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How can the Bitcoin network stay secure without a bank or other type of entity watching over it?
Well, Bitcoin is designed with security at the heart of everything. It just takes a completely different approach than what most of us are used to. Instead of trusting a single organization, like a bank, it’s a worldwide network of computers that all work together to make Bitcoin transactions happen safely and securely.
From the basics of the blockchain to the digital locks that keep your coin safe, we’ll cover it all. Read on to learn more about the security of the Bitcoin network.
So, what’s the blockchain, anyway? After all, it’s the first word that comes to mind when Bitcoin is mentioned.
In essence, it’s Bitcoin’s public record book.
Imagine a digital notebook shared with thousands of people online. Every Bitcoin transaction gets written down in this notebook, also known as the public ledger.
Here are a few core ideas that make this all possible:
Each page in this notebook (a block) is linked to the previous one and any subsequent pages. Chain them all together and you get, well, a blockchain.
The next essential element of the Bitcoin network’s security is called public key cryptography. Imagine a mailbox with a key. Only you can open it, but anyone can send you a letter.
In public key cryptography, there are two main components:
As you might imagine, keeping your private keys safe is important.
Every non-custodial wallet, meaning you have control over the keys, has a private key that needs safe protection. If it’s lost, so is the Bitcoin within.
There are thousands of stories out there of lost private keys and Bitcoin, like this one about a hard drive with a private key to a wallet in a landfill that’s worth almost $800 million* (as mentioned on cnn.com). So, while public key cryptography is such a critical part of Bitcoin network security, it ultimately means you, and only you, are responsible for your keys.
Another key element of Bitcoin network security is hashing. What is hashing?
Think of hashing as instantly creating a unique "fingerprint" (the hash) for any piece of digital information. In this case, transactions and blocks will be hashed.
This is important for a few reasons:
That last point is an important one. Because each block in the blockchain is linked to the previous block’s fingerprint (hash), if someone tries to tamper with an old block, it will change the rest of the chain.
In short, it makes any sort of tampering incredibly obvious.
Let’s put all these pieces together with mining.
Essentially, mining is how transactions are processed on the Bitcoin network. It uses what’s called a Proof-of-Work consensus mechanism.
Basically, transactions on the network group together in blocks, and groups of specialized computers (the miners) work to guess the right number (known as a nonce) to complete the block’s corresponding hash.
Once the miner solves this puzzle, the block is considered valid and becomes part of the blockchain.
Just like with mining gold, this process requires energy and equipment. The miners put up this energy and equipment to secure the network; as a result, if they validate a block, they get a reward (in the form of newly minted Bitcoin and the transaction fees).
This is a very basic overview of the process. To learn more, check out our Proof-of-Work vs. Proof-of-Stake blog.
Mining is big business. The entire Bitcoin mining industry is estimated to be valued at around $2.5 billion* (data from precedenceresearch.com). But don’t think that means it’s off limits for the everyday user.
While huge mining operations certainly exist, single miners (meaning one not connected to a mining farm or business, usually a home hobbyist) often score the block rewards, which can net up to $260,000* (read more at cointribune.com) per block.
Can the Bitcoin network be attacked?
Well, attackers can certainly try. Because of all the above technologies, though, it’s incredibly difficult to mount an attack on Bitcoin. Let’s take a look at some of the most well-known threats and how the Bitcoin network handles them:
Since the first transaction in 2009, the Bitcoin network has never gone down or been hacked. While threats are always evolving, Bitcoin has stood the test of time, giving it the title of the most secure blockchain in existence.
As you can see, there’s a lot that goes into keeping the Bitcoin network secure.
Whether it’s hashing or public key cryptography, all these technologies work together to make sure every transaction you send makes it to its destination safe and sound.
If you’re ready to get your hands on some Bitcoin, we’ve got you covered.
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*The information provided above is for informational purposes only. The inclusion of any particular 3rd party site does not imply an endorsement, sponsorship, or partnership between Bitcoin Depot and the 3rd parties listed above. While Bitcoin Depot endeavors to ensure the accuracy and relevance of the information provided, we do not guarantee the reliability of any 3rd party’s information.