Is Bitcoin Hackable?
September 04, 2020
With the growing popularity of Bitcoin, the concerns revolving around it are increasing, too. Especially with it being technology-based, there is the question of whether it can be hacked or not. There are a lot of technology systems being hacked these days, and thus, you would want to be more secure while choosing anything that has to do with technology. This article is here to help you with that and show you whether Bitcoin can be hacked or not and the reasons for it.
Has Bitcoin Been hacked Before?
The plain answer is no. If you have heard or seen the news about a Bitcoin hacking, what has been hacked is a Bitcoin wallet or the people that own these wallets. Mostly, as a result of this, people have lost their Bitcoin. However, Bitcoin itself has never been compromised.
Why Is Bitcoin Considered Hack-proof?
Bitcoin is considered hack-proof because of the systems it is part of which include:
Blockchain & Nodes
Due to this decentralised and distributed system, failure in one section cannot affect the whole system. The system is widespread in such a way that if you truly try to attack the system, you have to attack the whole system at once and do it from a large number of entry points. It is a proven fact that this is virtually impossible, as it has not happened yet. This high level of blockchain security makes digital currency a viable option for many users around the world.
These are what keeps the Blockchain peer-to-peer running. With the decentralised nature of Blockchain technology, nodes help to broadcast messages across the network and ensure that transactions are secure. Nodes make sure that the same transaction using the same digital token does not happen more than once. Before a transaction is completed, details or conditions of that exchange are checked with other parts of the network through nodes. If the conditions do not match, the transaction is not allowed. There are so many nodes, which are randomly generated that hacking them is virtually impossible, still to this day.
Hashing & Mining
Hashing enables security during transactions between people. A formula or an algorithm generates a hash that is unique to the transmission message of the exchange and keeps it secure from being tampered. In Bitcoin, hashing means that transactions are taken as input and run through a hashing algorithm that generates an output in the form of a unique code of fixed length.
Bitcoin is mined by solving highly complex mathematical problems. These problems are created by Bitcoin hashing. When these problems are solved, new blocks are added to the Blockchain. Before a block can fully be added and confirmed in the Blockchain, all the nodes have to agree, and then the Bitcoin ledger is updated.
How Would Bitcoin Be Hacked?
With decentralisation and thousands of copies of nodes getting scattered across the computer network, hacking Bitcoin is extremely tough and has never happened. Let’s look at a theoretical way by which Bitcoin could be compromised. The only one way this could happen is called a 51% attack.
It is called a 51% attack because a hacker would need to use more than half of the computers involved in Bitcoin, to hack it successfully. The hacker would have to take control of not just half, but the majority of the network’s mining power, which is the hash rate. Once the hacker has taken control, the transaction history could be changed.
A majority of the network is necessary-hence the 51%- to successfully hack it. However, taking control of this majority is extremely hard and very unlikely to happen.
How are cryptocurrencies stolen?
Although Bitcoin is un-hackable, it is a different story for people who possess and use Bitcoin in daily transactions they make.
Cybercriminals can hack trading platforms. From the trading platforms, hackers can get API (Application Programming Interface) keys. This becomes one gateway into the system. These keys can be used to program bots that can withdraw funds from the accounts or to perform fraudulent trades. An instance is when Coincheck, a Tokyo-based exchange was infiltrated in 2018, and over $500 million in cryptocurrency/currency was stolen.
Third-party applications can keep traders up to date on cryptocurrency prices. They can also calculate potential profits on a network. However, they come with one potential security risk. The data of the users can be used as information for hackers since the credentials obtained from the data can be used to target the customers that use the applications.
Hackers often create dummy sites and registration forms with in-built lines of code that can steal a user’s personal information. This information can be sent to a data server and can be sold in the black market and used to create accounts on foreign platforms.
By posing as legitimate websites, crypto criminals get access to user credentials. They don’t only do this through sites, but via legitimate-looking emails that direct users to these sites. These user credentials can be used for online activities without the knowledge of the user.
A notable exchange hack is the Twitter hack. Influential accounts were broken into and used to get other users to exchange Bitcoins to the wallets of criminals.
Another hack is that of Mt Gox, which was a business that allows customers to trade for other assets in different currencies. In 2010, Mt Gox was redeployed into a Bitcoin exchange, that is, a business that allows trade cryptocurrencies and other digital currency for other assets. Due to inadequate safety measures, hackers stole more than $850,000 in Bitcoins. This attack led the exchange to bankruptcy in 2014 and left a lot of people feeling quite angry.
Bitcoin is decentralised, distributed, and secured from hacking, primarily due to the systems it’s associated with, such as Blockchain. Blockchain technology makes it extremely difficult for people or bots to penetrate the network.
Although Bitcoin cannot be hacked, the same cannot be said for the user’s digital wallets. Hackers can steal Bitcoins by gaining access to user wallets. People therefore need to safeguard their bitcoins and be on the lookout for fraudulent transactions or sites. They should also be careful with where they share their personal and digital credentials.
Still, to this day many people worry about what would happen if the Bitcoin network collapses due to a hack. However, as we have explained a hack in our modern world is almost impossible. To avoid being targeted yourself we highly recommend keeping your credentials safe. Store your keys offline and in a safe place away from the dark side of the web.