Safety is paramount in the digital financial ecosystem because it ensures investor trust and trading flow. Cryptocurrency would be doomed without blockchain’s high-security cryptography measures, especially since hackers are becoming more ingenious with their attacks.
However, cryptography is not the only factor that secures digital assets. Features like decentralization, consensus, and immutability contribute greatly to safeguarding private keys and confirming networks are not compromised. Thanks to them, users can perform transactions stress-free.
Despite that, crypto experts found several vulnerabilities in blockchains or smart contracts, which can act as a catalyst for hackers or scammers. Every layer of blockchain—from infrastructure to applications—can be at risk. Such security breaches can impact the value of cryptocurrencies, like Bitcoin, as seen in the Bitcoin price chart during past exchange hacks. That’s why securing your account is essential before learning how to buy Bitcoin on any platform.
Still, considering current technologies, Bitcoin is one of the safest digital coins out there, which is one reason for its popularity among investors. Let’s analyze what makes it so secure.
The hashing process
Satoshi Nakamoto, its creator, developed the process of mining for Bitcoin to function, through which global nodes can verify transactions’ legitimacy and add them to the blockchain. In the beginning, mining Bitcoin was generally considered easy, but as the cryptocurrency became more popular, mining required specialized hardware and a lot of energy. This is measured through the hash rate factor, which is the difficulty rate of mining Bitcoin.
The hash rate measurement shows if mining needs more computing power, leading to increased energy costs and longer verification times for user transactions. When this happens, mining Bitcoin gets more expensive and slower.
The hash rate acts as an additional shield over the blockchain’s security, ensuring the integrity of transactions, which is why they can sometimes take longer to process. Sometimes, the hash rate can trigger price increases even though it usually follows a steady upward trend.
The consensus mechanism
Bitcoin mining works based on the PoW consensus mechanism, which many other cryptocurrencies use. This technology involves miners validating transactions on the network. Therefore, miners can earn considerable rewards by investing in computational power. At the same time, PoW is significantly competitive, even though it requires a lot of energy.
Although some consider it to become slowly obsolete compared to other consensus like PoS, proof-of-work is one of the most lucrative technologies in the crypto industry and has paved the way towards greater improvements for miners.
Through PoW, miners hash transactions to produce the “Merkle root” digital signature that offers them value. This requires worldwide miners to run numerous computations, but since it safeguards transactions, it is worth it despite its disadvantages.
The rapidness of adoption
One interesting reason Bitcoin has become safer over the past decade is that traditional financial institutions have adopted it to provide customers with a way of payment that meets their standards. Companies like Microsoft, Twitch, and PayPal allow Bitcoin payments or other features through which an additional payment channel exists.
Since Bitcoin is becoming more popular among people who are not avid investors, the number of miners and developers who maintain the network is also increasing. Therefore, as Bitcoin expands, it becomes more secure and less susceptible to being controlled or manipulated, which is also an important component of safety.
Ethereum staking, for example, has been the subject of network centralization and exploitation, as only a few mining pools hold power over the ecosystem, influencing prices and competitiveness. On the other hand, Bitcoin offers various ways of earning income.
The 51% attacks
All investors fear the 51% attack at times, but it’s close to impossible to happen. The idea behind it is that if a hacker or a group controls at least 51% of the blockchain’s computing power, the network is compromised. This can happen if malicious actors replace one or more blocks, find ways to invalidate transactions, and steal the cryptocurrency.
The success of the attack requires unimaginable amounts of energy, specialized hardware as well as money. The creator of Bitcoin itself discussed this kind of attack on the cryptocurrency’s white paper, as it might’ve been easier to perform in the past. However, the Bitcoin network and its hash rate have increased considerably in the past years, so breaking the ecosystem is more difficult now.
Even if the attack happens, Bitcoin miners have the capacity to crash its prices and devalue it, which would leave hackers with a valueless cryptocurrency. While this cannot happen in an instant, it would not take that much to occur until hackers could be able to spend or withdraw the money.
The internet alternative
Although Bitcoin relies entirely on the internet, this doesn’t mean there are no other solutions to this problem. Of course, if the internet were to crash tomorrow or we were left with no internet connection worldwide, investors would have problems.
Crypto developers are wary of this possibility and are working to deploy unique ways through which Bitcoin can circulate even without the internet. For example, Bitcoin blocks can be broadcasted over radio, mesh networks, and satellites, and some similar projects have already benefited communities. In Africa, for example, people can buy or sell Bitcoin with only a regular cellular and a SIM card, therefore with no internet connection or fancy devices and hardware. The solution offers a financial alternative to people without access to banking products and services.
In the future, investing in Bitcoin might be easier and more lucrative since technology will evolve and traditional systems will adopt it as legal tender and way of transactions.
What’s your take on Bitcoins’ safety?
Bitcoin is the first cryptocurrency in the world, created by Satoshi Nakamoto, an anonymous investor and crypto expert. The project brought millions together by offering positions of miners, validators, and nodes who contribute to the platform’s well-being and make it safer daily by employing strict safety practices. Their contributions and the blockchain’s hash rate, consensus mechanism, and fast adoption rate help maintain the ecosystem’s reliability and avoid 51% attacks. We’re also expecting the future to bring less internet-dependent Bitcoin.