Business
How secure is Bitcoin?
Thing is though, this doesn’t mean that you should blindly jump into Bitcoin. Aside from the high price of entry, a string of events over the past year have shown that while the Bitcoin protocol itself may be secure, the wallets and services used to store and exchange Bitcoin may not.
Here’s a quick look into the security of the bitcoin protocol itself as well as some notable instances of large-scale bitcoin theft.
Bitcoin is one of many cryptocurrencies available today. Cryptocurrencies are digital currencies that implement cryptography as a central part of the protocol, in order to establish pseudonymous (or anonymous) and decentralized currencies. Bitcoin uses SHA-256 encryption for both its Proof-of-Work (PoW) system and transaction verification. The security of the bitcoin protocol lies in one of its fundamental characteristics, the transaction blockchain.
Bitcoin Blockchain
The blockchain is basically a chain of multiple “blocks” containing transaction history. The blockchain starts with the initial block, known as the genesis block. Transactions and solved hashes add new blocks after this genesis block, creating a blockchain.
Within the bitcoin protocol, the blockchain that has seen the most work put into it is considered to be the best blockchain and the one that the entire protocol refers to when verifying transactions. Bitcoins are considered spent once a transaction has been verified.
Double Spending
It’s possible (despite belief in the contrary) to trick the blockchain and spend the same bitcoins twice, an action known as double spending.
There are a number of ways this can be done. If a merchant doesn’t wait for transaction confirmation, bitcoins can be double spent by attacker(s) quickly sending two conflicting transactions into the network. Another way is to pre-mine one transaction into a block and then spend the same coins, before releasing the block into the blockchain.
However the amount of computing power required to succeed at this renders it less productive than just to mine bitcoins legitimately.
Bitcoins are stored in wallets, but unlike, say, a PayPal account, these “wallets” don’t actually store the bitcoins themselves. Despite a number of different implementations and formats, generally wallets will contain a public key that is used to receive bitcoins (similar to a bank account number). It also contains a private key that is used to verify that you are indeed the owner of the bitcoins you’re trying to spend.
Storing Bitcoins Offline
Wallets are usually stored digitally, either locally or online, but there are more secure ways to store bitcoins. Your bitcoin “wallets” can be printed out and stored on paper. A paper wallet is a slip of paper with both your private and public keys printed on it.
As mentioned earlier, the bitcoin protocol itself may be secure enough, but this does not extend to all the sites and services that deal in bitcoin. Here’s a quick rundown of some of the more notable instances of security-related issues over the past year or two.
Inputs.io
October 2013, online Bitcoin wallet service inputs.io was hacked twice. A total of 4,100 Bitcoins, worth about $1.2 million at the time were stolen via a social engineering attack, gaining access to inputs.io’s systems hosted on Linode, a cloud-hosting provider.
By compromising a series of email accounts, beginning with an email account that the inputs.io founder had set up six years prior to the attack, the hacker managed to gain access to the site’s account on Linode and reset the site’s account password.
Mt. Gox
Mt. Gox, which used to be one of the leading Bitcoin exchange services, has filed for bankruptcy protection, having lost a staggering amount of bitcoins: $468 million worth!
Mt. Gox’s demise began in early February when it, alongside other Bitcoin exchange sites such as BTC-e, froze Bitcoin withdrawals citing heavy Distributed Denial of Service (DoS) attacks aimed at taking advantage of bitcoin’s transaction malleability.
Simply put, transaction malleability means that it’s possible for valid transactions to be modified so that the transactions appear to not have gone through, when in reality it was succesful.
However, transaction malleability is not a new issue. Neither is it one that is impossible to solve, as Bitcoin developer Greg Maxwell has pointed out.
In fact, other Bitcoin exchanges such as Bitstamp and BTC-E are still operational, having resolved the issues on their side and resumed processing transactions within days after initially freezing transactions. Most damning of all, though, is the aforementioned lost bitcoins and poor security and accounting in Mt Gox, as detailed in a leaked series of slides. There might have been more going on behind the scenes than just issues with transaction malleability.
Silk Road 2.0
In February this year, $2.7 million worth of bitcoins were stolen from Silk Road 2.0‘s escrow account. This heist occured at roughly the same time as the aforementioned DoS attacks on bitcoin exchanges such as Mt. Gox, and exploited the same transaction malleability in the bitcoin protocol.
However, unlike the bitcoin exchanges, which shut themselves down as a precautionary measure, Silk Road 2.0 did not shut itself down and was attacked during a re-launch phase when all bitcoins were stored in hot storage.
However, some users, such as those on Reddit’s DarkNetMarkets, believe that the hacking story was a cover-up – and that Silk Road 2.0 was a scam from the start.
The idea is that the new Dread Pirate Roberts set up the site expressly to steal users’ bitcoins, leveraging on the trust present in the Silk Road name. The illicit nature of the goods bought and sold on Silk Road 2.0 would help such an endeavour, since it would make victims think twice about seeking aid from law enforcement.
Source: Hongkiat
The electric vehicle maker’s stupendous rally in recent months has given shareholders something to cheer about, cost short-sellers billions of dollars and vindicated legions of retail investors who have long adored Elon Musk’s company.
Tesla shares have soared by nearly 320% since early June, helped by the company’s better-than-expected financial results and ramped-up production at its new car factory in Shanghai.
After surging 36% over Monday and Tuesday, the stock by Friday had settled back to a gain of about 15% for the week. On Friday afternoon, it was down marginally at $747.11.
Another factor driving this week’s surge may be fund managers hurrying to raise their allocation of the stock, analysts said.
“A lot of advisors and institutions, they jump in the bandwagon because they don’t want to trail,” said vocal Tesla bull Ross Gerber, president and chief executive of Gerber Kawasaki in Santa Monica, California. “If Tesla goes to $1,000 and they don’t own it, what are they going to tell their clients?”
Gerber trimmed his fund’s position in the stock as the company’s valuation soared. He hopes to buy more if the stock falls and said a fair valuation would be around $550.
THE BULLS
Retail investors have driven part of the surge.
Among Fidelity Investments customers, Tesla has been by far the most actively traded stock in recent sessions, with nearly 16,000 buy orders for the electric carmaker’s shares. Twitter, ranked second overall in trading activity on Fidelity, had just over 2,000 buy orders.
On Monday, when Tesla shot up 20% in its biggest one day rally since 2013, clients at TD Ameritrade – millennials in particular – overwhelmingly took profits after having bought the stock for months, said JJ Kinahan, chief market strategist at the online brokerage.
Tesla’s biggest institutional shareholders are Baillie Gifford, Capital World and Vanguard, according to Refinitiv data.
It also has an international following. Retail investors in South Korea have been trading Tesla shares at a furious pace in recent weeks, buying and selling $200 million worth of stock in January, according to the Korea Securities Depository. Volume in November stood at $43 million.
Tesla options positioning is also bullish. According to data from options analytics provider Trade Alert, skew turned deeply negative this week, meaning that demand for calls, used to position for further share gains, has surpassed demand for puts, used to guard against a fall in shares.
That’s a departure from the usual dynamic in most stocks, in which options used for downside protection generally command prices higher than those for upside participation.
Mining cryptocoins is an arms race that rewards early adopters. You might have heard of Bitcoin, the first decentralized cryptocurrency that was released in early 2009. Similar digital currencies have crept into the worldwide market since then, including a spin-off from Bitcoin called Bitcoin Cash. You can get in on the cryptocurrency rush if you take the time to learn the basics properly.
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Which Alt-Coins Should Be Mined?
If you had started mining Bitcoins back in 2009, you could have earned thousands of dollars by now. At the same time, there are plenty of ways you could have lost money, too. Bitcoins are not a good choice for beginning miners who work on a small scale. The current up-front investment and maintenance costs, not to mention the sheer mathematical difficulty of the process, just doesn’t make it profitable for consumer-level hardware. Now, Bitcoin mining is reserved for large-scale operations only.
How Cryptocoin Mining Works
Let’s focus on mining ‘scrypt’ coins, namely Litecoins, Dogecoins, or Feathercoins. The whole focus of mining is to accomplish three things:
- Provide bookkeeping services to the coin network. Mining is essentially 24/7 computer accounting called ‘verifying transactions’.
- Get paid a small reward for your accounting services by receiving fractions of coins every couple of days.
- Keep your personal costs down, including electricity and hardware.
As a hobby venture, yes, cryptocoin mining can generate a small income of perhaps a dollar or two per day. In particular, the digital currencies mentioned above are very accessible for regular people to mine, and a person can recoup $1000 in hardware costs in about 18-24 months.
Best known as the immutable database that runs underneath cryptocurrencies like Bitcoin and Ethereum, blockchain is poised to play a critical role in every industry imaginable as businesses seek ways to cash in on the distributed ledger technology’s promise of enabling a “trustless” consensus to validate transactions.
Earnings in the past year
Smart miners need to keep electricity costs to under $0.11 per kilowatt-hour; mining with 4 GPU video cards can net you around $8.00 to $10.00 per day (depending upon the cryptocurrency you choose), or around $250-$300 per month.
Chart shows our earnings in the past year.
Financial transactions are typically guaranteed by a trusted third party (such as PayPal) and blockchain can be used to automate that process, reducing overall costs by cutting out the middleman with autonomous smart contracts acting as trusted intermediaries between parties on the network.
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