This question is constantly on people’s minds, “how safe is Bitcoin or the Blockchain, really?”
Before I attempt to answer this question, we first need to understand that NO particular individual, company, bank or government owns Bitcoin or the Blockchain. Bitcoin is a decentralized currency (at least that’s what me and countless others are using it as) and the Blockchain is a central online ledger which keeps track of all Bitcoin transactions taking place in the world.
You can see the ‘live’ transactions of Bitcoins being recorded by visiting Blockchain.info
Here’s what Lester from Cryptocoinsnews also said recently in his piece…
In a report by Swiss multinational financial institution Credit Suisse, bitcoin and blockchain are deemed to be ‘relatively safe’.
Bitcoin has some unique risks, the report noted. The value of the cryptocurrency has been three times more volatile than the price of oil and 11 times more than the post-Brexit exchange rate between the British pound and the U.S. dollar, according to the bank’s markets research department.
Bitcoin transfers are also irreversible, so someone making a mistake entering an account number when making a payment will be out of luck. In addition, if a bitcoin user loses their private key, they can lose all their bitcoin.
Blockchain’s Immune Structure
Bitcoin’s blockchain architecture has demonstrated immunity to hacking risks. The blockchain is not an interconnected series of individual accounts, but a record of past transactions. When a user wants to transfer bitcoins, all computers running the bitcoin software process the sender’s signature through an algorithm and checks the past transactions encoded in the blockchain to ensure the sender owns the bitcoins they say they do.
Other computers then verify the recipient’s work. The transaction is then aggregated with other transactions, and computers running the bitcoin software, known as miners, race to solve a mathematical puzzle to verify the transactions. One miner wins the race, while the others verify the accuracy of the solution. When they agree the transactions are valid, the miner winning the race receives new bitcoins, thereby increasing the bitcoin supply.
A Challenge for Hackers?
Theoretically, someone could hack into the blockchain and alter the record to make it look like previous bitcoin transactions transferred money to the hacker’s account. But it would require huge computing power. Bitcoin users verify a transaction by looking at all past transactions, so a hacker needs to solve the mathematical puzzle linked to a particular block to manipulate it, and also with the blocks that come after it.
Blocks are only considered valid six blocks deep into the chain. The deeper one goes into the blockchain, the more computing power needed to alter records.
A 51 Percent Attack
Concentrated share among bitcoin miners also presents a potential risk. If a single party gained control over 51 percent of the bitcoin network, it could theoretically stop legitimate new transactions from settling or undoing recent confirmations, potentially enabling it to double spend the bitcoins.
Credit Suisse, with 30 percent of the network, has calculated that a malevolent actor has a 40 percent chance of mining six consecutive blocks in one week, enabling them to alter transactions. In the event of a so-called “51 percent attack,” however, bitcoin’s value would plummet. In other words, miners attacking the network would also undermine the value of the same assets they attempted to steal, along with the assets they already own.
To acquire 30 percent of the network, the malevolent actor would need to mine past blocks. Hence, they have a stake in keeping the ledger intact.
Cyber Theft Of Cryptocurrency
Most bitcoin users use online exchanges to exchange fiat currency for bitcoin, and digital wallets that facilitate payments. Both have been suffered cyberattacks. In August 2016, hackers stole 119,756 bitcoins (worth $72million) on deposit with the Bitfinex exchange.
The Mt. Gox exchange filed for bankruptcy in 2014, claiming hackers stole 850,000 bitcoins. Only 24 percent of the coins have been recovered. Japanese prosecutors charged ex-CEO Mark Karpeles with embezzlement. Various articles have laid the blame for the exchange’s problems on unorthodox management.
The bottom line is that blockchain technology and bitcoin trading are relatively safe. Complications arise when people enter the mix.
Well said, Lester. But without the poeple, Bitcoin or the Blockchain will probably have no value.
And here’s the thing…you don’t need to be overly concerned about the safety of Bitcoin or the Blockchain either. Personally, I know it’s very safe or else by now both entities would have been hacked. You need to protect your Bitcoins and keep it safe from hackers and I’ve written a post just on that. How I protect my Bitcoins.
So, just like what Lester said, it would require huge computing power for the hackers to hack in and not to mention they would also need to solve the mathematical puzzle linked to a particular block to manipulate it. Very very tough!
Many hacking attempts have been made in the past by some of the world’s top hackers to hack the Blockchain too but to date, no one’s been successful at it.
What’s your take on this? Tell me in the comments below.