Author Topic: Is Cryptocurrency Secure?  (Read 700 times)


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Is Cryptocurrency Secure?
« on: August 27, 2016, 03:00:44 PM »
You have probably seen news headlines before: "Bitcoin Hacked! Bitcoin CEO Sent to Jail!"  Or similar low effort click bait.

These are articles typically written by ignorant 'journalists' who fail to investigate the facts. First, if you've spent any time with BeginnerCoin at all, you probably already understand that there is no Bitcoin "CEO." Bitcoin is software, not a company. It is developed by a group of experienced open-source programmers who test it and come to a consensus and make compromises. All of their actions and changes are public.

The hacks on Bitcoin have all targeted central holding facilities that act as online banking exchanges.  These "exchanges" are where people deposit their cryptocurrency and cryptoassets to trade them with other holders. Some of them allow you to transfer cryptocurrency  exchange them for local currency (USD, EUR, GBP, etc.) The security of this money is ultimately guaranteed by the exchange holding it.  In the recent hacks that have taken place, these central exchanges have been compromised.  The actual theft is almost identical to a thief breaking into a bank vault and physically removing the cash.

The term ‘hack’ is a bit misleading as it implies the actual Bitcoin technology was hacked or compromised, which is utterly false.  A better explanation would be more like thieves found a vulnerability in the bank vault, stole the keys for safe deposit boxes and used those keys to transfer the assets into their own pocket. The security of the system as a whole wasn’t compromised, it was only the individual security system of that individual bank.

This is an important distinction to make. Security is only as good as its weakest link.  No matter how strong or secure the Bitcoin network and technology is, it will fail when you store the assets in an insecure location.

It’d be like having an impenetrable fortress then leaving the key under the doormat.
It’s not the designer of the fortress who is at fault here.

Cryptocurrency is secure. Exchanges and centralized services are usually not. Whenever a large amount of money is stored anywhere, it becomes a target for hackers.

An interesting fiction book that delves into the nature of security systems was written by Corey Doctorow.  He has released the entire text for free on his website under Creative Commons licenses. 

The book has nothing to do with Bitcoin or cryptocurrency, but is a great beginner’s introduction to network and physical security systems.  This information is adroitly wrapped in a story about a 17 year old geek in San Francisco fighting against the increasing public ‘security’ measures enacted by the US government following a devastating bombing attack.  It’s a fast read that may change the way you look at many aspects of your daily life.
« Last Edit: September 16, 2016, 06:00:50 AM by BeginnerCoin »
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