple already has a vault for private keys, then we have such vaults for backdoor keys”, Ozzie is saying “if Apple already had secure hardware/software to secure the phone, then we can use the same stuff to secure the backdoors”. But we don’t really have secure vaults and we don’t really have secure hardware/software to secure the phone.

Again, to stress this point, Ozzie is solving the part we already know how to solve, but ignoring the stuff we don’t know how to solve. His solution is insecure for the same reason phones are already insecure.

Locked phones aren’t the problem

Phones are general purpose computers. That means anybody can install an encryption app on the phone regardless of whatever other security the phone might provide. The police are powerless to stop this. Even if they make such encryption crime, then criminals will still use encryption.

That leads to a strange situation that the only data the FBI will be able to decrypt is that of people who believe they are innocent. Those who know they are guilty will install encryption apps like Signal that have no backdoors.

In the past this was rare, as people found learning new apps a barrier. These days, apps like Signal are so easy even drug dealers can figure out how to use them.

We know how to get Apple to give us a backdoor, just pass a law forcing them to. It may look like Ozzie’s scheme, it may be something more secure designed by Apple’s engineers. Sure, it will weaken security on the phone for everyone, but those who truly care will just install Signal. But again we are back to the problem that Ozzie’s solving the problem we know how to solve while ignoring the much larger problem, that of preventing people from installing their own encryption.

The FBI isn’t necessarily the problem

Ozzie phrases his solution in terms of U.S. law enforcement. Well, what about Europe? What about Russia? What about China? What about North Korea?

Technology is borderless. A solution in the United States that allows “legitimate” law enforcement requests will inevitably be used by repressive states for what we believe would be “illegitimate” law enforcement requests.

Ozzie sees himself as the hero helping law enforcement protect 300 million American citizens. He doesn’t see himself what he really is, the villain helping oppress 1.4 billion Chinese, 144 million Russians, and another couple billion living in oppressive governments around the world.

Conclusion

Ozzie pretends the problem is political, that he’s created a solution that appeases both sides. He hasn’t. He’s solved the problem we already know how to solve. He’s ignored all the problems we struggle with, the problems we claim make secure backdoors essentially impossible. I’ve listed some in this post, but there are many more. Any famous person can create a solution that convinces fawning editors at Wired Magazine, but if Ozzie wants to move forward he’s going to have to work harder to appease doubting cryptographers.

Hijacking Computers for Cryptocurrency Mining

Post Syndicated from Bruce Schneier original https://www.schneier.com/blog/archives/2018/03/hijacking_compu.html

Interesting paper “A first look at browser-based cryptojacking“:

Abstract: In this paper, we examine the recent trend towards in-browser mining of cryptocurrencies; in particular, the mining of Monero through Coinhive and similar code-bases. In this model, a user visiting a website will download a JavaScript code that executes client-side in her browser, mines a cryptocurrency, typically without her consent or knowledge, and pays out the seigniorage to the website. Websites may consciously employ this as an alternative or to supplement advertisement revenue, may offer premium content in exchange for mining, or may be unwittingly serving the code as a result of a breach (in which case the seigniorage is collected by the attacker). The cryptocurrency Monero is preferred seemingly for its unfriendliness to large-scale ASIC mining that would drive browser-based efforts out of the market, as well as for its purported privacy features. In this paper, we survey this landscape, conduct some measurements to establish its prevalence and profitability, outline an ethical framework for considering whether it should be classified as an attack or business opportunity, and make suggestions for the detection, mitigation and/or prevention of browser-based mining for non-consenting users.