People often ask if Bitcoin is a safe investment not because of the market’s legendary volatility, but because they are concerned about the security of the digital asset. Bitcoin is one of the most popular cryptocurrencies in the world and has been around since 2009. Since then, in over a decade, the network has proven to be very resilient and powerful in protecting vital information. In recent years, the blockchain technology on which Bitcoin runs has become increasingly prevalent as cryptocurrency has begun to take center stage in many markets.
The Blockchain technology that runs virtual currency is known for its unrivaled security. It’s one of the main reasons for its rapid adoption, with Bitcoin being one of the technology’s biggest success stories.
What is blockchain technology and how does it work?
Blockchain is associated with cryptocurrencies like Bitcoin, Ethereum and others as a platform for digital money transactions. It is a database of all cryptocurrency transactions worldwide. However, this technology was also used to store other types of data, such as medical records, humanitarian aid data, and more.
Blockchain technology is like a digital ledger and open to the public. It provides a secure way to make and record transactions. All transactions made using cryptocurrency are logged and saved as block data. All this information is date and time stamped.
Is blockchain technology secure?
The easiest way to understand blockchain technology is to remember it as a series of blocks that store data. Each of the blocks contains a unique hash number and a link that connects it to the previous block. Each block is an important part of the sequence and cannot be changed. If there are any changes, the sum of the hash would be changed and the block would be more valid. This invariability is the foundation of blockchain security, along with three other aspects that we’ll look at next:
All blockchain transactions are protected by encryption. Each block essentially contains a unique, private key that can be verified with a public key. If there is a change in transaction-related data, the unique key of the block becomes invalid. As a result, the block is dropped from the chain.
Blockchain technology is secure as it is decentralized and distributed. There is no single point of failure, which makes it much harder to corrupt. Hacking one part of the system cannot affect other parts. However, in the case of a private blockchain, this advantage is partially lost as they have a single point of control and a limited number of nodes. This prevents users from making changes to the ledger. Organizations operate these types of blockchains for internal use as they allow the company to control its own processes.
Every blockchain technology operates through a consensus model, which checks whether a transaction has been performed and legitimizes it. Most consensus models run on protocols that include proof of work, proof of wager, proof of authority, etc.
What makes the Bitcoin blockchain safe?
The cryptographic system makes transactions irreversible – in other words, a block once created in the chain cannot be modified. However, you can add information to it. This restricts people from being able to reverse any transaction that has already taken place.
The Bitcoin blockchain is public. While the words transparency and public don’t seem safe, in the case of Bitcoin it is. Despite the user’s anonymity, all transactions on the network are publicly accessible, making it difficult to hack or cheat the system.
It’s decentralized. The Bitcoin network is distributed and has thousands of nodes around the world that track every transaction that takes place on the system. This ensures that if something goes wrong on one server, there are others to compensate. Hacking any server is useless.
That’s not to say it’s foolproof or impossible to hack – but it certainly isn’t easy either. With Bitcoin and other cryptocurrencies, you are more likely to suffer losses from bad investments or be driven to give up your coins than to have them ripped from you.