This month, the cryptocurrency, Bitcoin, hit an all-time high of a value of $41k per coin, skyrocketing from below $4,000 a coin in March 2019. With gains higher than ever before, the question of bitcoin’s security arises once again.
Bitcoin and the technology that powers it, the blockchain, are considered by many “unhackable,” but is that true?
Let’s start with some of the basics.
Bitcoin is an electronic form of money that was invented in 2008 by an anonymous creator who went by the name Satoshi Nakamoto and unlike paper money, there is no ability to create more bitcoin.
Bitcoin takes advantage of the distributed and decentralized nature of blockchain technology. Blockchain is a technology that allows for something digital to exist in only one place. It combines multiple technologies like cryptography and peer-to-peer networks to form a decentralized and distributed public ledger of who owns or has access to something at any given moment in time.
So, why is the blockchain considered “unhackable?”
Blockchain is generally thought of as an impenetrable ledger of information that cannot be modified, leaked, or destroyed. Because it is distributed, decentralized, and transparent, participants can trust it is secure. However, there have been several cases of blockchain hacks that are raising doubts about its security.
Since 2017, hackers have stolen nearly $2 billion worth of cryptocurrency. The blockchain can be hacked, and here is how it is most commonly done.
- 51% Rule – A 51% attack exploits the rule that computers decide when the majority is taken as truth. In this type of attack, individuals or groups gain control of the majority of nodes on a blockchain network and use them to alter transactions in their favor.
- Phishing and Malware – Even with new, advanced technology, humans fall victim to phishing attacks. In fact, the Twitter attack last year scammed hundreds of thousands of dollars in Bitcoin from individuals.
- Smart Contract Bugs – A smart contract is a computer program that runs on the blockchain to automate the movement of cryptocurrency according to a set of rules. Many organizations have already begun to deploy this technology, but there are bugs emerging that can be exploited by hackers.
While blockchain technology is still on the forefront of the future, there are definitely ways it can be compromised. There is no doubt that we will continue to see cryptocurrency, and the technology that powers it, regularly in the news.