Can Bitcoin Be Hacked

Investors seeking an alternative to gold and other commodities have great interest in the alternative cryptocurrency bitcoin. But recent network security concerns about hackers and bitcoin exchanges have raised serious concerns about storing and transacting digital money in any form.

These concerns are compounded by the fact that no central bank or governmental authority backs the safety or soundness of digital currencies. Unlike fiat currencies like the US dollar, which is printed by the Federal Reserve, bitcoins are minted by complex interactions across a broad global computer network.

Due to the nature of digital mining, bitcoin’s value cannot be manipulated or altered. Bitcoin's value is secured thanks to the cryptographic functions that it employs, and though it could be hacked one day in the future, technology and cryptography experts agree that such an attack is unlikely in the near-term. However, the networks and storage locations where bitcoins are housed and “protected” can be hacked by malevolent forces. Despite assurances by bitcoin storage companies and developers of the currency, bitcoin exchanges can and have been hacked.

There are three prominent hacking cases of bitcoin exchanges in recent years:

Bitstamp: The Slovenia-based Bitstamp exchange represented the third-busiest marketplace for bitcoin at the beginning of 2015. The exchange processed roughly 6% of bitcoin transactions. The firm announced a breach in early January 2015 and shut down its services temporarily. When the smoke cleared, thieves had taken off with roughly 19,000 bitcoins (BTC), a fraction of the exchange’s total assets. Rather than keep its assets on live exchanges, Bitstamp had stored more of the currency on local hard drives, a process known as “cold storage.” The total heist was valued at $5.1 million.

Mt. Gox: The most prominent bitcoin hacking occurred in 2014. Mt. Gox, which was based in Japan, was once the largest marketplace for bitcoin, and processed roughly 80% of all global transactions for the currency. That was until a security breach at led to the heist of $460 million. The hacking soon fueled a price collapse of the cryptocurrency, with bitcoin falling by half in less than a year. Following the well-publicized heist and blow to bitcoin, Mt. Gox confirmed that it faced roughly 150,000 hack attacks every single second. Just one of these attacks made if possible for thieves to make off with 750,000 bitcoins and bring the exchange to its knees.

This too would prove impossible. While Bitcoinica attempted to reboot, it built its entire business around Mt. Gox. However, legal proceedings were brought against the exchange, forcing Bitcoinica to let all of its holdings sit idle in Mt. Gox exchanges while the courts attempted to sort out the second case ever involving digital currencies. While lawyers bickered, Mt. Gox was hacked, and anyone who still had Bitcoinica accounts proceeded to lose anything that was left.Bitcoinica:

These aren’t the only hacking attacks in recent years. Hackers took down the zloty and euro exchanges of Polish exchange Bitcurex last March. The firm lost “between 10 and 20%” of its funds. That same month, Canadian bitcoins announced it lost $100,000 after a hacker breached vulnerabilities in the exchange’s security protocols. And Picostocks, a bitcoin stock exchange, also lost 6000 BTC in 2013, despite having just four clients trading on it. Bitcoin wallet services BIPS and Inputs.io have also reported breaches in recent years.

The Bottom Line

Before bitcoin can become a mainstream alternative to fiat currencies or gold, exchanges must drastically improve security around transactions in order to boost trust in the platform. Despite advances in security, bitcoin exchanges have a challenging history of hacking attacks and theft by rogue agents. While the cryptocurrency may have a future in global finance, such attacks undermine confidence in its sustainability and broader movement to replace fiat currencies or other commodities as an investment.

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Reference : -http://bit.ly/1H28dHT