Researchers at the University of Edinburgh in the U.K. say they have conducted an in-depth security analysis of the communications systems used in popular models of Bitcoin wallet.
The team identified some security flaws, but also determined how some of them might be rectified.
They created a piece of malware that could intercept messages sent between hardware wallets and computers where users manage their bitcoin accounts, and tests confirmed that users' privacy is unprotected, and also showed how easy it is to access bitcoin funds managed by such devices and divert them to a different account.
Based on the research, the team has proposed a solution for improving the security of such systems by encrypting specific messages sent between bitcoin wallets and computers, which they say makes them much more secure.
The researchers say their technology could be incorporated into all bitcoin hardware wallets to offer better protection against hackers.
From University of Edinburgh
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