Bitcoin Security master’s thesis gives an overview of the peer-to-peer cryptographic currencies security model. This paper introduces Bitcoin and its design principles and cryptographic primitives used to create the system. The main focus of the thesis is on Bitcoin security. It seeks to develop a better understanding of how Bitcoin is secured by analyzing different attack methods towards the system, their relations and defence mechanisms in Bitcoin design.

We show that Bitcoin uses strong cryptography that is currently unbreakable, but the system can be attacked with a lot of computing power and special attacking machines connecting to the network. Those attacks are however a lot harder than client-side attacks due to users big responsibility levels in peer-to-peer currency. Client-side attacks include wallet theft, breaking the users’ anonymity and denial-of-service.

The thesis is divided into 2 main parts: introduction of Bitcoin and Bitcoin security. In introductory chapter 2 we look at how Bitcoin system works. As Bitcoin is rather complex system this part describes it from a view-point that gives the readers needed background to understand the attacks presented in chapter 3. This means that we are mainly studying technical principles like peer-to-peer design, publicly held hash-linked chain that acts as a database of all transactions and use of public-key cryptography for sending transactions as those are the main innovations in Bitcoin system and also the most important properties for attackers.

Introduction also includes Bitcoins history with short overview of previous works that have influenced creation of the currency and reasons for inventing digital cash systems such as Bitcoin. We end our introduction with looking at the most important cryptographic principles used for creating Bitcoin. Chapter 3 focuses on possible weaknesses of Bitcoin. We give an overview on client-side attacks that target Bitcoin users like tackling their anonymity and stealing the wallet.

Before that we present our main focus: technical vulnerabilities of the system as a whole. We look at breaking the cryptography, denial-of-service and double-spending attacks with help of lot of computing power and cancer nodes in more detail. Chapter 3 builds on top of knowledge gained from introductory part and within lies the main contribution: analyzing different attack scenarios and their relations. Chapter 4 summarizes Bitcoin security and gives recommendations to users, Bitcoin businesses and developers.