From bitcoin’s encryption to its approach to blockchain technology, no monetary system is as secure from threats and attacks.
It might surprise you to know that bitcoin's base layer isn't anonymous. Instead, it's pseudonymous.
All bitcoin base layer transactions contain associated public key addresses. And if you've bought or sold bitcoin through a regulated exchange, their records tie your personal identity to your bitcoin.
That's because of Know-Your-Customer (KYC) rules. Regulated financial services companies must obtain and store your name, address, and more. Some exchanges share that information with governments and chain analysis companies. Anyone with that data can now see which wallets belong to which individuals.
So, if you use a regulated exchange, consider one that doesn't voluntarily disperse this information.
Beyond that, the security of the actual bitcoin protocol is impeccable. That's because bitcoin uses SHA-256 encryption. SHA256 is a Secure Hash Algorithm that converts text of any length into a string that’s 256 bits long. And while we can easily enter data and learn its hash, there’s no way to type in a SHA256 hash and uncover the information that created it.
On top of that, bitcoin's independent nodes and diversity of mining pools protect the integrity of the network. The protocol itself runs without a hitch and has an extraordinary 99.98% uptime rate.
The greatest danger to bitcoin’s security has nothing to do with the protocol at all. Instead, it's bitcoin left on exchanges and not held in a personal wallet that could be at risk. If you don't hold the private keys to your bitcoin, you don't control your bitcoin.
With a simple app or hardware wallet, hodlers can protect their bitcoin from hackers and others. Those who run a bitcoin node, help contribute to the security of the network.
And then we have the Lightning Network. Lightning is a censorship-resistant payment layer intended for smaller bitcoin transactions. Lightning transactions share different information than bitcoin's base layer. Using it adds yet another layer of security and privacy to your personal business.
Attempting to crack the private key for a specific wallet needs the computation of 115 quattuorvigintillion different combinations. That’s a 78-digit number that looks like this:
To keep your wallet safe, keep your private keys to yourself!
The bitcoin protocol mainly uses SHA-256 for all hashing operations.
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