Are bitcoins safe?

Are bitcoins safe?

 Are bitcoins safe?

The cryptography behind bitcoin is based on the SHA-256 algorithm designed by the US National Security Agency

Cracking this is, for all intents and purposes, impossible as there are more possible private keys that would have to be tested (2256) than there are atoms in the universe (estimated to be somewhere between 1078 to 1082).

There have been several high-profile cases of bitcoin exchanges being hacked and funds being stolen, but these services invariably stored the digital currency on behalf of customers. 

What was hacked in these cases was the website and not the bitcoin network.

In theory, if an attacker could control more than half of all the bitcoin nodes in existence then they could create a consensus that they owned all bitcoin, and embed that into the blockchain. But as the number of nodes grows this becomes less practical.

A real problem is that bitcoin operates without any central authority. Because of this, anyone making an error with a transaction on their wallet has no recourse. 

If you accidentally send bitcoins to the wrong person or lose your password there is nobody to turn to.

Of course, the eventual arrival of practical quantum computing could break it all. Much cryptography relies on mathematical calculations that are extremely hard for current computers to do, but quantum computers work very differently and may be able to execute them in a fraction of a second.

What are the problems with bitcoin?

There have been several criticisms of bitcoin, including that the mining system is enormously energy hungry.

 The University of Cambridge has an online calculator that tracks energy consumption and at the beginning of 2021, it was estimated to use over 100 terawatt hours annually. For perspective, in 2016 the United Kingdom used 304 terawatt hours in total.

Cryptocurrency has also been linked to criminality, with critics pointing out it is a perfect way to make black market transactions. In reality, cash has provided this function for centuries, and the public ledger of bitcoin may actually be a tool for law enforcement.


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