ssme-thesis/docs/_posts/2019-05-03-Moneror-usage.md

layout	title	subtitle	gh-repo	gh-badge	tags
post	Monero usage	From wallets to multisig	daattali/beautiful-jekyll	star fork follow	wallet storage portals

4 Monero Usage

As pointed out in the Chapter 3.3, Monero is one of the cryptocurren- cies that aim to implement as complex anonymity system as possible. Moreover, because of that not only the underlying technology of the network is different from other cryptocurrency projects but the user side as well.

4.1 Wallets

The essential part of every currency is the user’s ability to access stored funds. In cryptocurrency, this is represented by the wallet and associ- ated software. Overview of the wallet storage methods is described in the Table 4.1. Monero wallet contains information that is necessary to send and receive Monero currency. Each wallet is encrypted by the password set in the creation process. Typical wallet created using Monero software named example-wallet consists of:

• example-wallet.keys file - Is an encrypted file containing private spend key and view key together with wallet address. - Keys file also contains user preferences related to transac- tions and wallet creation height, so wallet software will only read blockchain from the wallet creation point. - Using this file, the user can restore the wallet by using the monero-wallet-cli command: monero-wallet-cli –generate-from-keys

• example-wallet file - Acts as an encrypted cache for wallet software that contains: ∗ List of outputs of transactions that are associated with the wallet, so it does not need to scan the blockchain every time after startup. ∗ History of transactions with metadata containing trans- action (TX) keys.

• example-wallet.address.txt file - Stores unencrypted information containing generated wal- let address. - With recent address-based attacks that swap wallet ad- dresses found in clipboard or files on the hard drive for the attacker’s wallet address, this poses a security risk [37].

• Mnemonic seed - Mnemonic seed is a 25-word phrase which the last word is being used as a checksum. Together they represent a 256-bit integer that is the accounts private spend key. - By having accounts private spend key, wallet software can derive private view key by hashing private key with Keccak- 256. That produces another 256-bit integer that represents private view key. - Both public keys are then derived from newly recovered private keys.

Example of Monero wallet address and mnemonic seed:

• Wallet address - 461TWLQhsxrR9dD4CXk4p1RRxAAQ3YCEDhNiGCQjj5 QA33ohhZPnCX6346EyEwC7TiRSB3XB8KgNaJ4vThd5N pQqRkGab66
• Mnemonic seed - serving odometer nifty flippant worry sphere were thorn putty bogeys lyrics feast fawns input biscuit hobby outbreak rash tucks dwelt liquid azure inexact isolated liquid

4.1.1 Wallet types

As Monero wallet can be represented as little as one file or 25 words, it is rather a small piece of information which the user needs to store in the safe place to keep account under own control. To do that, there exist two main types of wallets:

• Hot wallet - Refers to wallet software running on a computer that is connected to the Internet, thus Monero network. By being online, the user can verify incoming transactions, spend from the wallet and check balance as well. - As this type of wallet is not air-gapped (not connected to the Internet), this poses an external intrusion risk. - The hot wallet can also refer to web-based or exchange- based wallet that is explained further in this Chapter.

• View-only wallet - Is a wallet containing only private view key pair to see transactions associated with the wallet. - As this is a view-only wallet, the user can see incoming transactions but is not able to spend, sign or view outgoing transactions. That results in incorrect balance when the wallet is used for sending funds.

• Cold wallet - Is an offline solution to storing wallet seed or private keys on storage media. Using method, media storing wallet in- formation have no direct access to the Internet. The storage medium can be represented by an external hard drive, air- gapped computer as well as paper with wallet seed written on it. - That comes with increased security from the IT standpoint, but the usability of the cryptocurrency suffers. That is mainly due to the hassle of working with funds when the user wants to spend them as it requires: ∗ Cold wallet imported into wallet software in the air- gapped computer. ∗ A view-only wallet connected to the Internet. - This way, the user can generate an unsigned transaction on the view-only wallet, transfer it for signing to the air- gapped computer and then back to submit transfer to the Monero network.

• Exchange hosted wallet - In the exchange wallet, users funds are stored under an online account in an online exchange. - As opposed to a regular wallet, there is no wallet soft- ware or seed required as the whole balance and transaction system is run by the third party. Funds can be controlled through users online account that accessible by traditional username and password. - This poses a risk as the third party has complete access to users funds and the account’s security is directly depen- dent on exchanges security measures as Two Factor Au- thentication (2FA) implementation, IP restriction or email verification.

• Web-based wallet - Web wallet represents server based Monero client that is served to the user in the browser. By using a web wallet, the user can access funds from any Internet-connected device by sharing: ∗ Mnemonic seed or private spend and view key to send and receive funds. ∗ Public view key and wallet address to view incoming transactions to the wallet.

• Hardware wallet - Dedicated hardware solution like Ledger Nano S is still in its beta phase [38]. - Due to lack of real hardware wallet, the community around Monero recommends as the alternative a USB drive with a live distribution of Linux coupled with persistent storage where Monero client and users private key pairs are stored. - Although this alternate solution effectively rules out host operating system, there is still a way to capture viable in- formation. Especially when interacting with an untrusted machine, where attacker captures GPU output or uses a hardware keylogger to log the users activity.

4.1.2 Attacking the wallet

With the rapid expansion of cryptocurrencies from 2014 to 2018, this area became a significant spot for malware development [39]. As there are many attack vectors, this Section aims to give info about malicious activities on users wallets.

Wallet thieves

Aim to compromise the system in a way that malware finds wallet files and steals cryptographic keys or seed belonging to the wallet. Although in Monero, keys are encrypted while stored on the disk. When running wallet software, keys can be obtained from memory. This attack can also be performed by distributing malicious wallet client software.

Cloud storage

Cloud storage provides an easy way of sharing files between devices as well as users. As the user does not need to set up the infrastructure and the majority of the services provide free tier, it is usual for people to take this for granted as a safe place to store files [40]. This way, the user’s security depends on the following factors:

• Wallet encryption on the file level, user password habits.
• Account security – login implementation, 2FA.
• Client application implementation for caching and data transfer.
• Vendors storage system security.

Delivery chain

Hardware wallets like Ledger are built to ensure the safety of users coins. Therefore the owner of such a device should be pretty con- fident when using this device that came with original undisrupted packaging. For this attack, malicious vendor puts pre-generated mnemonic seed on a scratchpad. This piece of paper is made to look like an official one-time generated secret key to the wallet for the user. This way when

Malicious seed generation

Similar to Delivery chain attack, the attacker in this scenario provides service that offers secure seed generation to obtain seed information belonging to the wallet. That is usually done by running a malicious web service that offers secure seed generation for cryptocurrencies or developing a standalone software for download. After the user generates the seed, a package with seed data is automatically sent to the attackers listening service and then saved to the database. Both parties know the private information and can spend funds from the wallet.

4.2 Local and remote node

To spend or view the balance in the wallet, the user is required to have a wallet client software or use third party services to access the Monero network. This Section covers the most common type of accessing the funds, hot wallet in combination with official Monero client software available athttps://getmonero.org/downloads/. Monero client requires to be in synchronization with the network to show the correct balance as well as to work with the funds. That is done by either running a full local node or connecting to the remote node.

The node is a part of the cryptocurrency network that keeps a synced copy of blockchain in the local storage and provides a service that enables clients to access the information from the blockchain file. In Monero client software, this is represented bymonerod, a separate daemon which synchronizes with the network.

The local node is the default option when running wallet soft- ware, using monerod client downloads from Monero network the blockchain and stores it in local storage. As of July 2018, blockchain size is about 44.3 GB. By running local node, client can independently verify transactions as well as blockchain state.

The remote node , on the other hand, represents a lighter ver- sion with slightly less privacy when it comes to working with the wallet. By either choosing in GUI to connect to the remote node or running cli with parameter .\monero-wallet-cli.exe –daemon-address node.address:port , the client connects to the remote node and starts scanning the blockchain as if it was a local one. Comparison of the node types can be found in the Table 4.2.

Local node Remote node Blockchain stored on locally Blockchain stored remotely Observable traffic between nodes

4.3 Multisig implementation

Monero started to support multisignature transactions and addresses by 17th of December 2017 when codebase for this feature was merged into master by Fluffypony [41]. Multisig became available in the Lithium Luna release that was released 23rd of July 2018 [42]. Multisig in a cryptocurrency is a feature that requires the multisig transaction to be signed by all keys that are required. For multisig, one can create a multisig wallet that is designed as follow:

• 1-of-2 - Requires one of two participating parties to sign a transac- tion. - This scheme acts as a shared wallet where each of the key holders can spend funds without the other party signing the transaction.
• 2-of-2 - Requires both parties to sign a transaction. - Each side has to agree to spend funds and sign the transac- tion.
• M-of-N - Requires M keys of N to sign a transaction, note that M is a subset of N.

4.3.1 Multisig usage

After Lithium Luna release, only Monero wallet CLI software is ready for processing multisig transactions. In the Figures 4.2 and 4.3 example scheme of 2-of-2 is presented with user A as blue and user B as green for wallet generation and transaction using Monero multisig feature.

4.4 Problems in Monero environment

Monero privacy features are appreciated not only by privacy savvy users but malware, phishing, and other malicious software creators as well. The main reason to use Monero over other cryptocurrencies for them is that Monero is not only harder to trace but when the attack is implemented well, after moving funds in separate batches to multiple wallets an over more extended period, no one will be able to associate the coins with the malicious activity. There are four main problems concerning Monero environment:

1. Ransomware

Malware that encrypts user files and then demands a ransom in the form of cryptocurrency, computer and files are no longer accessible unless the user pays the required amount. During its peak time, all popular ransomware demanded payment in Bitcoin. As malware developers started to get their coins targeted by projects such as one from Netherlands’ police called No More Ransom available atnomoreransom.org[43, 44]. Because of this targeting, they had to choose another cryptocurrency to solve this problem, and the solu- tion was Monero [45]. Kirk is an example of Monero malware that is included in the Figure 4.5 [46].

Figure 4.4: Kirk ransomware that demands payment in Monero.

2. Scam portals

As mentioned in the Section Wallets 4.1, online wallets usage is a risky thing due to entrusting user’s private keys to the third party. Users often choose them as they are not required to have any additional software. Due to this fact, there are more than ten domains that copy the design, functionality, and name ofmymonero.comofficial online wallet with added code that steals the user’s wallet data. Detailed list of domains is available at https://www.reddit.com/r/Monero/wiki /avoid. Aside from direct scams, there are also services offering wallet services which have their codebase closed and store all wallet infor- mation. The best-known example of such service is freewallet.org, that is strongly criticized for closed source as well as funds that are reported as missing from user’s accounts [47].

3. Crypto-jacking attack

Crypto-jacking a type of attack where the attacker delivers a malicious payload to the user’s computer. Rather than rendering the device unusable either by blocking like ransomware, part of system resources is used for mining.

Figure 4.5: Some websites openly state that they mine Monero.

Crypto-jacking is becoming more frequent than ransomware as it has proven that steady but low income is more profitable than one- time payment in the form of ransomware [48].

4. Black Ruby

Interesting intersection of ransomware and crypto-jacking category is Black Ruby malware that combines features of both. First, it encrypts files on the target computer and then proceeds to mine Monero using XMRig (as explained in the Section 7.2) at full CPU load [49].

4.5 Monero use case

Aside from code quality and features, another important factor in cryptocurrency success are the ways how users can spend the funds. While numerous community around Monero that centers around Reddit /r/Monero created /r/XMRtrader , there are also projects that support Monero in day-to-day use like https://xmr.to/. What is most noticeable tough, are darknet markets, that started to support payments by Monero. This results in the rather negative use case of the crypto as payments by Monero are not directly likable to one’s wallet as described in the Section 3.5.2.

Although darknet markets may support Monero, a short inspection of Top 10 markets revealed that only 5 of them list Monero as the general way to pay. Rest of them are not forcing the sellers to use Monero. This results at about 40% availability of Monero payment option on these type of markets.