Cryptocurrency recovery framework using pre-signed transaction

Abstract

The bankruptcy of major cryptocurrency exchange FTX has raised questions about trust in third-party custody of cryptocurrencies. Accordingly, more users are choosing self-custody methods using personal wallets to ensure the safety of their assets. But they may encounter challenges in using the wallets due to the risk of losing their assets. When using a cryptocurrency wallet, the loss of private keys and recovery words results in the permanent loss of assets in the wallet. There are limitations to individuals effectively storing recovery words; therefore, a means of complementation is necessary. In this paper, we propose a framework for recovering assets in the case of private key loss by storing recovery transactions. This framework creates a recovery transaction that transfers the remaining asset to a pre-specified wallet address whenever the asset of the wallet changes. Without execution, it is sent to and stored on the server of the recovery service provider. If users are later unable to access their crypto assets, they may submit a recovery request to the service provider following identity verification. Through experiments, we verified that the proposed framework is functional within the Bitcoin operating environment (TestNet) and analyzed the execution time. In addition, we analyzed the advantages and limitations of the proposed approach through a qualitative analysis.