Security strategies within the bitcoin network are in a constant state of progression, 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 developments in cryptographic technologies such as Schnorr signatures. In simple terms, we will examine these technologies that help provide the necessary fortifications that act as a foundation behind bitcoin’s security framework.
We will also discuss some of the major security incidents of recent years and the lessons that were learned. The overall goal of this article is to highlight the importance of the bitcoin community in developing new ways to secure bitcoin infrastructure and strengthen blockchain technology; this need is further emphasized by the looming threat of quantum computing…
How has bitcoin security evolved over the years?
Since the launch of bitcoin in 2009, the world of finance and technology has been completely transformed, moving towards ultimate financial freedom as an ambitious yet noble goal. As a decentralized cryptocurrency, bitcoin has increased in value and become the 13th most important currency in the worldHowever, this value has also presented a number of security challenges.
To think that, just a decade and a half ago, bitcoin-pizza-trade-pushed-decentralized-money-into-the-spotlight-14-years-ago/”>The most we could do with bitcoin was buy a pizza.It's not hard to see how we'll end up with today's wallet standards.
In the beginning, bitcoin relied on fairly basic security solutions, such as digital wallets that stored cryptographic keys to facilitate transactions. These wallets, while effective in basic terms, lacked the security necessary to prevent malware and cybersecurity threats that quickly became more sophisticated over the years, necessitating innovations to keep bitcoin safe.
Software Wallets
The first digital wallets were basic software that was stored on a person's hard drive and stored private cryptographic keys which allowed users to access and transfer their bitcoin.
As bitcoin's value increased and cybercriminals realized its potential, the need for increased security became paramount to prevent widespread hacking and theft. Initially, digital wallets were enhanced with better encryption and dedicated user interfaces, but this did little to stem the tide of a growing number of cyber threats.
Improving and maintaining software portfolios became a somewhat pointless task for developers who were forced to constantly run API Penetration Testingstress tests and other safety exercises to ensure a high level of safety. As a result, a new, more practical solution was created.
Hardware Wallets
These hardware devices stored private keys offline and negated many of the threats associated with internet-connected software wallets. Hardware wallets came in the form of a small device that plugged into a computer via USB; two popular hardware examples were Ledger and Trezor.
Although hardware wallets were offline and required a PIN code to access, and in case of loss, recovering these PIN codes was a multifaceted process. This increased level of security made these devices increasingly popular as they were not susceptible to malware attacks, private keys never left the device, and transactions were completed within the wallet before being bitcoin.com/get-started/what-is-a-confirmation/”>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 drastically reduced the possibility of unauthorized access and this method was preferred by businesses and organizations that regularly conducted large-scale bitcoin transactions.
To make a transaction, two or more private keys are required to authorize the activity, similar to written contracts that require multiple signatures. This way, even if one private key has been hacked, the bitcoins inside the wallet cannot be accessed.
Advances/Signatures of principal root and Schnorr
The taproot was a significant factor bitcoin-taproot-upgrade”>Upgrade to the bitcoin network which was designed to improve scalability and brought with it a number of improvements. One of those improvements was Schnorr signatures which offered multiple benefits over previous ones. Mechanism of Elliptic Curve Digital Signature Algorithm (ECDSA) which facilitated the generation and verification of private keys.
He bitcoin-taproot”>Main advantages of Schnorr signatures The most significant improvements to Schnorr signatures were key aggregation, which reduced the size of multi-sig private keys so that they take up less space in a block and incur the same transaction fees as a single-party transaction.
Another important improvement was the non-malleability characteristic This prevents cybercriminals from modifying a valid signature to enable them to perform malicious activities. Schnorr signatures also improve the privacy of multi-sig wallets, significantly increasing their complexity compared to single signatures.
Preparing for future threats to bitcoin
The rise of bitcoin-blockchain.html”>Quantum computing poses a significant threat to bitcoinas these machines can solve extremely complex problems that standard computers cannot. This can include decrypting 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 significant and could lead to the complete collapse of the cryptocurrency market if there is no solution.
The bitcoin community has been busy doing ongoing research to aid in the Development of cryptographic algorithms resistant to quantum technology.
The hope is that the development of these advanced algorithms will provide sufficient protection against this impressive computational power, but the key challenge is their successful implementation on the bitcoin network. This process will be extremely complex and will require precise orchestration from all users, from developers to miners.
Creating algorithms that even a quantum computer cannot crack is a monumental 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 the cause and things are expected to speed up in the coming years.
High-profile bitcoin security incidents
Let’s consider two recent bitcoin security incidents that have caused significant disruption and helped change the way we think about securing cryptocurrencies.
Ronin Network Breach: In March 2022, the highest-value cryptocurrency attack was the breach of the Ronin Network, which powered the extremely popular blockchain gaming platform Axie Infinity. By breaching this network, crypto-hackers-exploit-ronin-network-for-615-million-a-18810″>Cybercriminals stole around $625 million in cryptocurrency.
North Korean state-backed hackers Lazarus Group 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. chain bridge (a decentralized application that facilitates transactions).
Binance Exchange Hack: In October 2022, one of the world's largest cryptocurrency exchanges, Binance was hackedwith $570 million stolen. Hackers attacked the BSC Token Hub, a cross-chain bridge, and exploited a bug in a smart contract to mine Binance coins.
In addition to high-profile cases like this, the countless number of people cybercriminals have targeted is an even bigger concern. Some people may become complacent when it comes to protecting their bitcoin keys, while various platforms may employ outdated processes or need to provide more security. For example, if a wallet, platform, or app has a QR code for registration, this can be a significant security flaw, especially when it comes to protecting their bitcoin keys. Since hackers have already attacked features like this.
Conclusion: What have we learned?
These high-profile cybercrime cases show that even the most advanced and high-profile cryptocurrency institutions are struggling to keep up with the latest cybercrime techniques. In addition to vast and complex blockchain networks and secondary-level third-party applications, the resources required to protect bitcoin and other cryptocurrencies are substantial.
While multi-signature wallets provide impressive protection, they are not foolproof. That is why the development of advanced algorithms, such as those created to defend against quantum computing attacks, is the key approach to securing the future of cryptocurrencies.
This is a guest post by Kiara Taylor. The views expressed are solely her own and do not necessarily reflect those of btc Inc or bitcoin Magazine.