Bitcoin is becoming an everyday topic of conversation, this week has seen bitcoin hit a peak of over $20,000 following the cryptocurrency’s debut on Wall Street, a massive rise from where it was at the beginning of 2017 where it cost just over $950 to purchase a Bitcoin. With this rise in interest from the public and increasing value, Bitcoin faces the risk of becoming more susceptible to attacks from hackers and other malicious users.
What is Bitcoin?
Bitcoin was invented by an unknown group or person referred to as Satoshi Nakamoto. It is the first de-centralised cryptocurrency worldwide i.e. there is no single administrator or central bank. Transactions take please between users for goods and services without a third party intermediary. The bitcoin network is peer to peer and transactions take place through the use of cryptography. A key factor of bitcoin is that transactions are anonymous and are verified by “miners”. These transactions are then recorded in a public distributed ledger called Blockchain.
How does it work?
Using Bitcoin, a person can buy almost anything; from computers, houses to coffee. Bitcoin wallets are used to send transactions to and from a user. Wallets have both a public key, which anyone can see (quite similar to an email address) and a private key which (similar to a password). Without this private key, bitcoin cannot be accessed.
Bitcoins are created through a process known as “mining”. New Bitcoins are issued to agents known as “miners”, as payment for processing Bitcoin transactions and adding them to a public ledger of transactions, also known as the Blockchain.
The Blockchain is a de-centralised ledger of all transactions in a network. Using Blockchain technology, participants in the network can confirm transactions without the need for a trusted third party.
- The list of these transactions are protected in the Blockchain.
- A block is the aspect of a Blockchain, which records some or all of the recent transactions that take place.
- By requiring difficult math problems to be solved with each block, potential attackers are up against the entire rest of the network in a computational race that they are very unlikely to win.
- Once a transaction is completed, a block goes into the Blockchain and is held here permanently.
- Each time a block gets completed, a new one is generated. There are countless number of such blocks in the Blockchain, connected to each other in a chronological order.
Is bitcoin secure?
The bitcoin protocol itself is secure due to the Blockchain technology. However, the same cannot be said for the threats posed to accompanying sites and services. There are ways in which Bitcoin can be hacked and stolen. The majority of these ways come down to negligence or error. For example:
- Exposing your private key
- Using an untrustworthy third party wallet provider
Only time will tell if Bitcoin will be able to survive these potential vulnerabilities and future risks.