Can Bitcoin be Hacked?

You might have heard the alarming stories of DeFi and cryptocurrency exchange hacks...

Introduction:

In the realm of digital currencies, Bitcoin stands as a revolutionary phenomenon, reshaping the landscape of finance and technology. Since its inception in 2009, Bitcoin has garnered both fervent supporters and vocal skeptics, with discussions often revolving around its security, particularly concerning the possibility of hacking. The question of whether Bitcoin can be hacked is not only pivotal for investors and users but also for the broader understanding of blockchain technology and its implications for the future of finance.\

Bitcoin operates on a decentralized network, utilizing cryptographic principles to ensure security and immutability. However, its underlying technology, while robust, is not impervious to vulnerabilities. In this introduction, we delve into the multifaceted nature of Bitcoin's security, examining potential attack vectors, historical incidents, and ongoing efforts to fortify its defenses against malicious actors.

At the heart of Bitcoin's security lies its blockchain, a distributed ledger that records all transactions in a tamper-resistant manner. Through the process of mining, transactions are validated and added to the blockchain, creating a chronological chain of blocks. This decentralized architecture makes it exceedingly difficult for any single entity to alter transaction records or manipulate the network.
Yet, despite the formidable security measures in place, Bitcoin faces various threats that could compromise its integrity. One such threat is the 51% attack, wherein a malicious entity gains control of the majority of the network's computational power, enabling it to dictate transaction confirmations and potentially double-spend coins. While the theoretical possibility of a 51% attack exists, executing such an attack on the Bitcoin network remains highly improbable due to its immense computational power and the distributed nature of mining.

Furthermore, Bitcoin wallets, the digital repositories for storing and managing bitcoins, present another potential vulnerability. From software vulnerabilities to social engineering attacks targeting individual users, the security of Bitcoin wallets is crucial in safeguarding users' funds. While advancements such as multi-signature wallets and hardware wallets offer enhanced security, the human factor remains a significant consideration in mitigating risks.

Additionally, the evolving landscape of cybersecurity introduces new challenges for Bitcoin's security. Sophisticated hacking techniques, such as ransomware attacks targeting Bitcoin exchanges and phishing scams exploiting user trust, underscore the importance of robust cybersecurity measures across the ecosystem.

In light of these challenges, ongoing research and development efforts seek to bolster Bitcoin's security and resilience. From protocol upgrades such as Segregated Witness (SegWit) to the emergence of second-layer scaling solutions like the Lightning Network, innovations aim to enhance transaction throughput, privacy, and overall network security.

Need a reminder? Bitcoin exchange Mt. Gox was famously hacked in 2014 and $460 million worth of bitcoin — equivalent to $38 billion today — was stolen. Ouch.
Just recently, a hacker stole $600 million worth of various cryptocurrency assets from the DeFi project Poly Network. Most of the funds have since been returned, but I can't imagine putting your trust and securities into an exchange, just to have a shadowy supercoder make away with all of your investments.
With the cryptocurrency industry being hacked left and right, it's important to proceed with caution. However, there are ways to protect yourself from these hacks: take your bitcoin off exchanges, and don't play with altcoins.


In a few days, I'll walk you through buying, transacting, and self-custody bitcoin, step by step. But today, I want to discuss cryptocurrency network hacks. Specifically, why bitcoin is especially "unhackable" compared to the other cryptocurrency networks (DeFi/altcoin projects). While it's technically possible for the Bitcoin network to be hacked and funds to be stolen directly off of the blockchain, it will never happen with Bitcoin (though, it can and does happen to other cryptos).
Here's why.

The 51% Attack

The reason why the Bitcoin network is so strongly decentralized is because of how many participants there are in it. With each additional miner and node that comes online, the overall security of the network is strengthened, and it becomes increasingly harder for some malicious entity or group to try and take over the network.
But if a blockchain network is not strong, then it is prone to something called a 51% attack, where if miners can gain a hold of over 50% of the network, they can effectively take over and "double spend" their existing crypto. Similar to counterfeit bills, hackers would be able to use "fake copies" of an existing cryptocurrency, thus inflating the supply and devaluing the currency.
A 51% attack on proof of work protocols like Bitcoin can take place successfully since the network will always default to the longest chain with the highest mining power as the chain of truth.


Ultimately, this won’t happen on the Bitcoin network because Bitcoin's proof of work algorithm requires a lot of power for a 51% attack to occur (as much power as a small country consumes along with more than $23 billion worth of hardware alone); it wouldn't make much sense for a hacker to spend this much money in an attempt to make risky money.
Additionally, hackers cannot "steal" bitcoin from others — they can only "double-spend" their bitcoin, just as counterfeiters make fake dollar bills instead of robbing a bank. Once again, this would be foolish to do because the value of bitcoin would quickly drop as the network recognizes that bitcoin has been double-spent and people start to lose confidence in bitcoin.

Quantum Computing Concerns

Many skeptics also bring up the concern for quantum computing rendering the Bitcoin network’s security useless, since quantum computing would be able to break the network’s encryption algorithms and reveal users’ private keys.
Another concern is that quantum computing could allow for “super miners” that can mine Bitcoin at an extremely high speed, thus centralizing mining and allowing them to take control over the chain.

While these situations may appear daunting, they are far off into the future of quantum computing. In any case, the Bitcoin network has much time to “upgrade” to prepare for such dire circumstances and will inevitably be able to protect itself from any sort of attack we see coming. To do this, Bitcoin would "hard fork" to a protocol that accommodates quantum-secure features (tomorrow I'll go over what it means for a cryptocurrency to "fork").
 

What Can You Do To Protect Your Bitcoin?

For now, just continue to execute your best internet security practices, such as using password generators and turning on two-factor authentication for your crypto exchange accounts. Later on, I’ll teach you how to transfer your Bitcoin off of exchanges and into your self-custody solutions to prevent your Bitcoin from potential hacker theft.

However, a word of warning: self-custody isn’t an inherently simple task yet for most people. The industry must continue to develop and optimize user experience for Bitcoin wallets, but also to hold exchanges accountable for safeguarding people’s funds who aren’t ready for self-custody storage solutions yet. Ultimately, self-sovereignty is the end goal for securing your Bitcoin — but remember to take the time to learn first.