Bitcoin Can Topple The Might Of Banks Say Researchers But Needs To Be More Secure

The virtual money was made possible by modern encryption technology. Every Bitcoin is secured by a key; every transaction that the (anonymous) users perform is regis­tered so that the same coin cannot be used twice. However, the verifica­tion of a payment usually takes ten whole minutes. Sometimes, the seller even has to wait for an hour before he can be sure that the money trans­ferred is actually his. For online trad­ers who sell books on the internet, this amount of time is not a problem. For quicker transactions, such as pur­chasing a hamburger at a snack bar, however, it is a major obstacle. If the buyer is not to wait unnecessarily long, the seller has to hand over the goods without any definitive confir­mation.

Together with Ghassan Karame and Srdjan Capkun, Elli Androulaki, a postdoc at the Institute of Information Security, managed to demonstrate that there is actually a security loophole here, even if it has never been exploited in concrete daily life. With an elaborate configuration, the buyer can actually spend his electronic coins twice: first, he buys the goods he desires; then he transfers the same amount to his own account. As the transactions are verified via a complex process in the Bitcoin network and not by a central office, the buyer can perform an exchange manoeuvre: the seller sees that the Bitcoins have been transferred to his account, so he is willing to dispatch the goods. However, if the buyer is clever enough, the network only registers the second illegal transaction instead of the first legal one, and the buyer ends up with both: the goods and the money.

If Bitcoin is to establish itself as an everyday, viable alternative, this gap needs to be plugged, confirms Capkun, in whose group the study was conducted  “We are already in talks with the operators of the Bitcoin network and have proposed a concrete solution, which is now due to be implemented.”