Video transcription below.
Bitcoin is a decentralized cryptocurrency, meaning it is not controlled by a single person, company, or government. It’s base code, the blockchain, run in countless computer around the globe, and that’s why it is called decentralized, because it is not centralized in the hands of one or a small group.
Just because of that, it is already very hard to break bitcoin. If one, or a few of these computers running the code are attacked, others will keep the code running and no one will even notice that there was an attack attempt on Bitcoin. And it’s basically impossible to control the blockchain, for that same reason. There are just too many backups.
So, Bitcoin and other cryptocurrencies are unbeatable, and can’t ever be broken? Well, not exactly, and that’s what you’ll learn on this video.
So, make sure to like and subscribe, and don’t forget to turn on that bell notification so you don’t miss out on any new video from the Crypto Odyssey. And if you’re real fan, join the Crypto Odyssey in our other social medias, links in the description.
How to hack Bitcoin
We will discuss two ways Bitcoin could be hacked and show a few examples of cryptocurrencies that got hacked in the past. The first way to hack bitcoin we’ll be discussing is called the 51% attack. The other one is known as the birthday attack. But before going into those, let’s just take a quick look on what double-spending means.
Bitcoin is nothing but a bunch of codes in a computer. And if you’re savvy enough, and knows how the blockchain works, you could eventually make copies of bitcoin and use it on two different transactions, spending it twice. This is a potential problem, unique to digital currencies because digital information can be reproduced relatively easy.
Physical currencies do not have this issue because they cannot be easily replicated, and the parties involved in a transaction can immediately verify the authenticity and past ownership of the physical currency.
So just have this in mind, as both hacking possibilities we’ll discuss come down to the double-spending problem.
The first one is called the 51% attack. Bitcoin is a decentralized currency, as already mentioned, and the 51% attack happens when this decentralization is not big enough, making Bitcoin’s network vulnerable. We mentioned this type of attack in our Bitcoin mining video, which you can check out at the link in the description.
You may have already guessed what the 51% attack means. If someone were able to control 51% of all Bitcoin mining power, that someone controls the blockchain and Bitcoin is no longer decentralized, or not decentralized enough.
The attackers would be able to prevent new transactions from gaining confirmations, allowing them to halt payments between some or all users. They would also be able to reverse transactions that were completed while they were in control of the network, meaning they could double-spend coins.
Although very harmful for the system, if a 51% attack were ever to happen on Bitcoin, it would not destroy the cryptocurrency, as they would not be able to alter existing blocks of the blockchain, neither create new coins nor alter the mining reward.
If these seems too confusing to you, I strongly recommend you check our video on Bitcoin Mining, link is in the description, it will make things clear.
Examples of 51% attack
Bitcoin, has never suffered a 51% attack, but back in 2014 a mining pool named gHash.IO briefly exceeded 50% of the Bitcoin network’s computing power, leading the pool to voluntarily commit to reducing its share of the network. It said in a statement that it would not reach 40% of the total mining power in the future.
As of today, with dozens of mining pools out there, and more than a hundred thousand nodes in Bitcoin, and attack like this is very unlike to happen.
However, it did happen to other cryptocurrencies. In 2016, Krypton and Shift, both based on the Ethereum network, suffered this type of attack.
But the most impressive 51% attack happened to Bitcoin Gold. Attention, I said Bitcoin Gold, not Bitcoin. In 2018 the attackers were able to double-spend for several days, eventually stealing more than $18 million worth of Bitcoin Gold. And as if that was not enough, a few years later, in 2020, it happened again.
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The second type of hack that could happen to Bitcoin is called the birthday attack. This has nothing to do with the date Bitcoin was created, it is just a reference to a probability theory problem that shows that in a classroom with 30 students, the probability of 2 students sharing the same birthday is around 70%. Ok, but what does that have to do with Bitcoin?
Once again, I must recommend that same other video about Bitcoin mining, which link is in the description, it will make what I’m about to say, so much easier to understand. You’ve been warned.
Bitcoin is based on an algorithm called SHA-256. In this algorithm, no matter what the input is, the output will always be a 64-digits hexadecimal number. The output is also called a hash. It is extremely unlikely that two different inputs generate the same exact output, or a collision as it is called. So extremely unlikely, that we could say that it’s impossible. And if you don’t believe me, the probability of just two hashes accidentally colliding is approximately: 4.3 multiplied by 10 to the power of -60. That’s 60 zeros before you see a number that represent something. Even if we use all of Bitcoin hash power, focused on finding 1 single collision, it would take more than the time of the universe’s existence to find this two inputs.
But even though, to safeguard Bitcoin from the infinitely small probability of a birthday attack to happen, a good practice is to double-hash. Which means, run the SHA-256 algorithm on an input, get the output of that, and run it in the algorithm again. This cuts in half the probability of a collision occurring, making the protocol that much more secure.
So, if you were planning on hacking Bitcoin, I am sorry to disappoint you, but the odds are not on your side. But look from the brighter side, now you know what makes Bitcoin secure, and that you can trust it, I mean, verify that it is legit and safe. Because Bitcoin is not based on trust, as we shown in our What is Bitcoin video, link in the description.
And if you ever plan on beating the blockchain, your best chances are to be the biggest Bitcoin miner the world has ever seen. At least big enough to control 51% of the world’s hash power.
Many other topics were mentioned in the video that we barely touched their surface. If you want to get into more details on those, please check the list of related videos we left on the description. And feel free to comment on anything you wish to see here in the Crypto Odyssey.
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