Why are Bitcoin and blockchain relatively secure?

Rage Comment : Since blockchain is a record of past transactions rather than a series of interconnected personal accounts, when a user sends bitcoin, all computers running the bitcoin software will process the sender's signature through an algorithm to check past transactions, thereby ensuring the authenticity of the sender's bitcoin amount. This blockchain architecture can resist hacker attacks very well. And if it suffers a so-called "51% attack", the value of bitcoin will also decline, so bitcoin and blockchain are relatively safe.

Translation: Nicole

In a report by Swiss multinational financial institution Credit Suisse, Bitcoin and blockchain are considered “relatively safe.”

The report noted that Bitcoin has some unique risks. The bank's market research unit said the cryptocurrency's value fluctuates three times more than the price of oil and 11 times more than the post-Brexit exchange rate fluctuations between the pound and the dollar.

Bitcoin transfers are irreversible, so if someone enters a wrong account number when paying, they are out of luck! In addition, if a Bitcoin user loses his private key, he loses all his Bitcoins.

The immune structure of blockchain

Bitcoin's blockchain architecture is resistant to hacking risks. The blockchain is not a series of interconnected individual accounts, but a record of past transactions. When a user wants to send bitcoins, all computers running the Bitcoin software will process the sender's signature through an algorithm and check past transactions encoded in the blockchain to ensure that the sender has the right amount of bitcoins.

Other computers later verify the recipient's work. The transaction is then aggregated with other transactions, and computers running the Bitcoin software (called miners) compete to solve mathematical puzzles designed to verify the transaction. While a miner wins the competition, other miners also verify the accuracy of the solution. When they agree that the transaction is valid, the miner who wins the competition receives new bitcoins, which also increases the supply of bitcoins.

Hacker's challenge?

In theory, someone could hack into the blockchain, change the records to look like previous Bitcoin transactions, and transfer funds to the hacker's account. But this would require a lot of computing power, as Bitcoin users verify transactions by looking at all past transactions, so if a hacker wants to manipulate a block, they need to solve a mathematical puzzle of blocks that connect to a specific block and the blocks after it.

Blocks only recognize six blocks deep in the chain as valid, and the deeper you go into the blockchain, the more computing power is required to change the record.

51% Attack

There is also a potential risk of centralized Bitcoin miners. If a single party gains control of 51% of the Bitcoin network, it could theoretically prevent legitimate new transactions from being settled or reverse recently approved transactions, thus creating the risk of double-spending Bitcoin.

Credit Suisse, which owns 30% of the network, calculated that there is a 40% chance that a malicious actor would mine six consecutive blocks in a week, which would allow them to change transactions. However, if a so-called "51% attack" were to occur, the value of Bitcoin would also fall. In other words, miners attacking the network would also destroy the value of the same assets they were trying to steal, as well as the assets they already own.

To gain 30% of the network, malicious actors would have to mine past blocks, so they have a vested interest in maintaining the integrity of the ledger.

Cyber ​​theft of cryptocurrency

Most Bitcoin users use online exchanges to convert fiat currencies into Bitcoin and digital currencies for payment. However, both have been subject to cyber attacks. In August 2016, hackers stole 119,756 Bitcoins when depositing funds on the Bitfinex exchange.

Mt. Gox filed for bankruptcy in 2014, claiming that hackers had stolen 850,000 bitcoins and that only 24% of the coins had been recovered. Japanese prosecutors charged former CEO Mark Karpeles with embezzlement. Various articles attributed the exchange's problems to irregular management.

The bottom line is that blockchain technology and Bitcoin transactions are relatively secure.