A method for protecting digital assets from permanent loss in the event of private key loss

Authors

  • Oleg Boiko National Technical University of Ukraine "Igor Sikorsky Kyiv Polytechnic Institute", Institute for Applied System Analysis, Department of Artificial Intelligence, Ukraine https://orcid.org/0009-0002-3424-8234

DOI:

https://doi.org/10.20535/kpisn.2025.1.309585

Keywords:

Digital Assets

Abstract

Background. Cryptocurrencies have introduced a decentralized and secure way to transfer value, with private keys playing a crucial role in authorizing transactions and verifying ownership. However, the loss or destruction of private keys leads to permanent asset loss, presenting a significant risk to users and hindering broader adoption. 

Objective. This paper proposes a smart contract-based mechanism to mitigate the risk of losing digital assets in the event of permanent private key loss, providing an automated recovery procedure without compromising the security of digital assets. 

Methods. The proposed solution leverages smart contract technology to create an automated recovery process. Key components include a protected address (Address A), a predefined recovery address (Address B), and a time interval (Period T). If no outgoing transactions are registered during Period T, the smart contract transfers assets from Address A to Address B. 

Results. The proposed algorithm ensures that in the event of private key loss, assets are automatically transferred to a backup address after Period T. This process ensures users maintain full control over their assets, allowing adjustments to Period T and Address B as needed. 

Conclusions. The smart contract-based recovery mechanism provides a reliable and user-friendly solution to address the consequences of possible permanent private key loss. It complements existing solutions, offering an additional layer of security and enhancing user confidence in decentralized financial systems. Future research might focus on improving the security and reliability of the backup address. 

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Published

2025-04-24