Buy Bitcoin Safely with a Credit Card

Term DefinitionAddress-based CryptocurrencyA cryptocurrency that uses addresses to receive and send transactions, such as Bitcoin and Ethereum. A Bitcoin address is derived from a public key and is a unique identifier for receiving Bitcoins. BlockchainA decentralized public ledger that records all cryptocurrency transactions. CryptocurrencyA digital or virtual currency that uses cryptography to secure transactions.Crypto Key PairA cryptographic key consisting of a public key and a private key that is used to authorize cryptocurrency transactions.Crypto WalletA software or hardware used to store cryptocurrency key pairs and manage cryptocurrency transactions.Digital SignatureA method of encrypting data using a private key to prove the origin and integrity of the data.Bank (B)A financial institution that issues credit cards and verifies the identity of users.User (U)A user who wishes to purchase Bitcoin using a credit card.Vendor (V)A merchant that sells Bitcoin.

Short Answer Question

Briefly describe the security issues with traditional methods of purchasing Bitcoin. Traditional methods of purchasing Bitcoin lack a verifiable binding between the user and the Bitcoin address, which results in the possibility of chargebacks by the user.

Explain how the Unique-Public-Key (UPK) solution enhances the security of Bitcoin transactions. The UPK solution ensures that users cannot deny transactions by establishing a binding between user identity information and Bitcoin address from the bank's perspective.

In the first UPK solution, how does a user register a Bitcoin address with the bank? The user needs to log in to the bank's website, authenticate, and then register their Bitcoin address to establish a binding relationship with the bank.

How does the second UPK solution use digital signatures to verify user identity? The user uses a private key to digitally sign encrypted data containing identity information, and the bank verifies the signature to confirm the user's ownership of the Bitcoin address.

Explain the role of the bank's Account Identification Service (AIS) in verifying Bitcoin purchase requests. The AIS stores the binding information between the user and the Bitcoin address, and the vendor can query the AIS to confirm whether the user has registered the address.

Why is it important to restrict access to the bank's AIS? Because unauthorized access can be used for malicious purposes, such as identifying the real identity of a Bitcoin user.

In the third UPK solution, how is the binding of a published email to a Bitcoin address utilized? The bank can establish the binding between the user's identity and the Bitcoin address by confirming that the user has registered the same email address, or by sending an email containing a unique link for authentication.

Briefly describe how malicious wallets pose a security threat to users. Malicious wallets can steal a user's credit card information or private keys, resulting in financial loss.

List the types of networks that may be used in information processing systems. Information processing systems can use the Internet, wide area networks, local area networks, satellite networks, telephone networks, cellular networks, and wireless networks.

In addition to Bitcoin, what other cryptocurrencies can the described techniques be applied to? These techniques can be applied to any address-based cryptocurrency, such as Ethereum, Litecoin, etc.