There have been many hack incidents related to the cryptocurrency industry in the past few years. For outsiders, they often mix up these incidents as if the hack incidents of crypto exchanges means that cryptocurrency and Bitcoin themselves are not safe to hold.
Well, here’s the truth. We need to be able to tell the differences among blockchain hack, exchange hack, and phishing attack. They are very different from one to another. Just because someone loses his Bitcoins to a random online hacker, it doesn’t mean Bitcoin blockchain itself is not safe. This article tells you the differences and gives you the answers to all these.
The Security Of Bitcoin Blockchain
Let’s start with the most common question, “can Bitcoin get hacked?”. When they ask this question, they usually don’t know the differences between the Bitcoin blockchain and hack incident involving crypto wallet or crypto exchange. As for the Bitcoin blockchain itself, it’s almost impossible to hack it.
Why? Because Bitcoin blockchain is decentralized. Its distributed network makes sure that there are thousands of Bitcoin copies all over the world instead of just one single copy. If a hacker wants to modify the ledger of Bitcoin blockchain (or any other cryptocurrency), the same hacker cannot just hack one computer. It needs to be able to hack thousands of participating networks in the same blockchain (51% of total participants).
It’s extremely unlikely for a hacker to be able to modify the records inside 51% of the Bitcoin network. It’s already hard for someone to hack into one computer. Now the same person has to alter the records in thousands of computers if he wants to “hack” Bitcoin blockchain. It’s never been done before.
The Possibility Of 51% Attack
However, just because it’s very unlikely for Bitcoin blockchain to get hacked, it doesn’t mean it’s impossible. The loophole to manipulate a blockchain is called double-spending, which is a way to overwrite a previous transaction through a 51% attack. If someone or a company has control over or equal to 51% of a blockchain’s hash rate, technically, that individual or company has the ability to overwrite the transactions inside the blockchain. He doesn’t have to hack into other computers in the network because he already “owns” the majority of the network.
This 51% attack has happened before to the much less powerful blockchains. However, it has never happened to Bitcoin as Bitcoin blockchain is currently the strongest public blockchain in the world without a single entity controlling the majority of the network.
The chance for a 51% attack to happen on Bitcoin is extremely slim. The more popular a coin is, the less likely it is to suffer a 51% attack. You don’t have to worry too much about the possibility of Bitcoin blockchain to get hacked like this.
The Security Of Cryptocurrency Exchange
Now we have found our answer regarding Bitcoin blockchain’s security. Let’s talk about the usual problem whenever we hear of a hacking incident. Hack incidents are usually related to crypto exchanges’ stolen funds.
So, there are many centralized cryptocurrency exchanges where you can easily trade one crypto asset against another. Traders usually use these crypto exchanges to buy or sell cryptocurrencies.
These exchanges typically have API features where they “open up” the trading platform to trading bots. Why do they do it? Because many crypto traders, especially whales, like to trade with bots. Bots allow you to trade with much faster reaction than human eyes.
But API has its own risks. If not crafted properly, hackers can exploit some API loopholes to steal user funds that use trading bots with their exchange accounts. This is what has happened multiple times in the past. The hackers then withdrew the stolen crypto funds to their own non-custodial crypto wallets.
To make sure you wouldn’t be a victim of this type of hack incident, well, you can just trade manually or don’t open the API functions inside your account. It’s also better if you trade with crypto exchanges that guarantee its user funds’ security through cold wallets policy.
Another common hack incident related to cryptocurrency is phishing attacks. This is actually an individual attack and not a hacker trying to get into a crypto exchange or a blockchain. Phishing attack is as old as the internet itself. Basically, phishing is a fraudulent act to obtain your sensitive information or wallet backup phrase by disguising oneself as someone else.
For example, let’s say someone pretends to be a representative of a particular crypto web wallet that you regularly use. This someone sends you an email and tells you to retype your 12-word backup phrase into his fake website. Because the fake website looks exactly the same as the original one, you fall for the trick. The criminal then would be able to know the 12-word backup phrase that you type into his website.
This is a common trick to find naive and unsuspecting victims. There are plenty of users who fall for phishing tricks and eventually get their crypto funds stolen. The way to avoid this is to be sure you never type your backup phrase, private key, or other sensitive info outside your usual procedure.
For example, if you use MyEtherWallet to manage your crypto assets, bookmark the page, and only go to MyEtherWallet through the same bookmark. Don’t go to MyEtherWallet from a telegram message or a link from an email. I hope it helps.