Busting Bitcoin Myths: Myth #003 – Bitcoin (i.e. SHA256 encryption) can be hacked

Busting Bitcoin Myths: Myth #003 – Bitcoin (i.e. SHA256 encryption) can be hacked

Hass McCook | 9 April 2016

The Myth

“I don’t trust bitcoin – it gets hacked too often. Didn’t you hear about Mt Gox?”

The Facts

Saying that Bitcoin can be hacked is akin to saying that the US Dollar (USD) can be hacked – it can’t. Can USD be stolen? Sure. So can bitcoins. Can a bank be robbed? Sure. So can a bitcoin exchange. Can USD cash be lost? Sure. So can bitcoins. Point is, when someone loses USD, it doesn’t mean that the USD is inherently bad, it just means that they were not able to successfully protect their dollars from nefarious characters, or in the majority of cases, themselves. As time goes on, bitcoin exchanges will become more professional and secure, and adopters will be able to store and spend their coins much more easily and safely, and will be educated enough about the use of The Bitcoin Ecosystem to not need to rely on an exchange or managed wallet service to secure their bitcoins for them.

Figure 1 – Multi-factor Authentication (Source)

The Bitcoin network runs on SHA256 encryption, which is unhackable military-grade encryption used by nations and large banks[2]. If a thief wanted to rob a bank by cracking SHA256 encryption, he would need to violate the laws of thermodynamics and “build a computer out of something other than matter which occupied something other than space”. However, if a thief has malware installed on your computer that gives them access to your username and password, they will take all of your money like candy from a baby. This is sadly a case of individual incompetence and misfortune, not an inherent security flaw. As online security continues to evolve with things like multi-factor authentication, these issues of individual incompetence will stop tarnishing the reputation of Bitcoin as “unsecure / hackable”.

When quantum computing finally comes in 10-30 years time, hackability of bitcoin will be the absolute least of our worries, as it would be more profitable for an evil character with a quantum computer to hack the global banking industry, which will net them thousands as times as much money as hacking the bitcoin network. On that note, I’ll leave you with this to pique your paranoia

References

Australian Department of Defence, 2012, Multi-factor Authentication. Available at: http://www.asd.gov.au/publications/csocprotect/multi_factor_authentication.htm

Sartain, J., 2012, Hot Authentication Tools – The latest in multi-factor authentication schemes. Available at: http://slideshow.techworld.com/3336017/hot-authentication-tools/

Schneier, B., 2009, The Doghouse: Crypteto. Available at: https://www.schneier.com/blog/archives/2009/09/the_doghouse_cr.html

Wang, X. D. & Ishikawa, H., 2005. Linear and Differential Cryptanalysis of SHA-256. Journal of the Faculty of Environmental Science and Technology – Okayama University, 10(February 2005), pp. 1-7. Available at: http://ousar.lib.okayama-u.ac.jp/file/11479/010_001_007.pdf