Despite the hazards, investors from all over the world have flocked to Bitcoin and other cryptocurrencies because of the promise of rapid riches. The popularity of Bitcoin has inspired several spin-off ventures, copycats, and supporters. Not to be left out, thieves also found chances since they could steal anything that had the promise of wealth.
Read more: What is Bitcoin
Your cryptocurrency may be compromised due to vulnerabilities that hackers may exploit, but only under certain circumstances. So, how can you safeguard your assets and yourself?
Bitcoin was first introduced in 2009; being a decentralized digital currency, it is not supervised or controlled by any one person, group, government, or other organization. Peer-to-peer exchanges contributed to the development of digital money, which later gave rise to a digital environment in which any object may be represented by a blockchain token.
Blockchains for cryptocurrencies are open ledgers that keep track of and validate all transactions inside a network. Everyone has access to transactions, the involved pseudonymous addresses, and the amount transmitted. The entries in these open ledgers are automatically made by scripts, programming, and an automated transaction validation procedure; nevertheless, no one is able to access them and make new entries or edit existing ones.
The Security of a Blockchain
Blockchain security is handled by cryptographic methods and consensus procedures. Blockchains encrypt transaction data and include information from earlier blocks in each subsequent block. Encrypted data is used to link the entire ledger together. The security increases with each new block that is added.
Therefore, an existing blockchain cannot be “hacked” in the sense of “being hacked” that refers to the introduction of harmful code or the use of brute force to gain access to the network and start making modifications.
How Might One Attack a Blockchain?
A blockchain might be taken over by an attacker—or group of attackers—if they have the majority of its hashrate, or computing power. A so-called 51% assault allows for the introduction of a modified blockchain if the attackers control more than 50% of the hashrate. This enables them to modify transactions that the blockchain had not yet validated when they gained control. Six confirmations are required before a transaction is deemed successful.
For instance, the first confirmation would occur if you sent a buddy 1 BTC, which would be recorded and validated in one block. The data from that block is validated, recorded in the following block, and then the block is closed—this is the second confirmation.
The tokens used in transactions that the network has not yet approved would then be available for use by the attackers. The updated blockchain would behave as they had intended it to, and they could transfer the coins to anonymous addresses.
How to Protect Your Bitcoin
To prevent the theft of your bitcoin, you may take a few simple measures. Knowing where your keys are kept, how to get to them, and how to prevent others from getting to them are important considerations.
Wallets can be hot, cold, custodial, or non-custodial, as was before noted. Any hot wallet, or one that is connected to another device or the internet, is the least secure type of wallet. Never keep your keys on a device that has a connection that is always on or accessible for security reasons. It can be hacked if it has a connection and a program is used to obtain your keys.
You don’t need a commercially produced gadget to operate as a wallet, despite what advertising and bitcoin wallet reviews would lead you to believe. Another option is an encrypted USB thumb drive. A computer or other connected device must be connected for a cold storage device to become hot storage; however, with time, USB connections might deteriorate.
There is no technique of key storage that is completely safe, unbreakable, and long-lasting. However, keep in mind that a lot of individuals become targets of hackers and con artists, losing money from their bank accounts as a result of personal information being exploited to get access to them. Private key security is identical to that of your personally identifiable information.
Non-custodial cold wallets are the safest type of wallet. These may be anything from a sheet of paper with the keys written on it kept in a safe to a gadget with passkeys and further encryption. Because they are readily destroyed, paper wallets should only be used as a temporary solution.
There are numerous solutions on the market that promise ease and security for your Bitcoin or other cryptocurrencies, but the best way to protect your cryptocurrency from hackers and thieves is to follow a few basic guidelines:
- Don’t store your keys in the wallet on your mobile device or any other device that has a connection to the internet.
- Your private keys should always be held in cold storage.
- Don’t let someone else store your keys for you unless you’re comfortable with the risks.
- If you want to use your cryptocurrency, only transfer the keys you need to your hot wallet, conduct your transaction, then remove them from the hot wallet immediately.
- Keep your cold storage method in a secure, humidity-controlled environment without a wired or wireless connection.
- Check on your devices periodically to ensure they’re not degrading. If they are, transfer your keys to a new storage device.
- Never share your private keys with anyone else.
Can hackers take cryptocurrency?
Cryptocurrency can be taken and stolen by hackers. Exchanges, wallets, and decentralized financial apps are frequently targeted since they are the weak areas.
This article does not constitute a recommendation by Investopedia or the author to invest in cryptocurrencies or other Initial Coin Offerings (“ICOs”). Investing in cryptocurrencies and other ICOs is very hazardous and speculative. Before making any financial decisions, it is always advisable to get the advice of a knowledgeable specialist because every person’s circumstance is different. No guarantees or claims are made by Investopedia on the timeliness or accuracy of the information provided here.