Business

Security of the Bitcoin Network

As Bitcoin Network works online like other networks on the net it is facing different security issues. It has been attacked by many hackers and some of the attacks were so successful that they stole a lot of money from different wallets. After these continued attacks the developers made many security protocols to save the assets of people. It enables the bitcoin network to be secure, process transactions, facilitate consensus, and mint new ones concurrently by proof of work.

Proof of Work is a beautiful way for miners to make a healthy living, and it also strengthens the relationship between the mining pool and the Bitcoin network in many ways. Mining is the process used to secure the bitcoin network, which validates transactions on the network while minting new ones.

Moreover, bitcoin is resistant to being controlled (or shut down) by any government or central authority because the code is not owned by just one entity. The BitcoinTrader network provides reliable security, although there are risks associated with it as well.

Bitcoin mining and its role

Source: cnbcfm.com

Mining bitcoins creates them and validates bitcoin transactions simultaneously.

There’s a computing puzzle called a Proof of Work (PoW) puzzle, in which computers on a network compete to solve.  The first miner maintains Bitcoin’s distributed ledger to find an acceptable solution by most miners — known as “blocks.”

Bitcoin is a currency now actually a valuable currency since it has an actual cost associated with it. Although the process takes approximately 10 minutes, the following block rewards are determined after most miners have mined one. Bitcoins are totally digital currencies and they did not have physical existence. that makes it more convenient and easy to use. it uses peer to peer technology. So the extra fees and charges reduce too much and the fees that people were paying to make transactions to middle authorities like exchanges and central banks has reduced. It has made it famous among the traders internationally.

The bitcoin exchange rate provides value (according to the labour theory of value) and digital scarcity.

A miner can solve the puzzle using transaction data only if they work from the same transaction data set. If they do not, they will not reach a consensus on a solution as the solution could be flawed. In the start, bitcoin mining was so easy and people were earning too much in the mining field but with the passage of time the number of miners increased gradually so the mining became difficult. In the start people were using their own pc or laptop for mining but now they need more efficient computer systems that can perform faster and solve the puzzle before anyone else. This made bitcoin mining more expensive and difficult so trading them is better than mining, but still people who are doing the mining are facing many security problems.

The result is that the reward can only come from her coin. She has no chance of earning it from her block. All the computational power she has spent on finding a solution will go to waste. As a result, miners should use reputable transactions instead of leaving behind precious resources, reducing the cost of mining and maintaining the Bitcoin network’s security.

Mine centralization is a risk

Source: static.dw.com

Bitcoin mining, in general, has become a specialized and capital intensive pursuit. The structures of incentives reward operating within the rules, making it cheaper to deviate.

Bitcoin’s mining market has consolidated into a few more prominent players due to this trend, so it doesn’t pose a problem for many in the bitcoin community. As such, concentrating the majority of the network’s hash rate in one or a few jurisdictions creates the potential for governments or other state actors to meddle with the network.

The Bitcoin network would move forward despite a decrease in aggregate hash rate in the short-term if a government bans bitcoin miners in its reach.  These might lessen bitcoin’s fungibility and freedom from government control. Therefore, a government might coerce miners to censor transactions.

As a result, the bitcoin community would need to preserve its latest unadulterated blockchain and use a more resistant consensus mechanism not to be censored by miners and manipulated by governments.

Hard Forks are a significant risk.

Source: wallstreet.finance.com

The bitcoin blockchain’s decentralized nature means a particular entity cannot censor it because it is replicated by computers called nodes across the globe.

Among bitcoin’s capabilities is its ability to process one megabyte worth of transactions per ten minutes – setting the number of transactions processed per second (throughput).  Contrary to this, centralized networks (including Visa) have much higher capacity than peer-to-peer networks, but they also have high censorship chances and lack peer-to-peer characteristics.

The number of bitcoin nodes increases substantially with a smaller block size due to the decrease in computational power and storage space requirements.  Although bitcoin has had no attempts to increase the block size, it has not gone without controversy and agitation. In 2017, tensions reached a boiling point, and a hard fork caused a public split.

The bitcoin community supports the idea of decentralization above all else. However, that does not mean it won’t be debated in the future regarding this or any design decision, resulting in dissent.

Attacks based on quantum computing

Source: cryptonomist.ch

One of the concerns surrounding quantum computing is that it may endanger the standard public-key cryptosystems like bitcoin. However, there is good news: Quantum resistant cryptography already exists.

Bitcoin is a software program to be updated at any time and switch to new post-quantum algorithms accordingly. Furthermore, any quantum threat is likely to be predicted years in advance, and bitcoin will be able to adapt.

If a security breach were to occur, the world would have more concerns than bitcoin network security. For example, all satellites and in-flight command and control systems would be compromised. Due to that, it would require worldwide effort to find a solution.

Related Articles

Back to top button