Prevention of Cryptocurrency Loss from Wrong Receiver Address

Abstract

Digital money such as Bitcoin, Ethereum and Litecoin are blockchain-based cryptocurrencies. In today's financial age, many people are holding and trading cryptocurrencies instead of fiat money or other assets. To transfer money in the centralized banking application, the valid receiver will be checked before enable transaction to be process. To transfer cryptocurrency in blockchain network, there are steps to verify the transactions by the blockchain nodes instead of the central authority. However, most of the verification processes are based on sender’s properties such as sender’s digital signature and sender’s account balance compared to the sending amount, etc. There is no process to verify whether the receiver address is valid or not. From this vulnerability, there is a risk that the sender may input the wrong receiver address. If this mistake happens and the transaction has been confirmed, the sender will lose his cryptocurrency without recovery option. The amount will be transfer to that receiving address, but we cannot know that it is belong to whom or may not belong to anybody. There are many topics in cryptocurrency forum and news that the owner cried about losing of their cryptocurrency. Many of them had mistaken input in receiver address. Up until now, there is no mechanism to protect this mistake. In this paper, we propose a process to verify the receiver address using the blockchain API before constructing and submitting the transaction in blockchain application. If the receiver address does not exist in the same blockchain network, there is a process to notify the sender. This process can prevent the loss of cryptocurrency not only from wrong receiver addresses but also from different network addresses.