Can BitCoin Be Hacked? Yes, But It’s Not Likely
by Josh Anderson
MONTRÉAL, QUÉBEC – Bitcoin is hot. But as with any hot asset, that comes with risk. Usually, most conversations about the risk of bitcoin focus on the volatility of its value. However, another risk that many curious minds want to know more about is security — can bitcoin be hacked? At CapRE’s Second Annual Greater Montréal & Québec Data Centre Summit, we convened a panel of crypto-mining experts to discuss the future and potential of this new phenomenon, and below we cover a snippet of that conversation honing in on how and why bitcoin might be at risk.
First, Laurent Féral-Pierssens, Executive Director for Emerging Technology at KPMG Canada offered his insight. “Most of the hacks we are hearing about in the public market in the public medium, are not actual hacks on the underlying platforms,” he began. “It’s hacks on code or bugs in the code, the applications above the platform. With blockchain, there’s not one blockchain. There are many networks. Many different networks. And each one has their own characteristic. There is some potential for attacks that could be made on the blockchain but they’re mitigated by the de-centralized nature of the underlying platform.”
According to Féral-Pierssens, the most common and the most well-known potential attack is the known as the 51% Attack. “So if you have more than 50% power to produce a block, then you could alter the block or illegal block or fraudulent block if you want, or a fraudulent transaction,” he explained. “But this is only if you own 51% of the network. ”
He then reminded everyone that there is 1.4 GW actually behind the blockchain, or the bitcoin network, currently. It’s a massive investment to do this,” he said. “And this is not even to reproduce the past transactions. Altering the past would mean re-computing the blocks. And that would be requiring the energy to actually do that. So these types of attacks are theoretically possible. But financially, extremely difficult.”
Next, Francis Pouliot, Co-Founder of Research and Cryptoassets at Catallaxy jumped into the discussion in to offer some clarification. “A 51% attack does not enable you to re-write the history of blockchain transactions,” he remarked. “What it does is, let’s say I have 51% of the bitcoin network and the other 49% is owned by four or five miners. And we’re all competing to find out blocks.”
However, at the same time, one of those miners must be mining a “secret” chain. “As a miner, I can send bitcoins to someone, and if my secret chain becomes longer than the honest chain, I can present it to the network,” he said. “And because it’s the longest chain, all of the nodes will be automatically considered the valid one. The way that blockchains work is that the longest one is the always the one that’s accepted.”
Pouliot then shared the fact that, as a miner, the only thing that the miner can defraud is someone else. “Not only do they need 51%, they need to be lucky,” he clarified. “They need to win every single block. So if you have 51%, you have a one of two chance at winning the net block, and then one of four to win the next block, one of eight to win the next block, and so on. So that’s why after 6 confirmations, we believe that it’s irrevocable.”
To be clear, Pouliot emphasized that it’s only a theoretical attack that’s possible. “Because it’s extremely costly,” he said. “And realistically, only a state actor, for example the U.S. government, with the collaboration with other state governments, could pull it off. They could defraud a few people if they pull it off. But what’s important is that the security model is always at the edge. As they say, wallets can’t be hacked. People can’t be hacked. Even the algorithm of bitcoin, to some degree, if it gets hacked, the least of your worries would be your bitcoins. Because if it got hacked, the entire internet, and the entire banking sector would go down instantly. Everyone’s balance would be zero and It’s the end of the world.”
Check out previous CapRE Insider Reports covering this panel with Pouliot:
- Why is Montréal Winning the Bitcoin Data Center Game?
- BitCoin is Transforming Data Centers and the Québec Arena — Are Financial Markets Next?
- Montréal Crypto-Currency Experts: Let’s Step Back From Short-Term Returns, Look to Future as a New Asset Class
- Crypto-Currency Mining: The Wild, Wild West of Data Centers
- How is Crypto-Currency Mining Changing Data Center Design and Infrastructure?
- Francis Pouliot: Demand for Crypto-Mining Space in Québec is Nearly Infinite, While Supply is Limited. So Know Your Position of Strength
- Blockchain 101: What is It and How is it Different From Other Asset Classes?
- Francis Pouliot: Shake Off Bitcoin’s Volatility, It’s a “Life Raft if the Titanic Goes Down”