Bitcoin is making headlines on almost a daily basis – startups ranging from currency exchanges to ‘virtual wallets’ keeps multiplying. Developments such as the first bitcoin ATM machines and support from large cap internet company CEO are all boding well to the future of the ‘internet independent currency’. What could threaten its future, one might ask?
It’s certainly not the technology. In fact Bitcoin’s design cleverly protects it from brute-forcing using ever-increasing processing power of the “miners”. It probably is not its vulnerability to machinations and market price fluctuations – these typically die away as the market stabilizes. It may not even be the regulatory instinct of the governments.
Instead, the biggest threat may be hidden in some of its core features such as anonymity and lack of centralization – something that may attract disproportionally higher usage for shady transactions than legitimate ones. That may eventually lead to Bitcoins being increasingly viewed as the tool mostly serving criminals and terrorists and eventually forcefully outlawed.
True, any new technology is prone to abuse. Music and movies recording on magnetic tapes gave boost to pirating (further exploding in internet era). Ease of communication enabled spreading on a vast scale – anything from homophobic propaganda to child pornography. Fast international funds transfers made money laundering lot easier. Readily available encryption tools hugely complicated lives of anti-terrorism agencies. And so on. But in all cases the nefarious usage of the new technologies has been vastly outweighed by perfectly legitimate ones – as the benefits also attracted huge segments of legitimate population. Hence “containing” these technologies historically proven to be problematic and economically unfeasible (bar “great firewalls” built by some autocratic states).
How is Bitcoin different? Well, it certainly does offer benefits to the average Joe – such as anonymity and an alternative inflation-proof tool for investments for future. But then again, how important it is to have an anonymous transaction vs other areas where anonymity matters – such as internet browsing (TOR or VPN)? Or how much would you invest into Bitcoin currency as an alternative to 401K? The fact that Bitcoin hasn’t been embraced by the millions – yet – may actually mean these benefits may not be enough for their common adoption.
By contrast, the criminals are very quick to ‘jump’ on the new currency – one could argue it’s a perfect solution to securing the most vulnerable component of the fraud rings – monetization. The best example of it is the recent outbreak of CryptoLocker virus which encrypts all your files and subsequently deletes them unless you pay the ransom – in Bitcoins, of course. Quick research on the web confirms so far that this strategy is actually working – thousands of victims ended up paying their way out. For most of them it’s the first time they are exposed to Bitcoin – and let’s face it, it’s not the most pleasant introduction.
How would BitCoin address this threat is unclear – breaking its architecture to provide some level of oversight may not be feasible. The key may be in attracting more legitimate usage of the technology – which is without doubt growing really fast right now – but the question still remains – is adoption of BitCoin by legitimate users going to outpace the exploding popularity of it among criminals?
FraudBump 
What’s the biggest threat to Bitcoin’s future?
November 7, 2013 Leave a comment
Bitcoin is making headlines on almost a daily basis – startups ranging from currency exchanges to ‘virtual wallets’ keeps multiplying. Developments such as the first bitcoin ATM machines and support from large cap internet company CEO are all boding well to the future of the ‘internet independent currency’. What could threaten its future, one might ask?
It’s certainly not the technology. In fact Bitcoin’s design cleverly protects it from brute-forcing using ever-increasing processing power of the “miners”. It probably is not its vulnerability to machinations and market price fluctuations – these typically die away as the market stabilizes. It may not even be the regulatory instinct of the governments.
Instead, the biggest threat may be hidden in some of its core features such as anonymity and lack of centralization – something that may attract disproportionally higher usage for shady transactions than legitimate ones. That may eventually lead to Bitcoins being increasingly viewed as the tool mostly serving criminals and terrorists and eventually forcefully outlawed.
True, any new technology is prone to abuse. Music and movies recording on magnetic tapes gave boost to pirating (further exploding in internet era). Ease of communication enabled spreading on a vast scale – anything from homophobic propaganda to child pornography. Fast international funds transfers made money laundering lot easier. Readily available encryption tools hugely complicated lives of anti-terrorism agencies. And so on. But in all cases the nefarious usage of the new technologies has been vastly outweighed by perfectly legitimate ones – as the benefits also attracted huge segments of legitimate population. Hence “containing” these technologies historically proven to be problematic and economically unfeasible (bar “great firewalls” built by some autocratic states).
How is Bitcoin different? Well, it certainly does offer benefits to the average Joe – such as anonymity and an alternative inflation-proof tool for investments for future. But then again, how important it is to have an anonymous transaction vs other areas where anonymity matters – such as internet browsing (TOR or VPN)? Or how much would you invest into Bitcoin currency as an alternative to 401K? The fact that Bitcoin hasn’t been embraced by the millions – yet – may actually mean these benefits may not be enough for their common adoption.
By contrast, the criminals are very quick to ‘jump’ on the new currency – one could argue it’s a perfect solution to securing the most vulnerable component of the fraud rings – monetization. The best example of it is the recent outbreak of CryptoLocker virus which encrypts all your files and subsequently deletes them unless you pay the ransom – in Bitcoins, of course. Quick research on the web confirms so far that this strategy is actually working – thousands of victims ended up paying their way out. For most of them it’s the first time they are exposed to Bitcoin – and let’s face it, it’s not the most pleasant introduction.
How would BitCoin address this threat is unclear – breaking its architecture to provide some level of oversight may not be feasible. The key may be in attracting more legitimate usage of the technology – which is without doubt growing really fast right now – but the question still remains – is adoption of BitCoin by legitimate users going to outpace the exploding popularity of it among criminals?
Filed under General Observations & Commentary, Prognosis