Will bitcoin be hacked

Can Bitcoin Be Hacked?

Investors all over the world are swarming to buy Bitcoin, prompting some governments to step in with severe regulations. The success of bitcoin fueled the rise of legions of followers, including hundreds of new cryptocurrency launches and a wave of startups predicated on blockchain technology.

Nonetheless, with all the fuss and hubbub surrounding bitcoin, many investors are still unsure about the security of the currency itself. Can bitcoin be hacked? If so, how can investors work to protect their investments?

Key Takeaways

• Bitcoin is a decentralized digital currency that uses cryptography to secure transactions.
• Bitcoin transactions are recorded in a digital ledger called a blockchain.
• Blockchain technology and users’ constant review of the system have made it difficult to hack bitcoins.
• Hackers can steal bitcoins by gaining access to bitcoin owners’ digital wallets.

Bitcoin and Security

Bitcoin was launched in 2009 as a decentralized digital currency, meaning that it would not be overseen or regulated by any one administrator, like a government or bank. Peer-to-peer transactions have fueled the rise of the digital currency world, and bitcoin has been at the forefront throughout. The blockchain is a public ledger used to verify and record these transactions. 

The issue of security has been a fundamental one for bitcoin since its development. On one hand, bitcoin itself is very difficult to hack, and that is largely due to the blockchain technology which supports it. As blockchain is constantly being reviewed by bitcoin users, hacks are unlikely.

On the other hand, however, the fact that bitcoin itself is difficult to hack does not mean that it’s necessarily a safe investment. There does exist the potential for security risks at various stages of the trading process.

Wallets and the Transaction Process

Bitcoins are held in wallets and traded through digital currency exchanges like Coinbase.   There are various security risks inherent in each of these two components. Developers are always improving wallet security, but there are also those looking to access other peoples’ wallets illegally to swipe their tokens and coins.

In the transaction process, two-factor identification is commonly used as a security measure. Of course, having the security of a transaction linked to an email address or a cell phone number means that anyone with access to those components can authenticate transactions. If hackers can determine some of your non-cryptocurrency-related personal information, they may be able to infiltrate your transactions in that space regardless.

Bitcoin users are assigned private keys, which allows access to their bitcoins. Hackers can infiltrate wallets and steal bitcoins if they know a user’s private key.

There have been widely publicized frauds, scams, and hacks that have plagued individual investors and even major cryptocurrency exchanges in their short history. Part of the issue is simply that the technology and space are new.

While this makes cryptocurrencies like bitcoin incredibly exciting—and potentially very profitable—investments, it also means that there are those looking to capitalize on security holes before they are corrected. All bitcoin investors are advised to take proper precautions to best protect their holdings.

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Can Bitcoin be Hacked? Realistic Doomsday Scenarios

One of the major concerns of Bitcoin investors is whether or not their digital asset has some form of security against hacking.

Can Bitcoin be hacked?

The Bitcoin protocol is immune to hacking attempts. However, there is a chance that in the future, technology may allow people to overcome this barrier. The chance of Bitcoin being hacked is small since Bitcoin evolves together with technology.

Aside from that, cryptocurrency exchanges are now putting more emphasis on the security of the funds on their platform. With the evolution of Decentralized Exchanges, it will slowly become impossible for cybercriminals to steal cryptocurrency funds in any sort of way.

What are the realistic ways that could “shut down” Bitcoin?

Protocol Risk – Bitcoin may have design flaws that can put the protocol at risk. With the development of quantum computing, computations that can break and compromise the cryptographic foundation of the Bitcoin may become a reality.

Exchange Shutdowns – Although Bitcoin is a decentralized digital currency, the exchanges that convert bitcoin into fiat currencies, are still controlled by third parties. These platforms are subject to regulations and closure if imposed by the government. Without the ability to exchange Bitcoin into traditional, government-based currencies, cryptocurrency may be doomed.

Fungibility – The transparent and open nature of the blockchain allows some states to mark certain coins as tainted. If there are regulations that will ban the use of tainted Bitcoins, it will become worthless or lose its fungibility .

Will the government shut down Bitcoin?

In the past few years, there have been many conversations on the topic of banning Bitcoin; especially in the United States. However, doing so would not be in the best interest of governmental institutions, since Bitcoin is a taxable asset and produces a lot of money for all countries that accept its use.

The future of Bitcoin is unpredictable. However, it is worth noting that many countries are now accepting and regulating it. This is because they see that BTC can serve their countries’ best interests.

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Can All Of Bitcoin Be Hacked?

$280 billion rides on the proposition that cryptocurrency is impregnable. Maybe it isn’t.

Machinery in an IBM quantum computing lab (photo by Seth Wenig)

Call it the singularity. One day, maybe a decade from now, a message flashes across the internet: “Elliptic curves cracked!”

Elliptic curve cryptography, or ECC, is the foundation beneath bitcoin. Wouldn’t the discovery of a hole in this code destroy the currency—and take down any coin exchange?

I posed the question to Brian Armstrong, who co-founded and runs Coinbase, the largest U.S. crypto exchange. He can’t prove that there won’t be some mathematical shortcut compromising bitcoin keys. But he considers the risk low.

“Ten years in, there’s a ton of people who have looked at this code,” he answered, in an interview at the Coinbase headquarters in San Francisco. “It’s a hundred-billion-dollar bounty. So I think that scenario is very unlikely.”

Bitcoin plus the lesser currencies that compete with it amount to a $280 billion asset pile, a tempting target for bad guys. From bitcoin’s earliest days, hacks, cracks, hijacks, phishes, vishes, and social engineering have threatened it. So far the successful assaults on this industry have been around the edges; even the big heist at Mt. Gox did not kill cryptocurrency.

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But what if thieves discover a fundamental vulnerability? It might be in the way the encryption works. It might be in the global network of computer nodes that track ownership of bitcoin. It might be in some aspect of crypto that no one is thinking much about.

Crypto players offer two answers to the question about cosmic risks. One is that the system might see an asteroid coming and take defensive measures. If bitcoin’s 11-year-old encryption proves to have a weak spot, the nodes could move en masse to a different protocol. They might be able to do this before any coins have been stolen. Alternatively, they could hark back to an earlier version of the blockchain that was in place before a theft; this is how the Ethereum chain partly undid some skulduggery involving the DAO venture capital fund.

The other answer, not entirely reassuring, is that a lot more than bitcoin is at stake. Says Philip Martin, head of security for Coinbase: “A core math problem? We’re talking the collapse of the internet.” Trillions of dollars course through electronic networks protected with encryption. So, for what it’s worth, in the digital apocalypse an implosion of bitcoin would be the least of our concerns.

Let’s now consider some of the weaknesses that envelop digital currency.

Once upon a time Sony used elliptic curves to protect its PlayStation. In order to run, a game would have to provide a digital signature constructed from Sony’s secret key, the same kind of key that protects your bitcoin. The signature routine uses, as one of its inputs, a different randomly chosen number for each validating signature.

Sony goofed, recycling the same number. It turns out that this enabled anyone possessing two legitimate games and a knowledge of high-school algebra to compute the secret key and run pirated games. Andrea Corbellini, a cryptographer who has explained the flaw, speculates that Sony might have been inspired by this Dilbert cartoon.

You might think that all such potholes were found long ago and repaired. But no. Recently the National Security Agency reported on a flaw in a Microsoft browser that made a mistake in delivering the digital signatures that verify websites as legitimate. ECC calls for using a specific starting point. The flaw enabled a website to slip in a different point. With just the right substitute, a malicious site could have forged a signature and stolen the password for your bank account.

Microsoft quickly patched the hole. But it makes you wonder. Could there be other holes in some or all of the software used to hold and transfer virtual currencies?

Crypto managers are on guard. Says Martin, the Coinbase security guy: “I am much more scared of an implementation flaw in a library than I am of a flaw in the underlying math.”

Some bitcoin owners, trying to manage their own coin wallets, have made the same mistake Sony did with its game console. Writes one security expert: “A lot of Russian bitcoin hackers have coded bots to automatically grab coins from vulnerable addresses.” Presumably you have nothing to worry about if you hire experts to manage your wallet.

A crook doesn’t have to know algebra to steal bitcoin. Good acting might do it.

Jamie Armistead is a vice president at Early Warning, the bank consortium that runs the Zelle payments network. Is there a risk that someone will crack the encryption that protects the money coursing through Zelle? Answers Armistead: “It’s not hacking” that keeps him awake at night. “It’s phishing, like the false email to the corporate treasurer.”

Vishing, a variant of phishing involving voice commands, is a security risk. So is device hijacking, in which the thief gets control of your smartphone account. So are all manner of man-in-the-middle attacks, the electronic version of a football pass interception. Cybersecurity engineers constantly update communication protocols to prevent that. They can barely keep up.

Could a hoax on a grand scale cause a majority of bitcoin nodes to simultaneously make a fatal mistake? It would have to be rather byzantine. It’s conceivable.

Encryption methods in common use look secure, because they have been studied for many years by many people. But they are not provably secure. Someone might discover a way to tunnel into them.

Encryption works by scrambling numbers. One way to do that, in the scheme named RSA (after inventors Rivest, Shamir and Adleman) that is still widely used to secure sensitive data, involves exponentiation and modular arithmetic. When you multiply 4 by itself 3 times, 3 is the exponent and you get 64. In modulo 11, you divide this by 11 and consider only the remainder 9.

With small numbers like these, this is a meaningless exercise. But cryptography uses gigantic numbers, and those numbers get shuffled into a giant mess. To get a sense of this, try out the exponentiation/modular game on our small numbers: 2 turns into 8, 3 into 5, 4 into 9 and so on. The only way to unshuffle is to know a certain secret about the modulo. This secret relates to some mathematical formulas that go back a long ways. A 17 th century Frenchman named Fermat played an important role.

The other big shuffling scheme is ECC. This involves the modular multiplying of not single numbers but pairs of them. Think of the pair as the coordinates on a map. The multiplying is weird: To double a pair, you don’t just move it twice as far from the corner; you bounce it off an elliptic curve. This scrambles all the points on the map. In cryptography, the starting point is not merely doubled; it is multiplied by a gigantic number. This really scrambles the map. That giant number, kept secret, is the key that unlocks a bitcoin.

RSA and ECC both have this feature: Someone who possesses the secret can prove that he possesses it without revealing it.

These two protection schemes rely on the apparent difficulty of certain arithmetic tasks. In the case of RSA, it’s finding the two numbers that were multiplied together to arrive at the modulo; in the case of ECC, it’s dividing the end point by the starting point to determine the multiplier. “Difficult” means taking trillions of years of guesswork on a laptop.

Unless shortcuts are found. For RSA, a well-known shortcut to factoring numbers involves a number sieve. For ECC, there’s a “big step, little step” algorithm that dramatically reduces the computation time. At this point, these tricks go only so far. The difficulty, for a key of a given size, might be measured in billions rather than trillions of years.

For reassurance about the safety of the crypto market and of internet commerce we go back to what Brian Armstrong said: There is a large incentive to find a killer shortcut, and evidently no one has found one. But there is no way to know that no vastly better tricks are about to be discovered.

Fermat, the French mathematician, conjectured a simple fact about exponents of numbers that looked true but couldn’t be proved. For three centuries people labored to prove it and failed. And then one day not too long ago a proof was discovered. It relied, in part, on elliptic curves.

Computers using quantum effects could, in theory, shrink the time for decoding an encrypted message from billions of years to hours. One such theory, for cracking RSA, dates to 1994.

In October Google sent a shiver through the cryptography world by announcing “quantum supremacy.” An experimental quantum device, the company said, did in 200 seconds what would have taken a conventional computer 10,000 years. That’s debatable; some researchers at IBM claimed that Google overstated the time difference by six orders of magnitude. Still, quantum computing is a threat.

Not an immediate one. The task in the Google experiment was designed specifically for the limited skills of quantum computing elements. These skills are a long way from those needed to crack codes. The 1994 algorithm is not in use because the hardware for it exists only on paper.

But ten years from now? We don’t know where quantum computing will be.

For an encryption routine the anonymous creator(s) of bitcoin plucked an elliptic curve off the shelf. This curve was designed by the federal government. Were the parameters devilishly selected in a way to create mathematical vulnerabilities? Does the National Security Agency have a back door to your coins? Probably not. But you cannot be sure. Governments are not in sympathy with the anarchist philosophy underlying cryptocurrency.

Since crypto’s creation, thousands of coins have been pilfered in hacks, scams and Ponzi schemes. These will continue. As for the big knockover, in which the whole system is taken down, we can say that the probability is low. But it is not zero.

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