Most crypto enthusiasts and experts say that bitcoin will stay here for an extended period, and people who invest in bitcoin love to hear this thing. Everybody understands that the bitcoin market is volatile and that cryptocurrencies are easier to buy and mine, and every day, retailers start to accept bitcoin payments which are great news.
Bitcoin has been here since 2009, and everybody has tested it, but it remains the world’s most famous cryptocurrency. Users trade bitcoin, and like bitcoin, oil also gets traded. If you are interested in trading oil and want to profit from it, download the official site of immediate edge.
Though you know all these things, it doesn’t mean you will directly jump into the crypto world and invest in it blindly. Aside from its increasing price, many events in the past have clearly shown that bitcoin exchanges and wallets aren’t entirely secure, unlike bitcoin protocol.
Here in this article, we will take a closer look at the security of bitcoin and its related aspects like crypto exchanges, its protocol, and digital wallets. Also, we will learn about some significant instances where bitcoin got hacked, or theft and investors lost their money.
Cryptography and blockchain
Of all the crypto assets available in the market, Bitcoin is the most valuable and well-known asset. In simple words, cryptocurrencies are virtual currencies that only exist digitally. Use cryptography in bitcoin protocol for establishing decentralization and anonymity.
Bitcoin uses the proof-of-work consensus method to verify its transactions, and for the PoW system, it uses SHA-256 encryption. Encryption is what makes bitcoin protocol secure and allows users to make transactions safely.
Blockchain of bitcoin is a long chain that consists of multiple blocks that all contain transactional history. The initial block of blockchain got named the genesis block. Individuals and computers contribute to the bitcoin network by verifying the transactions, solving hashes, and adding blocks in the blockchain chain.
Once bitcoin transactions get verified, they can never get reversed. A unique characteristic of bitcoin transactions is that they are irreversible, which prevents double-spending problems.
What is the problem of double-spending?
Earlier it was possible to spend the same digital coins twice, and this action got performed by the number of people where it got challenging to track the transactions, which is known as the double-spending problem. There are multiple ways users double-spend; for instance, if any retailer doesn’t ask or wait for confirmation of a bitcoin transaction, users can double-spend coins by sending two transactions simultaneously in the network.
Other ways through which this problem can arise is when miners pre-mine digital transactions in the block and use or spend the same crypto tokens before adding the block to the blockchain.
A specific computing power amount was required to successfully mine bitcoins legally without having a double-spending issue.
Bitcoins and other crypto coins get stored in digital wallets. These virtual coins have no physical appearance, and these wallets don’t technically store the crypto coins. All digital wallets contain keys that include public and private keys. The public key helps receive crypto coins, whereas the private key helps access and send crypto coins.
Private key verifies your ownership of coins and wallets. Users must store digital coins carefully and securely as if anyone gets access to the private key, they can hack your wallet, and you will lose access to your coins.
There are two types of wallets: online and offline, a secure way to store digital coins. Various types of crypto wallets are available that include paper, hardware, and more. Paper wallets print digital keys on a piece of paper, and it allows you to make transfers easily by scanning the QR code.
Another type of wallet is hardware wallets that are offline wallets that store information of transactions on a hardware device. The critical benefit of hardware wallets is that they are immune to viruses and hacks.
The bitcoin protocol uses cryptography, making it secure, but users face issues when dealing with services and sites. In the history of Bitcoin, there have been many hacks and scams that took place at crypto wallets and exchanges.