Bitcoin cryptocurrency is considered to be hack-proof because the Bitcoin blockchain is constantly reviewed by the entire network. Although it’s very difficult to hack the Bitcoin network, there is always the risk of digital coins being stolen from a wallet in a digital currency exchange. According to crypto experts, hacker attacks on the Bitcoin blockchain are very unlikely, while the risks of being hacked are quite low.
Bitcoin is based on blockchain technology, which is immutable. Immutable transactions make it impossible for any entity (the government or a corporation) to manipulate, replace or falsify data stored on the blockchain network. However, the rise in popularity of cryptocurrencies has encouraged hackers to find new innovative ways to attack the Bitcoin blockchain.
One of these methods is called “51% attack”, which has evolved in the past years and has proved to be quite successful. Numerous 51% attacks have taken place in recent years. In August 2021, Bitcoin SV (BSV) slid about 5 per cent value after an attack, while Bitcoin Gold (BTG) suffered a 51% attack in 2019. BSV and BTG are Bitcoin hard forks and they function according to the early rules from the original Bitcoin.
What is a 51% attack?
The 51% attack is one of the most significant threats to blockchains. What does a 51% attack mean? A 51% attack enables hackers to use one digital token more than once by duplicating the file. The attackers can rewrite transaction history and execute double spends, which means that the tokens can be used again. In a double spend, transactions are erased once the goods are received.
A majority of 51% is always required in order to decide which transactions would be approved or declined. Thus, a majority of 51% could alter a blockchain’s distributed ledger so that double spending would be a success. However, this situation is very difficult to achieve and unlikely to happen on the Bitcoin blockchain.
The Ethereum Classic (ETC), which forked from the original Ethereum blockchain, was not so lucky. In 2020, a 51% attack on the ETC network took place. The hackers used complex methods that ultimately generated a profit of over 5 million dollars.
Bitcoin has never been successfully 51% attacked. Also, Bitcoin has never been shut down, even for a short amount of time, despite the efforts of government institutions and banking officials. In recent years, they have proposed shut-downs of the Bitcoin network, but Bitcoin has been successfully running for almost ten years.
The hack of Mt. Gox – the biggest Bitcoin theft
In 2014, the Japanese company Mt. Gox, the largest stock exchange for Bitcoin transactions at that time, went bankrupt after hackers managed to steal more than 850,000 Bitcoins. This means that nearly 500 million dollar worth of BTC disappeared from the users’ accounts. The CEO Mark Karpeles blamed the hackers, who took advantage of some security issues.
According to Japan Times, in 2015, the company’s CEO was arrested after it was discovered that he transferred 314 million yen (over 2 million dollars) from the users’ wallets into his private Bitcoin wallet.
The hack of Mt. Gox is the largest hack since the emergence of Bitcoin, but it is also an example of poor security and insufficient safety measures. Since 2014, most of the Bitcoin exchanges have implemented drastic security features.
Another big heist happened in December 2021, when the cryptocurrency trading platform BitMart announced that hackers broke into a company account and stole almost 200 million dollars. BitMart froze all customer transactions for three days before it allowed them to trade their cryptocurrency again. The identity of the hacker behind this huge attack has not yet been revealed or, at the very least, has not been disclosed to the public.
How to prevent hacker attacks
Bitcoin users are assigned private keys, which allows access to their Bitcoin wallet. However, hackers can infiltrate their digital wallets and steal Bitcoins if they discover a user’s private key.
Most crypto experts believe that a cold wallet – an offline device not connected to the internet – is the safest place to keep your Bitcoin investments. Hacking can also be prevented by tightening the security processes affiliated with your Bitcoin wallet.
Here are some tips recommended by crypto experts in order to prevent hacker attacks:
- Two-step authentication – You should always activate a two-factor authentication system to secure your digital transactions. That way, If someone was able to crack your password, it would still require passing the second level of authentication.
- Using separate wallet addresses – If you’re using separate wallet addresses for each platform, you minimise the exposure to a loss. Even if one platform is hacked, the other would be safe. Don’t put all your Bitcoins in the same wallet.
- Avoid phishing links – Phishing links are malicious ads or emails that attempt to copy your personal information for hacking. You should always add mandatory two-factor authentication checks when you execute important or sensitive operations.
- Careful wallet management – The majority of your funds should sit in multisig wallets that keep your Bitcoins safe. On the other hand, hot wallets should always have minimal funds because they are the most susceptible to hacks.
- QR code scanner – If you want to access the mobile crypto wallet, then a QR code scanner is absolutely necessary. This allows mobile crypto wallets to generate and scan a QR code for Bitcoin transfers.
A multi-signature wallet or “multisig wallet” is a cryptocurrency wallet that requires two or more private keys to sign and send a transaction. A multisig wallet is shared by two or more users called copayers. Depending on the kind of wallet, the number of signatures required to complete a digital transaction will be lower or equal to the number of copayers of the wallet.
Which are the best Bitcoin wallets?
A Bitcoin wallet is a software application in which you store your Bitcoins. This type of software is easy to use and reliable while also being secure and fast. Since Bitcoins don’t exist in the physical form, they can only be stored in coin wallets.
Some of the best Bitcoin wallets of 2022 are:
- Blockchain wallet
- Coinbase
- Binance
- Ledger Nano X
- Trezor Model T
- Bitcoin Armory
- Exodus
- Mycelium
- ZenGo
- Crypto
- BitFlyer
- Lumi Wallet
- Atomic Wallet
- Paybis
- Coinsmart
- Gemini
- Paxful
- FTX
- CEX.IO
- Changelly
Blockchain wallet is the safest and the most popular Bitcoin wallet. It is used for investing and storing your cryptocurrency. Blockchain is considered to be one of the most secure Bitcoin wallets which keeps track of who owns the digital tokens.
You should always keep in mind that stolen Bitcoins are usually the result of storing your digital assets in places that are simply not secure.
Blockchain or “the chain of trust”
According to British financial magazine, The Economist, blockchain technology is “the big chain of trust”. Financial experts believe that blockchain technology will eliminate bureaucracy and corruption, while also putting an end to robberies coming from money transfers.
Why is blockchain technology considered to be secure? Here are some reasons:
• the chains work on a computer and are available to users from all over the world
• there is no central database that can be broken by hackers
• the blockchain is public, it can be seen by anyone, at any time, because it exists on the network, not in a single institution in charge of verifying transactions and accounting records
• the blockchain is encrypted with both public and private keys (similar to the key system for opening a vault) to preserve virtual security
The Bitcoin blockchain is an open source technology that offers a modern alternative to traditional money transfer. The intermediary is replaced by a group verification system, which offers a high degree of traceability, safety and speed.
Nowadays, blockchain technology is bigger than the financial sector. It can be used for multi-level transactions, where high traceability and visibility are required. The supply chain is an important example in which the blockchain can influence the management and signing of contracts and can audit the origin of the product.
Can Bitcoin be hacked?
In the last year, more people and companies around the world have directed their savings and money to the cryptocurrency market. According to their calculations, cryptocurrencies offer better returns than bank deposits and seem to be much more tempting than investing in stock exchanges.
In this context, the crypto market is rapidly growing, from one month to the next, attracting the attention of cybercriminals as well. It turns out the cryptocurrency market is very attractive, both for investors and for hackers. Eager for quick and substantial gains, hackers are intensely attacking the industry.
The Bitcoin network is supported by the blockchain technology, which is very difficult to hack, because data isn’t stored in a central server, but across a huge network of computers, which is constantly checking and verifying if the records are accurate. This technology makes cyber attacks much harder, since a hacker needs to breach a huge number of servers in order to gather all the information.
Yet, hackers are becoming more skilled as they are gaining more experience over time. Cyber security experts are sounding the alarm and they are warning us that blockchain technology could be quite vulnerable to hackers.
