# SmartOTPs: An Air-Gapped 2-Factor Authentication for Smart-Contract Wallets (Extended Version)

## TL;DR

SmartOTPs introduces a secure, flexible, and user-friendly 2-factor authentication framework for smart-contract wallets using OTPs, Merkle trees, and air-gapped authenticators, enhancing security and usability in blockchain crypto management.

## Contribution

It is the first framework to implement OTP-based 2FA in public blockchain wallets, combining air-gapped authenticators with quantum-resistant features.

## Key findings

- OTP aggregation via Merkle trees reduces data transfer size
- Air-gapped authenticators improve security and usability
- Cost of operations is comparable to existing multi-signature solutions

## Abstract

With the recent rise of cryptocurrencies' popularity, the security and management of crypto-tokens have become critical. We have witnessed many attacks on users and providers, which have resulted in significant financial losses. To remedy these issues, several wallet solutions have been proposed. However, these solutions often lack either essential security features, usability, or do not allow users to customize their spending rules. In this paper, we propose SmartOTPs, a smart-contract wallet framework that gives a flexible, usable, and secure way of managing crypto-tokens in a self-sovereign fashion. The proposed framework consists of four components (i.e., an authenticator, a client, a hardware wallet, and a smart contract), and it provides 2-factor authentication (2FA) performed in two stages of interaction with the blockchain. To the best of our knowledge, our framework is the first one that utilizes one-time passwords (OTPs) in the setting of the public blockchain. In SmartOTPs, the OTPs are aggregated by a Merkle tree and hash chains whereby for each authentication only a short OTP (e.g., 16B-long) is transferred from the authenticator to the client. Such a novel setting enables us to make a fully air-gapped authenticator by utilizing small QR codes or a few mnemonic words, while additionally offering resilience against quantum cryptanalysis. We have made a proof-of-concept based on the Ethereum platform. Our cost analysis shows that the average cost of a transfer operation is comparable to existing 2FA solutions using smart contracts with multi-signatures.