Security strategies within the Bitcoin network are in a constant state of progress, and in this exploration, we will assess how these strategies have evolved from simple digital wallets to complex multi-signature mechanisms.
This includes an overview of the latest advances in cryptographic techniques, such as Schnorr signatures. In simple terms, we will examine the techniques that help provide the essential fortifications that serve as the foundation behind Bitcoin’s security infrastructure.
We will also consider some of the major security incidents that have occurred in recent years and the lessons learned from them. The overall purpose of this article is to emphasize the importance of the Bitcoin community developing new ways to secure the Bitcoin infrastructure and strengthen blockchain technology – this need is further emphasized by the imminent threat of quantum computing …
How bitcoin security has evolved over the years
Since the launch of Bitcoin in 2009, the world of finance and technology has completely changed, moving towards ultimate financial freedom as an ambitious but noble goal. As a decentralized cryptocurrency, the value of Bitcoin has increased and it has become the largest cryptocurrency. 13th major currency of the worldHowever, this value has also introduced several security challenges.
Think about it, just a decade and a half ago, The most we could buy with Bitcoin was a pizzaIt’s not hard to see how we arrived at today’s wallet standards.
Bitcoin initially relied on basic security solutions such as digital wallets that stored cryptographic keys to facilitate transactions. These wallets, while fundamentally effective, lacked the security needed to prevent malware threats and cybersecurity threats that became more sophisticated as the years went by – innovations were needed to keep Bitcoin secure.
Software Wallets
The early digital wallet was basic software that resided on a person’s hard drive, and stored data. Private, cryptographic keys Which allowed users to access and transfer their bitcoins.
As the value of Bitcoin grew and cybercriminals realized its potential, the need for better security became paramount to prevent widespread hacking and theft. Initially, digital wallets were improved with better encryption and dedicated user interfaces, but this did little to prevent the growing number of cyber threats.
Improving and maintaining the software wallet became a redundant task for the developers who were forced to constantly keep it running. API Penetration TestingStress testing and various other security exercises to ensure a high level of security. As a result, a new, more practical solution was created.
Hardware Wallets
These hardware devices stored private keys offline and negated many of the risks associated with internet-connected software wallets. Hardware wallets came in the form of a small device that connected to a computer via USB – two popular hardware examples were the Ledger and the Trezor.
However hardware wallets were offline and required PIN codes to access them, and if lost, recovering these PIN codes was a multi-faceted process. This high level of security led to the growing popularity of these devices as they were not susceptible to malware attacks, the private keys never left the device, and transactions were completed within the wallet itself. Confirmed on the blockchain,
Multi-signature wallets
These advanced wallets required multiple signatures or approvals from multiple users before any transaction could be executed. This significantly reduced the chances of any unauthorized access and this method was preferred by businesses and organizations that regularly carried out large-scale Bitcoin transactions.
To conduct a transaction, two or more private keys are needed to authorize the activity, similar to written contracts that require multiple signatures. This way, even if a private key is hacked, the bitcoins within the wallet still cannot be accessed.
Advancements/Taproot and Schnorr Signatures
The taproot was an important Upgrade to the bitcoin network Which was designed to improve scalability and many improvements were made in it. One such improvement was the Schnorr signature, which offered many advantages over the previous one Elliptic Curve Digital Signature Algorithm (ECDSA) mechanism Which facilitated the generation and verification of private keys.
Main advantages of Schnorr signatures They allowed for smaller signature sizes, provided faster verification times, and offered better protection against certain cyberattacks. Key aggregation was the most important enhancement to Schnorr signatures which reduced the size of multi-signature private keys so that they took up less space in a block and charged transaction fees similar to single-party transactions.
Another important upgrade was non-corrodibility characteristic Which prevents cybercriminals from modifying legitimate signatures so that they can carry out malicious activity. Schnorr signatures also improve the privacy of multi-sig wallets, which significantly increases their complexity compared to single signatures.
Preparing for Future Threats to Bitcoin
rise of Quantum computing poses a major threat to BitcoinBecause these machines can solve extremely complex problems that standard computers cannot. This may include deciphering cryptographic keys. If this technology becomes more accessible and falls into the hands of cybercriminals, the risk of unauthorized access to all types of wallets becomes very high and if there is no solution, it could lead to the complete collapse of the cryptocurrency market.
The bitcoin community has been constantly engaged in research to help Development of quantum-resistant cryptographic algorithms,
The hope is that the development of these advanced algorithms will provide sufficient security against this impressive computational power, but the main challenge is their successful implementation in the Bitcoin network. This process will be extremely complex, requiring the precise orchestration of all users, from developers to miners.
Creating algorithms that even a quantum computer cannot break is a huge task and is described as Post-quantum cryptographyAlthough the development of these cutting-edge algorithms is still in its early stages, more and more developers are contributing to this work and it is expected to accelerate in the next few years.
High-Profile Bitcoin Security Incidents
Let’s consider two recent Bitcoin security incidents that have caused major uproar and helped change our thinking about securing cryptocurrencies.
Ronin Network Breach – In March 2022, the highest-priced cryptocurrency attack was the breach of the Ronin Network, which powered the hugely popular Axie Infinity blockchain gaming platform. By breaching this network, Cybercriminals stole nearly $625 million worth of cryptocurrencies,
The Lazarus Group, North Korean government-backed hackers, are believed to be the culprits and are believed to have obtained five of the nine private keys held by transaction validators that were needed to access the Ronin network. Cross-chain bridges (A decentralized application that facilitates transactions).
Binance Exchange Hack – Back in October 2022, one of the largest cryptocurrency exchanges in the world, binance got hackedIn which $570 million was stolen. Hackers targeted the cross-chain bridge, BSC Token Hub and exploited a bug in the smart contract to extract Binance Coin.
Along with such high-profile cases, the countless individuals who have been targeted by cybercriminals is of even greater concern. Some people may be careless about keeping their Bitcoin keys safe, while various platforms may adopt outdated processes or need to provide more security. For example, if a wallet, platform, or application has a QR code for registration, this could be a significant security flaw, especially Considering that hackers have targeted such facilities in the past,
Conclusion – what did we learn?
These high-profile cybercrime cases show that even the most advanced and high-profile cryptocurrency organizations struggle to keep up with the latest cybercrime techniques. In addition to the vast and complex blockchain networks and secondary-level, third-party applications, the resources required to secure Bitcoin and other cryptocurrencies are substantial.
Although multi-sig wallets offer impressive security, they are not completely secure. This is why developing advanced algorithms, such as those designed to defend against quantum computing attacks are a key focus to ensure the future of cryptocurrencies.
This is a guest post written by Kiara Taylor. The opinions expressed are entirely her own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
