How does bitcoin remain secure?

Bitcoin network security has several levels. Transaction hashing, mining, block confirmations, and game theory work together to make the Bitcoin blockchain impenetrable. No, Bitcoin doesn't use encryption. It is called “cryptocurrency” because its digital signature algorithm uses the same mathematical techniques used for a type of encryption based on elliptic curves.

Bitcoin uses the elliptic curve digital signature algorithm (ECDSA) with the secp256k1 elliptic curve, not the cipher. Bitcoin uses SHA-256 encryption both for its proof of work (PoW) system and for transaction verification. The security of the bitcoin protocol lies in one of its fundamental characteristics, the blockchain of transactions. Although bitcoin is a purely digital currency, it can be kept secure in analog form.

Paper wallets can be used to store bitcoins offline, eliminating the possibility of hackers or computer viruses stealing the cryptocurrency. Printing the contents of a wallet (basically, the private keys and their corresponding public keys) creates a physical record that must be kept secure. Most wallet programs can create a paper wallet, along with the QR codes of the keys, which can be easily scanned and added to a software wallet. While paper wallets were once a popular method for storing bitcoins, hardware wallets have made it much easier to manage and protect cryptocurrencies.

Bitcoin works with an unprecedented level of transparency that most people aren't used to dealing with. All Bitcoin transactions are public, trackable and permanently stored on the Bitcoin network. Bitcoin addresses are the only information used to define where bitcoins are assigned and where they are sent. These addresses are created privately by each user's wallets.

However, once the addresses are used, they are contaminated by the history of all the transactions in which they participate. Anyone can view the balance and all transactions from any address. Since users often have to reveal their identity to receive services or goods, Bitcoin addresses cannot remain completely anonymous. Because the blockchain is permanent, it's important to keep in mind that something that can't be tracked today may become trivial to track in the future.

For these reasons, Bitcoin addresses should only be used once and users should be careful not to reveal their addresses. More importantly, however, the unregulated bitcoin ecosystem means that there is no way to ensure that services and exchanges meet reliability and security standards. A set of bitcoin keys that is printed on paper is called a “paper wallet”, and there are many free tools that can be used to create them. The distributed Bitcoin network has more than ten thousand nodes around the world that keep track of all the transactions that take place in the system.

Bitcoin security is based on decentralized control of keys and independent validation of transactions by miners. Cryptography controls the creation and transfer of a cryptocurrency, and the protocols underlying bitcoin have proven to be robust. Prudent users will store only a small fraction, perhaps less than 5%, of their bitcoins in an online or mobile wallet as a “pocket currency”. When designing a complex bitcoin application that consists of services on many different systems, you must carefully examine the security architecture to determine where trust is placed.

While Bitcoin hides your personal information, it doesn't hide your crypto wallet address. Keep only a small amount of bitcoins on a computer or mobile phone for daily use in an online wallet (active), and the balance will be held in a separate offline wallet (cold). However, the strengths of DLT and the blockchain have not prevented attackers from exploiting the vulnerabilities of cryptocurrency exchanges, which are platforms where customers make payments and exchange cryptocurrencies for other digital or conventional currencies, or of cryptocurrency wallets, which are the software used to store bitcoins on computers and smartphones. Unless your intention is to receive donations or public payments in complete transparency, publishing a Bitcoin address in any public space, such as a website or social network, is not a good idea when it comes to privacy.

If you forget your Bitcoin password, that is, the password to your wallet, you will have problems. Simply storing bitcoins in an offline savings wallet, such as a paper or hardware wallet, should eliminate the risk of bitcoin wallets being stolen over the Internet. .

Gertrude Majera
Gertrude Majera

Freelance web aficionado. Subtly charming zombie junkie. Typical coffee maven. Wannabe travel aficionado. Hardcore music lover. Passionate pop culture aficionado.

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