Cryptocurrency provides positive opportunities, so it shouldn’t come as a surprise that countless people are eager to buy Bitcoin to diversify their portfolios, build savings, and make money for specific goals, such as retirement. Everyone comes to investing with their own agenda. Referred to as digital gold, Bitcoin has a low correlation with other assets, so it’s useful for storing value and hedging inflation. The mining of Bitcoin will come to an end when the coins in circulation reach the threshold of 21 million. The price of Bitcoin surged roughly 4% on October 1 in just a quarter of an hour before settling down below $28,000.
Bitcoin is regarded as hack-proof because transaction records are encrypted, meaning that a person without a private key can’t interpret the information. Attacks on the blockchain are very unlikely, but they do happen. Malicious actors seek to defraud victims, exploiting vulnerabilities in private keys to obtain access to cryptocurrency wallets. The point is that Bitcoin itself can’t be hacked, but interfaces like wallets can offer opportunities for thieves. Websites can be hacked, too, as they’re easy targets.
Blockchain Technology Is Secure by Design
Bitcoin is created, disseminated, exchanged, and stored using a decentralized ledger – in other words, the blockchain. The blockchain isn’t owned by anyone because it functions as an underlying network processed and managed by a system of personal computers. This format that we’ve grown used to was invented in 2008 by Satoshi Nakamoto, who penned the original Bitcoin whitepaper. The peer-to-peer network allows users to trade, buy, and sell Bitcoin without the assistance of a third party. Everyone can view the transactions by accessing the public digital ledger, but it’s not possible to submit or change entries.
The reason why it’s so hard to attack the blockchain is that it doesn’t have a single point of failure, so one failure doesn’t translate into instantaneous loss in activity. By propagating the ledger throughout the network of nodes, Bitcoin eliminates the single point of failure. Each node has a copy of the ledger, which is continually updated as new blocks are added, and before a new transaction can be added to the ledger, all nodes must come to an agreement. Additionally, Bitcoin relies on a consensus mechanism to enhance security. Transactions go through a security verification called Proof of Work, which requires miners to compete against one another to solve complex mathematical puzzles.
An Attacker (Or Group of Attackers) Could Take Control Over the Ledger
If a miner or mining group gains or acquires sufficient hash power to take control of 51% of the blockchain, they could alter the network. It’s possible to block new transactions from being confirmed or change the order of transactions. Reversing transactions allows threat actors to spend digital tokens more than once; it’s impossible to prove that two or more people spent the same amount of Bitcoin. 51% attacks are rare, but that doesn’t mean there aren’t risks to the blockchain. Blockchains with smaller numbers of participants have been attacked by miners. With Bitcoin, it’s next to impossible because the cost of acquiring 51% of the hash rate or staked cryptocurrency is high.
Bitcoin has never been successfully 51% attacked. What is more, it has operated continuously, with no shutdowns. With countless nodes operating from different parts of the world, a single entity would have to attack all the nodes at once. In a worst-case scenario, a major power outage would disrupt communications, and lack of connectivity could prevent nodes in the network from contacting one another, leading to its failure. Nevertheless, worst-case scenarios don’t often occur. Bitcoin is decentralized, so it operates without a financial system or the intervention of the authorities. Governments can ban the use of cryptocurrency, but they can only restrict their use to a specific jurisdiction.
A Few Common Targets Crypto Hackers Focus On
Hacking the blockchain can’t be easily accomplished, so malicious actors focus their attention on other aspects of the cryptocurrency ecosystem to make a profit. These are the main targets of hackers:
Cryptocurrency Wallets
Threat actors actively try to exploit the vulnerabilities in Bitcoin wallets to steal funds, profiting from price movements by manipulating the market. Hackers use a combination of social engineering, phishing scams, and fake wallet apps to get personal information from wallet holders. Malicious actors deceive and manipulate people into handing out sensitive data and performing actions that compromise their security. For example, they might send emails that imitate legitimate wallet services to obtain private keys, passwords, or recovery phrases. If you see transactions that weren’t authorized by you, chances are someone has taken control of your Bitcoin wallet.
Centralized Exchanges
Centralized exchanges aren’t overly complex, which is why they can be used by novice and advanced traders alike to buy or sell Bitcoin at desired prices. Unfortunately, these platforms present a single point of failure, so they’re lucrative targets for cybercriminals. The central authority or the server leaves the entire system open to failure. Most centralized exchanges are vulnerable to Cross-Site Scripting attacks where threat actors inject rogue code into the web pages to redirect users to third-party websites or infect their devices with malicious software.
Smart Contracts
In case you didn’t already know, Bitcoin has built-in support for different types of smart contracts. The only difference between Bitcoin and other blockchains is that smart contracts take a rudimentary form, so it’s not possible to implement more complex code. A smart contract can be hacked if it presents a vulnerability in its source code, meaning that a hacker can alter it and redeem the funds. To identify the weaknesses in smart contracts, it’s necessary to review the code, that is, to carefully examine the agreement’s code to find logical flaws or inconsistencies.
Final Thoughts
The Bitcoin network can’t be hacked, but wallets, centralized exchanges, and smart contracts have been breached by cybercriminals. As you feel pressure to buy Bitcoin at the right moment, threat actors exploit this compulsion to acquire untraceable funds. To reduce the chances of losing your Bitcoin, don’t share your wallet’s private key, use two-factor authentication, and keep some of your cryptocurrency offline.