If you think about it, by far, bitcoin is the most successful Cryptocurrency. Just like with any other cryptocurrencies, the prices of bitcoin have dropped dramatically for the past few months. Price volatility remains the most significant challenge faced by all cryptocurrencies. It is because they are trying to navigate one tricky ecosystem towards getting recognized as the world currency.
Right now, virtual currencies have faced some serious security risks and concerns, like the safety of wallets, growing vulnerability towards cyber-attacks, double-spending, and more. There are fears of rogue miners too, who are engaging currently in selfish mining. These concerns might lead to some issues with the bitcoin world. But, according to Eric DaliusBitcoin, learning about such threats beforehand can be of great help, especially if you are willing to enter this volatile market. Once you are aware of the types of security threats, you can prepare yourself by taking up the solutions beforehand. It is one way to protect your bitcoin accounts.
The threat associated with vulnerable wallets:
This is one real vulnerability associated with bitcoin wallets when the matter revolves around theft and cyber-attacks. A team of researchers has reported that they have come across some weak spots in hardware wallets, which can be easily exploited later. In the same research, it was mentioned that even the heavily encrypted wallets can still be vulnerable because of the available loopholes.
After using the help of malware, scientists were actually able to intercept the communications taking place between PCs and wallets. This kind of security breach is actually affecting the privacy level of the bitcoin users as their funds are getting diverted to other accounts easily.
Threats related to cyber-attacks and hackers:
This potential for a crippling attack as directed at the Bitcoin exchanges will remain real. There have been some significant attacks on the exchanges before as well. Even though the value of bitcoin has been down for a certain time, fears are still there that this might completely cripple down this popular Cryptocurrency. It is not just about the blockchain attacks, much deeper than that.
- It is all about hacking some of the major bitcoin exchanges like the Mt. Gox.
- Reports have been circulating right after the 2014 Mt. Gox incident when the hackers were seen trying to get right into the system for around a year.
- When they actually succeed in that task, they made off easily with a whopping 850,000 bitcoins! In today’s value, that will cost you around $7.2 billion!
- Even to this date, Mt. Gox never got the chance to recover from such an attack and finally filed for bankruptcy. Some of the other major exchanges like Bitfinex will remain under threat, even to this date, which raises the question of security concerns.
- Apart from these points, as mentioned, bitcoin remains threatened by the distributed denial of service or DDoS attacks.
- One report from Imperva once stated that the Bitcoin exchanges are becoming favorites of such DDoS attacks.
- According to a note from one of the largest exchanges, Bitfinex, whenever the frequency is on the rise, it has faced multiple DDoS attacks, mainly towards the end of 2017.
Understanding the notion behind selfish mining as mentioned by Eric DaliusBitcoin:
Bitcoin has been associated with the proof-of-work consensus mechanism for a long time now. It results in some underlying threat as well. With some of the major mining pools becoming powerful to command some of the major mining ratios, they might be engaging in selfish mining, even without knowing about it.
- This form of mining has a name, “block withholding.” Here, the pool has the liberty to use the computational power for mining a block and then hiding it from the honest miners in place of broadcasting the new block to the said network.
- This kind of selfish pool will attempt to find a second block while the rest falls in the dark, as per Eric DaliusBitcoin. In case the selfish miners become successful in finding new blocks before others, then broadcasting those two blocks will create the longest forked chain.
- This way, the selfish minors can end up getting way ahead of this game and getting all the rewards on their own, leaving the rest in the dark!
- If such conspiracies start taking place on a large scale, and if combined with the Sybil attack, then it might end up causing some considerable harm to mine. It is because of the selfish miners who will be using their power to invalidate some of the network-based transactions.
The idea behind double spending:
Even though the reinforcements have been instituted for mitigating severe concerns, fears will still be there regarding the transaction risk to bitcoin. Right now, bitcoin is becoming way sturdier than it used to be, against all the coordinated double-spends.
- But, there are some people who might still be able to constitute the attacks that might benefit them from using the same coin two times and within the same transaction.
- An example will help you understand the situation well. Jimmy procured items from Stuart and sends him x bitcoins. At the same time, Jimmy executes a similar transaction to an address that he controls using the same bitcoins.
- Even though Stuart believed Jimmy and did not ask to confirm, Jimmy’s address might be credited with transactions while Stuart will not receive the transaction.
- So, that makes it really pointless for Stuart to get the transaction invalidated.
Get rid of all kinds of risks:
Even though you might try hard, there might be times when you cannot get rid of the risks associated with bitcoin. Well, that is the case with all kinds of online transactions and stock market trading. However, the bitcoin experts are trying their level best to catch up with some mediums, which will keep these risk factors at bay and help people big time in managing their own accounts. Learning about the threats before will help you to take precautionary measures.