Did you know that there’s a new cyberattack that happens nearly every 39 seconds? Hackers have become so advanced in their prowling. This has even resulted in the US government set up a cybersecurity budget of approximately $15 billion. While this information sounds fascinating, you should remember a few things if it’s the first time reading about it. For instance, it leads to a loss of a lot of privacy. In the long run, this can be costly. But, with Bitcoin mining, things are a lot different. For example, you don’t have to worry about hacking, losing control, or your system shutting down. However, this doesn’t mean that there isn’t potential for any threats to occur.
In fact, there are theoretical attacks that can target the main power that’s used to secure your blockchain. Yet, these types of attacks still differ from conventional data breaches and hacks. This is why you need to know these types of attacks. It should help you to trust that your wealth will be safe over time. Keep on reading to find out more.
The thing is, Bitcoin is a complex system that can be difficult to understand. It’s easy to dismiss it as a Ponzi scheme. But, you must understand its design. Moreover, the benefits that you should gain from its adoption and continuous development. If you want to grasp the role of miners fully, you should know how to follow a simple transaction from the beginning until the end. This is very different when you compare it to your traditional financial systems. It’s easy for anyone to become a miner or node operator. With Bitcoin, miners typically play 3 significant roles.
In addition, you have nodes that are equally important to validate your transactions, keep a record of these transactions, and enforce the standard rules of your network. This is an effective way to ensure that everyone is adhering to the rules. Moreover, they ensure that software updates are regularly maintained. This is critical for confirming and propagating all of your transactions. There’s a consensus that ensures efficiency with Bitcoin.
When transactions are included in the blockchain, they’re considered confirmed, unlike when nodes have just validated them. When this is the case, transactions are still considered unconfirmed. Blocks are mined all the time. Recently mined blocks are called chain tips. The further away they are from the tip, they become more secure. So, if your block is more than a week old, it’ll be more secure than the one that was created 5 hours ago.
From time to time, bitcoin miners will mine empty blocks. An empty block is a block with zero transactions. While you can be awarded a subsidy for this block, you won’t receive any rewards from any transaction fees. A miner with a lot of hashrate could still weaken the network by adding numerous empty but valid blocks. This would keep all transactions in a pending status and stall the network’s use for as long as the attack can be maintained. The more time passes, the less possible this type of attack is because the subsidy of Bitcoin decreases considerably over time. It, therefore, becomes costly to deliver this kind of attack because the only reward that there will soon be to recover blocks will be the transaction costs. If no transaction is included in the blocks, the miner will not make any profit. In contrast, the honest miners will make the rewards and have the resources to maintain their operations and ultimately take back the majority of the hashrate.
While Bitcoin is lauded for its censorship resistance, it doesn’t mean that it can’t be weakened. For example, if there’s a group of colluding miners, they can enforce a form of censorship and never include a certain type of transaction in newly minted blocks. As a result, you end up unable to spend your coins for as long as these miners control the vast majority of the hash rate. Remember, for this attack; the malicious miners would need to acquire more than 50% of Bitcoin’s hash power to prevent your transactions from making them into a block potentially. It is again improbable to ever happen on Bitcoin’s Blockchain as it is the world’s most powerful and distributed network. Additionally, it would be incredibly difficult for anybody, even a government, to determine the country a transaction came from, more so with the addition of Taproot to Bitcoin.
Let’s say that you’re planning on making a huge purchase. If you’re a miner, you can spend your bitcoins to make this purchase. However, with a double-spend, you would spend the same bitcoins on a different transaction. This is done to pay for your purchase and secretly mine a different version of this chain. As a result, you can end up sending the coins to your seller and yourself simultaneously. So, you keep on mining the alternative chain in secret. When your purchase is made, you broadcast the secret alternative chain you have been mining. This can be achieved only if you manage to get more than 51% of the Proof of work and would most likely require more than 70% of PoW to effectively have a chance to succeed as this will also require a lot of luck. The cost of this attack is astronomical and unlikely to ever happen on Bitcoin’s Blockchain but has been seen on various low cap altcoins with very little to no proof of work.
It’s easy to focus on the negative aspects of your Bitcoin mining, such as these mining attacks. However, you need to understand the role of transaction confirmations and how they help to improve your security.
Once a block is mined, it means that all the transactions in that block have one confirmation. While this is considered decently secure already, it becomes more secure with each block mined on top of it. In the Bitcoin space, it is widely accepted that at least 6 confirmations should be used for very large or important transactions because it is extremely unlikely for a blockchain reorganization to go that deep.
If it is expensive to rewrite one block, it is significantly more expensive to rewrite six blocks.
The fact of the matter is Bitcoin seems to be designed more securely when compared to traditional systems. The latter systems are more prone to attacks that range from simple to severe. The difference between these systems and Bitcoin is that Bitcoin can be rewritten to a certain extent, but it still can’t be hacked. Although the above attack scenarios are theoretically possible, in practice, they are extremely costly to undertake to make them highly unlikely to occur.
Disclaimer: The information provided on this blog is for informational purposes only and should not be taken as any form of advice.
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