If you’re thinking of investing in cryptocurrency, then for sure, you have plenty questions to ask about it.
Also, you’d want to know what benefits you can get out of it.
On top of these, you’d also want to know if cryptocurrency is secure.
In this article, we will tackle security matters for the most popular type of cryptocurrency—Bitcoin.
Bitcoin is the world’s most widely used digital money created by a man under the pseudonym Satoshi Nakamoto.
It has been dubbed many times as the “money of the future”.
Many experts confirm that this is a very secure type of cryptocurrency.
One proof to this is the fact that it has never been hacked until now.
But most likely, you’re wondering what is it that makes Bitcoin secure?
The security of Bitcoin comes from the Blockchain technology that it utilizes.
Here’s how it works: individual miners across different countries around the world verify the network of Bitcoin in order to reject any suspicious and fraudulent activities.
In this type of technology, it is assured that there is a consensus among all the various decentralized computers in the world.
All the transactions involving Bitcoin that has taken place since 2009 when it was first created are kept in a public ledger.
All over the world, thousands of computers known as miners store a copy of their transactions on the public ledger of Bitcoin on their own devices and verify each new transaction that occur.
Now you’d probably be curious as to how the Bitcoin network is able to prevent fraudulent activities from getting into the public ledger.
This is guaranteed by getting all the miners to agree which transactions are to be accepted and which ones are not. This is done through a process known as mining.
You’d be interested to know that every 10 minutes, there is a new Bitcoin block that is added to this public ledger.
The public ledger, known as the Blockchain technology, which was mentioned earlier, got its word from the chain of blocks that keep various types of information.
This is where details of the transaction are recorded. These typically include the sending and receiving addresses, the amount of Bitcoins transferred, and the date and time of transaction.
Every 10 minutes, all the transactions recorded within that period are collated together and stored in a block.
Then, the miners would have to come up with a random number that when hashed will have a certain amount of zeros in the beginning. This is then required to meet the present difficult of Bitcoin mining.
This can seem pretty confusing if you’re a beginner in using Bitcoin, but don’t worry, it gets easier after a while.
So when these miners agree that a certain set of transactions are valid, these are added to the network.
But if there is any party that tries to manipulate the network such as attempt to spend Bitcoin that he/she does not really have, the miners will reject the transaction and not record it in the public ledger.
As you can see, the primary difference between Blockchain technology security and the traditional security of data is that the latter only has one possible source of failure, which in turn makes it more vulnerable.
In a typical situation, a hacker would only have to shut down a single central server to hack into a system.
A Blockchain technology, which does not have a single point of failure as it does not have a centralized system, is more impervious to threats.
The technology used by Bitcoin is decentralized, meaning it does not have a main computer. It means that there is no single computer for hackers to shut down in order to shut down the entire network. And this has made many hackers frustrated.
The computers that maintain the proper functioning of the Bitcoin network are spread in different countries around the world. If one of these malfunctions or stops working, the rest will be able to maintain the network so it runs smoothly without any problem.
Now, you do have to know that it does not mean that Bitcoin can never be attacked.
There is actually one possible threat to this network, which is known as the 51% attack.
This is where the majority of the hashpower of Bitcoin is controlled and regulated by a single central authority.
This is the only possible danger that can shut down the entire network.
If you’re not yet familiar with this, let’s get down to the nitty gritty.
For you to fully understand how this threat works, let’s go back to the part about Bitcoin miners.
You remember that they have to agree upon the transactions and decide whether these are valid or not.
It’s also a must to know that Blockchain is not a single technology. There are smaller Blockchains that split off the original. The one with the longest and most number of data entries is considered the original.
Now, the objective of the 51 percent attack is to have over half of the Bitcoin mining power that’s spread all over the world.
If anyone is able to get their hands on this, then he/she can then create a different chain, one that is fraudulent, and make it the longest one. You can now add new blocks very quickly than other miners because you now have the majority of the Bitcoin mining power.
So far, this is still a hypothetical scenario as the 51 percent attack has never happened yet. Although many believe it’s possible to happen if someone succeeds in obtaining the world’s majority of Bitcoin mining power, no one can tell for sure if this is plausible. We’ll only know that if it already happens.
Now let’s look at the other threats that you might encounter when using Bitcoins.
Even though there’s not much to worry about when it comes to the hacking of the Bitcoin network itself, you have to know that Bitcoin users get individually hacked all the time.
You need to know how these things happen so you can keep your Bitcoins secured.
The primary way hackers can get their hands on your Bitcoins is by being able to access your Bitcoin digital wallet.
As you know there are different types of digital wallets.
These include the following:
You’re eager to ask this question: which of these is the most secure way to store your Bitcoins?
The online wallet is the type of wallet that runs on cloud.
This means that if you have internet connection, then you can freely access your Bitcoins using any device. You can access it from your tablet, smart phone, computer or laptop.
As you can imagine, this is convenient on your part. The only problem is, this type of digital wallet is quite vulnerable to hacking.
If you choose to use online wallet, make sure that you opt for those that comes with multiple layers of protection.
The mobile crypto wallet, meanwhile is one that works as an application on your mobile device, hence the name.
The great thing about this is that you can easily bring it to physical stores so you can use it to pay for your purchases.
Using this type of digital wallet is also simple and straightforward. You just have to download and install the app on your device and set up your account with the digital wallet online.
Some experts say that this option is more secure than the online type of wallet.
But you have to know that you can still possibly lose your Bitcoins if in case someone steals your device, when it malfunctions or when someone breaches your account.
It’d be a good idea not to bring your phone in crowded places and to have a different for personal calls and text messages.
Then there’s the desktop crypto wallet that is also considered a safe choice.
This one is downloaded, installed and activated on your desktop computer or laptop.
Of course, it’s not 100 percent safe. If your laptop or computer gets infected with virus, malware or any other threats, your Bitcoins may be stolen.
You can also lose your Bitcoins if the computer breaks down or malfunctions.
Another type of digital wallet is the hardware wallet, which stores your Bitcoins in a device, typically in a USB drive.
You can do transactions anywhere as long as you bring your USB drive.
The only security issue with this type of wallet is when the device gets lost or stolen. You should also know that among all the types of digital wallets, this one is the most expensive.
Finally, there’s the paper wallet.
Many argue that this is the safest way to keep your Bitcoins.
This is simply a printed or written copy of your public and private keys. It’s actually just a piece of paper, which is why it is called as such.
If you’re going to use Bitcoin, there’s not much to worry about when it comes to the security of the Blockchain technology which it uses. Now about the use of digital wallets, you just need to choose the option that is most secure so that you’ll have peace of mind knowing that your Bitcoins are safe.