A cryptocurrency is a decentralized digital currency that is designed for secure and private asset transfer and storage. As a currency, it should be difficult to counterfeit and double-spend. In this paper, we review and analyze the major security and privacy issues of Bitcoin. In particular, we focus on its underlying foundation, blockchain technology. First, we present a comprehensive background of Bitcoin and the preliminary on security. Second, the major security threats and countermeasures of Bitcoin are investigated. We analyze the risk of double-spending attacks, evaluate the probability of success in performing the attacks and derive the profitability for the attacker to perform such attacks. Third, we analyze the underlying Bitcoin peer-to-peer network security risks and Bitcoin storage security. We compare three types of Bitcoin wallets in terms of security, type of services and their trade-offs. Finally, we discuss the security and privacy features of alternative cryptocurrencies and present an overview of emerging technologies today. Our results can help Bitcoin users to determine a trade-off between the risk of double-spending attempts and the transaction time delay or confidence before accepting transactions. These results can also assist miners to develop suitable strategies to get involved in the mining process and maximize their profits.
In 1991, the first secure blockchain was proposed by Stuart Haber and W. Scott Stornetta @cite_87 . Their blockchain aimed at certifying the creation or modification of a digital record by digitally time-stamping the record being processed. However, the blockchain was not efficient since each record was independently time-stamped. To improve the efficiency, Merkle trees @cite_95 were incorporated into blockchains in 1992 @cite_49 . They improved the efficiency by handling multiple digital records into one block. Finally, Satoshi Nakamoto implemented the first real blockchain and used it as the core technology for the Bitcoin cryptocurrency system.
@cite_95 @cite_49 @cite_87
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To establish that a document was created after a given moment in time, it is necessary to report events that could not have been predicted before they happened. To establish that a document was created before a given moment in time, it is necessary to cause an event based on the document, which can be observed by others. Cryptographic hash functions can be used both to report events succinctly, and to cause events based on documents without revealing their contents. Haber and Stornetta have proposed two schemes for digital time-stamping which rely on these principles [HaSt 91]. The prospect of a world in which all text, audio, picture, and video documents are in digital form on easily modifiable media raises the issue of how to certify when a document was created or last changed. The problem is to time-stamp the data, not the medium. We propose computationally practical procedures for digital time-stamping of such documents so that it is infeasible for a user either to back-date or to forward-date his document, even with the collusion of a time-stamping service. Our procedures maintain complete privacy of the documents themselves, and require no record-keeping by the time-stamping service.