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In its decade-plus lifetime, the Bitcoin blockchain has proved to be incredibly durable. Here’s what keeps it protected from intruders.
Name a firm, and chances are it has been hacked. With 71% of hackers motivated by money, it begs the question: can the Bitcoin network be hacked as well? After all, with a market valuation of over $335 billion, it’s an enticing target. We don’t want to say never at Decrypt, but the answer is: almost never. Indeed, in its decade-plus history, Bitcoin has proved to be extraordinarily robust to shocks and pressures. Furthermore, while cryptocurrency exchanges
have been hacked with depressing frequency, and their Bitcoin reserves reallocated, hacking and seizing control of the Bitcoin network itself is a considerably more difficult proposition.
This is due to the fact that Bitcoin is cryptographic, irreversible, distributed, and public.
Bitcoin uses public key cryptography
Bitcoin was the first cryptocurrency. “Crypto” is an abbreviation for cryptography, especially “public key cryptography.” That is, it utilises a private and public key to verify transaction authenticity and integrity; Bitcoin’s digital signatures are signed using the Elliptical Curve Digital Signature Algorithm (ECDSA).
The only method to derive a private key from a given public key would be to do a brute-force search, which would include attempting every conceivable value for a private key and checking if it produced the matching public key. In practise, such is impossible due to the fact that there are 1077 potential combinations.
Bitcoin transactions are irreversible
The smart aspect of Bitcoin is that it is based on a blockchain. A “block” is just a collection of freshly processed transactions. A one-way cryptographic function connects each block to the preceding batch of transactions, establishing a “chain.”
Blockchains are ledgers that can only be written to. You can add information to them, but once written, the blocks cannot be changed. All of the transactions appear to be buried beneath the weight of the other blocks.
This implies that individuals can’t just undo a transaction from a week ago, like your credit card company would if you “accidentally” purchased that dog wig on Amazon.
Bitcoin uses a distributed ledger
The traditional financial ecosystem relies on centralised parties like as banks to keep track of transactions and prevent fraud. However, you must rely on those parties to behave in good faith; any of them might alter the ledger of transactions to fake or reverse a transaction.
Blockchains, on the other hand, are a form of distributed ledger technology. Instead of having your money in a centralised database that is subject to a single point of failure, it is spread out (or, more accurately, the record of transactions is distributed among many separate parties).
That may appear to be a terrible thing, but it is not. Everyone who runs the Bitcoin software on a “node”—a computer—is in charge of validating transactions. Before transactions may be authorised, the majority of nodes must agree that the record of transactions is accurate. (Don’t worry: it’s automatic, so no one has to click “Agree” every 10 minutes when a new block is created.)
Someone would need more than to hijack the blockchain. Such an attack on the Bitcoin network would need the purchase and coordination of resources well beyond the capabilities of even the most powerful governments.
With so many different people running the software—and a collective interest in keeping the valuable coin secure—that’s not likely to happen. It’s simply too expensive and difficult to coordinate.
The Bitcoin blockchain is public
The transactions on the Bitcoin blockchain are visible to everyone. It’s a public record. While someone may see what’s in your wallet, they have no idea it belongs to you because your funds are under a pseudonymous address. Furthermore, they are unable to take your money; only the person who possesses the private key to a Bitcoin address is able to transfer funds.
Crucially, due of this openness, everyone can view the ledger of transactions and ensure that everything is in order. Anyone may audit the system, which fosters confidence.