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What Are the Security Issues Surrounding Bitcoin?

July 27, 2020 No Comments

Featured article by Beck Dahlia, Independent Technology Author

Are you looking for an investment? Have you heard about Bitcoin? It’s one of the many digital currencies/cryptos we have in the world today. It’s also the crypto with the highest value, public appeal, and guaranteed success level. Investing in Bitcoin requires more than having the capital to start. It’s crucial to understand the concept of Bitcoin- how it works, why people prefer it, how to acquire it, storage means, and more. Like any other currency in the world, whether fiat or virtual, Bitcoin has some security issues that surround it. Let’s discuss these security issues below.

Wallet Attacks 

All Bitcoins are stored in digital software called a wallet. There are several of these wallets that people can use, ranging from online, desktop, mobile, and hardware ones. One of the major security issues facing BTC is the wallets, especially the online ones that are very vulnerable to attacks, thereby requiring encryption and offline backup. The available backup systems enable users to recover old wallet files. Hackers can quickly attack these wallets using their high-tech malware knowledge and steal massive amounts of Bitcoin. This affects users as their funds can be sidetracked to different accounts. Hardware wallets are less vulnerable to such attacks and are considered the safest for BTC storage. All you need to access them is your private key, and since they’re offline, no one can access them from the internet.

Timejacking Attacks

These occur when an attacker broadcasts incorrect timestamps when linking to a transaction node. The node’s network time counter is changed, and it may accept a different blockchain. This action results in severe impacts like double-spending and loss of mining computational resources. Though very hard to happen as it involves breaking into the blockchain, Bitcoin’s most secure system when it does occur, the consequences are enormous.

Over 50% Attack

The >50% attack, also called the 51% attack, is an issue that affects Bitcoin, though, with limited possibility to occur. It targets the mining process mainly. It results when any user or group obtains over 50% of the mining process’s computing power. The user or group can then transform, eliminate, and undo transactions and bar some or all mining of authentic blocks for their benefit.

The mining difficulty has made it necessary for it to be done in pools. Some of these have high computational power, meaning if they reach the 51% mark, they can misuse it and manipulate transactions through mining void blocks or double-spending. This can make stand-alone miners or those in small pools to shy away. It also declines the consensus protocol.

A possible remedy to this security concern is to create checkpoints to prevent altering the blocks before checkpoints. If the attack succeeds, others can be launched too, and the changes made will be permanent and difficult to handle. Double spending alerts can also be relayed among peers, and large pools disincentivized to reduce this type of attack.

Double Spending

It’s also called the Race attack and involves spending the same BTCs in numerous transactions and sending two conflicting transactions successively. It majorly targets sellers or merchants, leading to the loss of their products. It also scares honest users from exploiting the investment and establishes blockchain forks.

The severe threat is most likely to happen in the “fast payment” mode. The hacker makes a transaction with Coin B to a receiver and another one with the same coin to a different address or receiving node in his control. Making the fraud real involves varying the timestamp. No Bitcoin peer accepts numerous transactions with the same input, meaning that the first transaction to reach the peer will be validated, while others invalidated. The original receiver won’t confirm the transaction, and there’s no way to adjust this once the validation process is complete.

Some possible solutions include; – introducing “observers” in the network, peer double-spending communication notifications, and disabling any direct incoming connections by merchants. It’s noteworthy that Bitcoin is increasing its sturdiness against this threat and has reinforced some measures to mitigate it.

Selfish Mining

Selfish mining or block discarding is a harmful threat that affects honest miners or pools by undermining the Bitcoin forking element to obtain an unjust reward. It enables a pool to get revenue more than its mining power ratio. This group of miners compels the honest miners to undertake wasted computations on the public branch stale. The latter group will consume their cycles on blocks that won’t be part of the blockchain since the selfish group would have hidden their mined blocks while diverging/bifurcating the blockchain to their advantage. The selfish miners’ primary intention is to invalidate the hard work of honest ones. ZeroBlock and timestamp-based methods can assist in counteracting this threat.

Distributed Denial of Service (DDoS) Attacks and Cyber-Attacks

Bitcoin is also surrounded by security issues that target exchanges and online platforms. These cyber-attacks can cripple the currency more than any other since most users transact and even store their coins on some platforms. Like the Bitcoin heists that have occurred in the past, possible hacking of exchanges means a massive loss of Bitcoins. It leaves the exchanges bankrupt as the funds stolen are never recoverable. Most exchanges have also become targets of DDoS attacks, with some reporting having faced such occurrences repeatedly.

Fraudulent Exchanges

There are numerous online exchanges or sites for buying and selling Bitcoin. Are all of them legit? Not all exchanges you see on the internet are legitimate. Some operate fraudulently and are havens for financial scams. It’s prudent to always research on the trusted Bitcoin platforms before engaging with any. Some of the reliable and authentic ones are CoinBase, Binance, CoinMama, and Bitifinex; you can’t get anything wrong with them. This threat isn’t a major one, but if you’re new into the investment, you can be a real target of such scams.

The Bottom Line

As you contemplate investing in this marvelous crypto, do so for the possible security concerns and risks facing it too. They majorly pertain to Bitcoin usage and not blockchain technology. Meaning, as discussed above, most of them can be counteracted. It’s necessary to be aware of these security issues. What if you’re seeking further information about loan scams to get started in this sector? Bugis Credit helps resolve this matter. Be careful enough to safeguard your hard-earned money. Do not fall for bitcoin scams.

 

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