A Simple Yet Efficient Approach to Combat Transaction Malleability in Bitcoin

Abstract

Bitcoin has emerged as a popular crypto currency. It was introduced in 2008 by Satoshi Nakamoto (A pseudonym). The reasons for its popularity include its decentralized nature, double spending prevention, smart strategy to counter inflation and providing a certain degree of anonymity. In February 2014, Bitcoin community was shocked to know that a Japan based company named Mt. Gox who, were dealing 70 percent of Bitcoin transactions that time, announced that they were hit by a bug in the Bitcoin protocol named as Transaction Malleability. The company lost hundreds of millions of dollars worth bitcoin. Soon after this, another company SilkRoad 2 also claimed to have affected by same issue. To date there is little research literature available on this recent issue and it is hard to grasp this problem. The purpose of writing this paper is twofold. We discuss Transaction Malleability in detail with respect to the structure of Bitcoin transactions in order to make reader properly understands what Transaction Malleability is and how it works. We also propose a mechanism to counter this issue.