Is Bitcoin Safe and Secure?
Bitcoin was designed to be highly secure. If it wasn’t, users wouldn’t trust the network enough to store their value on it. That being said, Bitcoin, like any other digital currency, is vulnerable to certain security risks (discussed below).
Bitcoin has several built-in features that make it difficult for criminals/hackers to steal or manipulate bitcoins. When you invest in Bitcoin, you’re investing in the security of the platform – amongst other things.
What Makes Bitcoin Secure?
One of the main security features Bitcoin utilizes is called public key cryptography. Every Bitcoin user has a public key and a private key. The public key is used to receive bitcoins, while the private key is used to sign transactions and access the bitcoins in a user’s wallet.
Think of your public key like your traditional bank account number, which you can send to people to receive wire payments, and your private key is more like your PIN code, which gives you access to the money.
The private key must be kept secret and secure at all times, as anyone with access to it can access and spend the bitcoins in a user’s wallet.
To learn more about the technical aspect of how public key cryptography works, read this article.
Another security feature of Bitcoin is the use of a decentralized, distributed ledger called the blockchain (read: How Blockchains Work). The blockchain is a public record of all Bitcoin transactions and is maintained by a network of nodes. This ensures that there’s single point of failure and that the network is highly resistant to tampering or manipulation.
Bitcoin also uses a consensus algorithm called “proof of work” which makes it difficult for attackers to manipulate the network (read: Proof of Work vs Proof of Stake).
The “proof of work” algorithm requires the miners to first solve complex mathematical puzzles in order to verify transactions and add them to the blockchain. Due to the amount of energy required to perform this computational work, it makes it expensive for an attacker to control more than 50% of the mining power. This deters them from being able to manipulate the network.
Additionally, the Bitcoin wallets themselves have various security features. The most secure type of wallet is called a hardware wallet. This is the type of wallet we recommend, and this site is where you can purchase one.
Hardware wallets are not connected to the internet, and when you go through the setup process, there’s no way hackers can view your sensitive recovery data as that information won’t be displayed on your screen.
These devices are also PIN protected, so even if a shady individual hard your hardware wallet in their hand, they wouldn’t be able to access your funds.
When using a hardware wallet to confirm transactions, you must physically push buttons on the device. This alone makes it impossible for hackers in different locations to send coins out of your wallet. Such a scenario would only be possible if you compromised your private key or recovery phrase.
When you get your hardware wallet, write down your recovery data and keep that information OFFLINE!
This brings me to my next point. While Bitcoin is secure, people still get their Bitcoins hacked. This isn’t due to a flaw in the network itself, rather.. it’s due to user error.
How People Typically Get Their Bitcoins Hacked
People are oftentimes careless with their recovery keys, and a malicious actor is able to access them. People are oftentimes gullible as well, and they fall for “phishing attacks”.
Phishing attacks are attempts to trick someone into providing sensitive information. You likely receive phishing attacks in your spam box every week.
These deceptive attempts come in many forms, but they’ll usually replicate a company you consider to be legitimate. For example, you may receive an email from what appears is Coinbase, but the sender will be using a non-official email – hoping you don’t notice.
Just be cautious, and never provide your private/recovery keys to anyone!
All that being said, Bitcoin is highly secure. Sure, individual exchanges have been hacked, and users have been hacked for various reasons – but the Bitcoin network itself has never been compromised.
The Bitcoin network uses public key cryptography, a decentralized ledger, a proof of work consensus algorithm and various types of wallets to protect the users’ funds. Despite its security features, users should always be vigilant and take appropriate steps to protect their coins.
