Synopsis: When confronting any new technology, newcomers are naturally wary of the potential pitfalls. This article looks at the potental of a cryptocurrency hack. Read it now to understand whether your crypto is at risk!
The “51% attack” refers to the possibility of one party gaining a majority of the total cryptocurrency mining power. Those worried about a cryptocurrency hack fear that if this were to happen, then that majority party would have free reign to do whatever they wanted.
The Bitcoin network has never suffered a 51% attack, and the larger the network grows, the harder it becomes. Even so, the concern must be addressed. We first get the cryptocurrency facts and understand exactly what a 51% attacker can and cannot do. A successful 51% attacker has less power than most people think.
The Bitcoin white paper explains what could happen should one party gain a majority stake:
“… it does not throw the system open to arbitrary changes, such as creating value out of thin air or taking money that never belonged to the attacker. Nodes are not going to accept an invalid transaction as payment, and honest nodes will never accept a block containing them. An attacker can only try to change one of his own transactions to take back money he has recently spent.”
To “change history”, an attacker needs to overtake the ‘honest’ blockchain, to gain the trust of the rest of the network. In practice, this means the attacker would need to not only create a new block in the past, but keep adding them faster than the rest of the network to eventually become the longest chain. The further back the attacker goes, the more of a headstart the rest of the network has, making an attack exponentially more difficult.
There is also a clever piece of crypto mining game theory that reduces the incentives of a 51% attack. Returning to the Bitcoin white paper:
“If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins.”
There you have it. The attacker would probably just be better off mining Bitcoin honestly instead of trying to cheat the network.
Cryptocurrency Hack – Attackers Cracking The Code
Could someone “crack the code” of Bitcoin? The incentives are certainly there to carry out such a cryptocurrency hack, if it were possible.
“A honeypot is a system that is designed to attract hackers. What bigger honeypot could you have than a financial network that has [billions] on it? If you hack Bitcoin, there is [a reward of billions] for you finding a way to hack it. No-one has collected that reward yet, and it’s not because they haven’t been trying. They’ve been trying nonstop.”
One of the core strengths of Bitcoin is that it is open-source software. All the code is there for anyone to see. While it may appear that this makes the system less secure, in fact it allows anyone to point out the weaknesses and for the code to become stronger over time – it is far more robust than code developed in a closed system.
Brute Force Solving Private Keys
Anyone who has possession of the private key has control of the Bitcoin balance which it is associated with. One of the key principles of the cryptography that Bitcoin relies on is: a public key can easily be derived from a private key, but it is computationally infeasible to derive the private key from the public key.
With computers being as fast as they are, some people question whether this is really the case. Could a private key be back-solved through brute force? The answer is: No. Cannot be done. Not if all the computers in the world were working on the problem for the entire history of the universe.
A far greater concern for crypto security is not a cryptocurrency hack, but lack of custodial care over the private key – accidentally revealing it, or losing access to the cryptocurrency wallet that controls it. But this is a human problem, not a programming problem.