- Virtual Currencies: Hackable or Not?
- Rug Pull
One of the biggest hurdles in the mainstream adoption of cryptocurrency is crypto security. Even the mainstream media and legacy finance have only added fire to the FUD around cryptocurrency. New traders who are looking to start investing in cryptocurrency, get discouraged by the news of security breaches in the crypto ecosystem.
The problem here is the language that is used to describe the event. The language used is confusing and conflated.
Virtual Currencies: Hackable or Not?
‘Crypto exchange hacked’ is one of the most trending headlines that are often seen on printed media and mainstream media. This always increases our curiosity about cryptocurrency and the first question that comes into our mind is Can cryptocurrency be hacked?
The answer to this question is a big NO. This is because blockchain technology uses a cryptographic function called hashing that is impossible to breach, thus allowing, the secure addition of the blocks on the blockchain.
Hashes are randomly generated alphanumeric characters, generated from data stored in the blocks. For every block, there is a unique hash, and if any change is made to data stored, no matter how small, the hash value will change. So if any change is made to a transaction stored in the block, it will lead to recalculation of the hash value of the current block and all the other subsequent blocks.
Altering the data stored in a block cannot be done randomly either. Every transaction on the block is verified by the miners to ensure that each block is calculated correctly. To alter data, a miner would have to convince more than 50% of miners, which could turn out to be a daunting task.
The decentralized nature of cryptocurrencies such as Bitcoin, and other crypto tokens makes it impossible for hackers to attack them as there is no single point of failure. The global distribution of the nodes in the crypto network makes it a many-headed hydra.
As many think, that rug pull is a hack, but it is not true, it is a scam. A rug pull occurs, when an investor is convinced by a crypto team, to invest in their project by purchasing its crypto tokens.
When investors have invested heavily in the project, the project team will pull the rug. In simple words, they will dump the entire crypto tokens on the crypto market. This will lead to a crash in the prices of crypto tokens. The developers of the project will disappear with all the money.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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