The infamous transaction malleability has come to the forefront in the crypto world during and following the drama unfolding at MtGox. In the lead-up to its collapse, MtGox pinned the blame on this phenomenon for its troubles, while other exchanges had to halt withdrawals for several hours as DDoS attacks looked to exploit the vulnerability.
The question arises: are there any cryptocoins out there that are not susceptible to malleability? And if so, do they compromise on security in some other respect? One would imagine that if it were so simple, such a coin should be by far the most popular by now.
First, a word on transaction malleability: With Bitcoin, every transaction in the blockchain is dependent upon the transaction that precedes it. Each transaction ID (txid) is used within the transaction hashing itself in reference to the previous transaction, which represents the coins being spent. The catch is that by definition, there is nobody to sign the validity of the transaction’s signature (everything is self reinforced). Thus, if the txid can somehow be altered during an unconfirmed transaction without invalidating the signature, such “malleability” allows it to still be included in the blockchain and counted twice.
The overwhelming majority of altcoins are based off of Bitcoin’s protocol, technically making this an issue for all of them.
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One exception may be Mastercoin. Peter Todd, developer at Mastercoin explains that unlike Bitcoin, Mastercoin transactions are based on balances and not on previous transactions. The balance is embedded in the signature itself, authorizing the transaction only on condition that everything is balanced.
The disadvantage of this approach is that order integrity isn’t preserved in the event of a blockchain reorganization (if it was so obvious, this design would have been in Bitcoin a long time ago). Mastercoin clients get around the problem by waiting several confirmations to ensure that a reorganization won’t cause issues. In the future, Mastercoin may try to get the best of both worlds by introducing txid-based ordering as found in Bitcoin.
By the same token, Bitcoin can potentially introduce its own protections against malleability.
There are also “2nd generation”cryptocurrencies claiming to have been built independent of Bitcoin, one of the most prominent being Nxt. Some other lesser known coins, not listed on coinmarketcap.com, are claimed to be resistant as well. Further investigation will tell how these stack up in this respect and where they may may compromise elsewhere.