Security On The Bitcoin Blockchain

CroW...PVMn

24 Jan 2024

181

Security on the Bitcoin Blockchain

We continue our training series about bitcoin security.
The Bitcoin blockchain is the first and most widely used network that comes to mind all over the world when it comes to blockchain. Bitcoin (BTC) is also considered the flagship of cryptocurrencies. So how is the security of the Bitcoin blockchain ensured?

Proponents of the distributed, decentralized ledger technology known as blockchain see it as one of the best ways to secure transactions. It is obvious that blockchain technology has many advantages over traditional and centralized finance methods, especially speed and decentralization. There are also arguments that it is much more reliable.

At this point, we should point out that how reliable blockchains are is determined by their infrastructure. So, while blockchain technology offers significant security opportunities, not all blockchains are equally secure. However, Bitcoin has been in our lives since 2008 and it owes its successful adventure to proving that it is one of the most secure blockchains.

Is blockchain technology safe?

In fact, how secure a blockchain is depends on the infrastructure of that blockchain. However, the blockchain already promises a certain level of security in terms of its basic logic and way of working.

First, let’s give a simple definition of the blockchain: A blockchain, in its roughest definition, is a series of blocks, each of which contains data within it. Each of the blocks has a unique hash number and a link that links it to the previous block. If there is a change in one of the blocks, the sum of the hash value also changes and the blockchain needs to be re-verified by consensus by the nodes. This makes it very difficult to change the blockchain with outside interventions. This immutability, combined with three more elements, makes blockchain technology secure. These three elements are:

Cryptography: All transactions in the blockchain are encrypted and secured with cryptography. Each block contains a unique and private key that can be verified with a public key. If there is a change in the data associated with the transaction, the private key of the block becomes invalid. As a result, the corresponding block is removed from the chain.

Decentralization: Another factor that makes blockchain secure is that it is a decentralized and distributed system. In other words, a cyber attack on one part of the system does not affect the other part. The exception is private blockchains, which have a centralized operation and a limited number of nodes.

Consensus: All blockchain technology operates on a consensus model that verifies that a transaction has taken place properly and legitimizes it. Most consensus models use either proof-of-work or proof-of-stake protocols.

How is the Bitcoin blockchain secured?

First of all, the cryptographic system used in blockchains makes transactions irreversible. That is, a block created once in the blockchain cannot be changed. However, you can add new data or information to it. This system prevents malicious people from reversing any action that has already taken place.

The Bitcoin blockchain is transparent and public. While users’ identities remain anonymous, all transactions on the blockchain are publicly accessible. This makes it difficult to deceive or attack the system.

Another factor that makes the Bitcoin blockchain secure is its decentralization. The Bitcoin network is distributed among thousands of nodes all over the world that track the transactions taking place in the system. This allows another server to maintain the system when something goes wrong with one server. That’s exactly why hacking a server on the Bitcoin blockchain makes no sense because you can’t control transactions, data, and information on the network without getting them all.

However, all this does not mean that the Bitcoin blockchain cannot be hacked. This is not impossible, but very difficult. Bitcoin uses the proof-of-work protocol as the consensus model. Thanks to this model, the computational power of the nodes not only helps to generate new blocks, but also ensures the security of the data in the network. With proof-of-work, hacking the Bitcoin network requires at least 51 percent of the total computing power in the network. This is almost impossible considering the size of the Bitcoin network and the high computational power.

How secure are Bitcoin wallets?

While the Bitcoin blockchain is extremely secure, cryptocurrencies and Bitcoin wallets can be vulnerable to cyberattacks. That’s why it’s important to choose the most secure Bitcoin wallet and the type of wallet that suits you best.

Cryptocurrency wallets, including Bitcoin, are roughly divided into two: cold wallet and hot wallet. The safest way to store your BTC is to store it in a cold wallet. Cold wallets are physical devices such as USB sticks that do not have an internet connection, unlike hot wallets that require an internet connection. Cold wallets are also divided into two:

Hardware wallets: Hardware wallets are devices that store private keys that allow you to access your cryptocurrencies in encrypted chips that do not have access to the internet.

Paper wallets: Paper wallets are real documents where your keys are actually written on paper or indicated as QR codes.

You connect your cold wallet to the internet only when you want to transfer your Bitcoin to a cryptocurrency exchange or a hot wallet. That’s why cold wallets are the safest way to store your Bitcoin. In hot wallet preferences, the presence of two-factor authentication in the wallet is an important security element. It should be ensured through antivirus software that the computer or mobile device running the hot wallet does not contain spyware.