Is Bitcoin Secure?

While you can now buy and sell thousands of digital currencies, the cryptocurrency revolution began with the creation of Bitcoin in 2008 and its public launch in 2009. Since then, Bitcoin has been the most widely recognized and adopted cryptocurrency, primarily used as a store of value and a medium of exchange. But how secure is Bitcoin? 

Behind the scenes, Bitcoin transactions are tracked and managed with software called a blockchain. Because of its design, the Bitcoin blockchain is considered exceptionally secure. 

Here’s a closer look at Bitcoin’s security model and how its transactions are safeguarded. 

How Bitcoin Secures Your Transactions

Bitcoin pioneered a decentralized, trustless approach to processing transactions, offering a secure and public method for transferring currency and tracking ownership. The Bitcoin blockchain uses the proof-of-work (PoW) consensus mechanism, where many computers around the world work together to process transactions and record who owns each sliver of Bitcoin.

How Bitcoin Transactions Work

Whenever someone initiates a Bitcoin transaction, it’s added to a group of transactions called a block. With PoW, computers (miners) compete against one another to solve complex mathematical challenges. 

The first to complete a given challenge officially records the block to the blockchain ledger and earns a reward. Every other computer on the network then gets a copy of the block. This distributed ledger allows anyone to review every blockchain transaction since its inception.

Because Bitcoin’s blockchain is decentralized and publicly verifiable, it’s extremely difficult to enter a fraudulent transaction. Every Bitcoin is assigned a unique wallet, and only someone with the secret key for that wallet can transfer the Bitcoin to someone else, where it’s again added to a new block and tracked in the Bitcoin ledger.

Can Cybercriminals Hack Bitcoin?

While Bitcoin transactions are highly resistant to hacking or cheating, the digital wallets and accounts holding Bitcoin are only as secure as the holder makes them. If a bad actor gets a copy of the unique security key for a wallet, they can transfer the Bitcoin to any other wallet they want, and there’s no way to reverse the transaction.

That means Bitcoin owners need to be aware of cybersecurity best practices and how to minimize the risk of someone gaining access to their wallets. When using an exchange, it’s critical to use a unique password not used anywhere else. It’s also wise to keep your device's operating system and software updated and avoid using public Wi-Fi networks, such as at a coffee shop or hotel.

If you hold Bitcoin outside of an exchange in your own wallet, make sure to keep the keys and backup codes in a safe place where you can easily access them if needed, but no one else can make a copy. For many, that means keeping a physical copy of your keys and backup codes offline and avoiding storing them on your computer or in cloud storage.

So, are Bitcoin transactions secure? The consensus is yes. And trading Bitcoin securely with a regulated, trusted custody solution offers an additional layer of security. 

Cold Wallets for Bitcoin Security

Bitcoin owners have three primary methods of storing their cryptocurrency. Cold wallets, which keep assets offline, are considered one of the safest options for secure Bitcoin storage. However, they’re not your only option. You can also:

• Hold currency in an exchange. When you hold your currency with a trusted exchange, it handles the secure storage on your behalf. Exchanges often employ robust security measures to ensure currency is stored securely offline with stringent authorization protocols. Holding your currency in an exchange also makes it easier to buy and sell. But you’ll need to take steps to ensure your account is secure. Again, strong, unique passwords are vital. Adding two-factor authentication with a third-party code-generating app can add an additional layer of security.

• Keep your currency in a software wallet. A software wallet like MetaMask takes Bitcoin from the exchange and moves it entirely under your control. The benefit of this approach is that you can send and receive currency easily using Web3 and decentralized finance (DeFi) apps. However, if someone is able to hack into your computer, they can easily steal your currency.

• Keep your currency in an offline hardware wallet. A hardware wallet, also known as cold storage, takes your cryptocurrency completely offline. Hardware wallets like those made by Trezor and Ledger allow you to receive crypto into your wallet. But to send, you must connect to your device, usually using USB or Bluetooth, and enter a password authorizing the wallet to transact. This is a generally safe way to keep your crypto, but losing the wallet and backup codes means losing access to your currency.

The Bottom Line: Bitcoin Security

Are Bitcoin transactions secure? In terms of technical security, Bitcoin is a leader in transaction security and works nearly anywhere with an internet connection.

If you’re looking for a cryptocurrency custodian that puts your financial security at the forefront, learn more about how BitGo plays a role as an industry leader in cryptocurrency security.

FAQ

What factors contribute to the security of Bitcoin investments?

Several factors contribute to your Bitcoin security, including where you hold it and the steps you take to ensure your digital wallets and cryptocurrency accounts are well protected. For example, BitGo employs multi-signature wallet and threshold signature schemes to keep your assets safe. You should also use secure passwords and follow other cybersecurity best practices like using trusted antivirus and firewall software.

Is it safe to store Bitcoin in digital wallets?

Digital wallets can provide a secure way to store Bitcoin, but only when you take steps to ensure your wallet is safe from cybercriminals. It’s also imperative that you create a secure backup of your wallet’s keys and backup codes to regain access if something goes wrong with your computer. If you keep your wallet information private and secure. Software and hardware wallets offer unique pros and cons related to ease of use and security that are important to understand when choosing where to store your digital assets.