Bitcoin and talk of cryptocurrency in general has dominated headlines recently with more and more people becoming involved in the crypto-craze. The most famous of the cryptocurrencies is Bitcoin. Here, cryptography expert Ian Thornton-Trump describes four Bitcoin conspiracies to change the way that we look at Bitcoin and cryptocurrency in general.
Thornton-Trump has a wealth of experience of cryptography and is well-placed to analyse digital currency having spent time in the military handling classified information to understanding how cryptography impacts sensitive law enforcement investigations, into the activities of cyber criminals…
Watching the media and the talk of Initial Coin Offerings (ICOs) has sparked many pundits to believe in Bitcoin (BTC) and other cryptocurrencies ability to bring a dawn of a new age and that we are in for a financial “revolution”. In fact, an article suggests “To Value Bitcoin Now, Think Back to Internet Startups.” [1] Except, maybe Pets.com. This hysteria has led to comments from former Goldman Sachs VP, Matthew Goetz, [who] believes that investing in the digital currency is like investing in the Internet in the late 90’s. [2] For those of us who were around when the Internet evolved in the late 90’s, that should elicit a shiver – and not just because of the fashion.
How can something which is nothing, be of value to anyone? It seems too good to be true; and like most things too good to be true it probably is some sort of scam.
Of course, it’s appropriate to use the quote “There’s a sucker born every minute” which is the widely misattributed quote of P.T. Barnum. As it turns out, if you find yourself at the center of a scam; having a banker named David Hannum suggest you said something that you didn’t, allows one to escape any potential legal action. [3] BitCoin’s value is largely based upon “an assumption of its use as a medium of exchange and as a store of value. It should be stated that BitCoin’s utility as a store of value is dependent on its utility as a medium of exchange.” [4] Thus, the more BitCoin is used as a medium of exchange the greater it’s value. Anyone can plainly see the potential instability of BTC value in this assumption. How quickly we have forgotten the thousands of promising dot.com businesses that crashed in flames in the late 90s “if more people use it, it will start to be profitable” – now the flames are coming out of video cards.
BTC is a conspiracy by electrical companies (especially US companies) to keep power rates high and potentially support un-clean energy sources, due to driving artificial demand.
I’m not a “hardcore” environmentalist, but I can imagine Naomi Klein is very unimpressed with the massive power consumption of crypto mining. One estimate has the production of a single BTC requiring 215 kilowatt-hours of energy. According to Morgan Stanley data, the total energy consumption of the bitcoin network consumes as much electricity as 2 million U.S. homes. Putting this into real numbers yields a range of BTC creation costs: $3,224 in Louisiana to $9,483 in Hawaii. [5] The more BTC mining that is done; the more power is demanded and since power generation has a fixed capacity, the price of power will rise accordingly. The law of supply and demand will always apply to the cost of producing BTC.
BTC is a conspiracy by GPU and Video Card companies to vastly inflate prices, by creating artificial demand for faster & faster GPU’s performance which has already exceeded game graphical software requirements.
Clearly the law of supply and demand has impacted the video card companies as well. Isaac Newton’s famous quote of “What goes up must come down” potentially describes the impact of BTC mining on the current profits of video card manufactures. Due to the need for quickly performing the complex calculations to mine BTC massive computational power is required. This has led to the disenfranchising of computer gamers who generally need one to two high end video cards for their rigs. Folks doing BTC mining are clearing shelves of these high-end cards. [6] Record profits in both the primary and secondary markets of video cards have resulted in a pricing “bubble” and make a tempting target market for the manufactures – only time will tell, but a market shift and a crash in price maybe inevitable.
BTC is an anonymous currency, stolen anonymously by anonymous cyber criminals
Cyber criminals love cryptocurrencies and since cryptocurrency exchanges and wallets are generally found online, cyber bank robberies and individual bitcoin wallet grabs are all the rage. Given the expense of both the hardware and the power needed to produce a legitimate BTC it is far easier to just steal BTC from the vast amount of poorly defended computers found on the Internet. Europol, the EU’s law enforcement intelligence agency, estimates that criminals in Europe generate $140 billion in illicit proceeds annually, of which about 3 or 4 percent – $4 billion to $6 billion – is being laundered via cryptocurrencies. [7]
Crypto-jacking, also known as using someone else’s computer to mine BTC has become a recently exploited cybercriminal attack vector. [8] Given the average time to identify a data breach is at 191 days, [9] it makes more sense for cyber criminals to establish malicious miners in the victim’s infrastructure or distribute this mining task using a malicious “coin hive” java script.
The temptation by trusted individuals to use organisational infrastructure for BTC mining may prove to be too much. Recently, several Russian scientists were jailed for using a nuclear research facilities super computer in an attempt to mine BTC. [10] There are no doubts ethically deficient but criminally entrepreneurial members of many organisations are using their employer’s infrastructure. Take for instance the case of Nicholas Berthaume, who was sentenced to 12 months’ probation and fined $5,000 for installing unauthorised BitCoin software on a Board of Governors of the Federal Reserve System server. He had mined bitcoins using a US Federal server for more than two years, from March 2012 to June 2014. Given the value of BTC peek and today’s price, Nicholas may be a very rich individual.
So, 2018 forward may prove to see the rise of cryptocurrencies and perhaps a fall – perhaps many times over. The future is uncertain; but many financial professionals are extremely critical of BTC. John Quiggin suggests BTC is a terrible currency, “If Bitcoin is a “store of value,” then asset prices are entirely arbitrary. As the proliferation of cryptocurrencies has shown, nothing is easier than creating a scarce asset. The same argument would apply to any existing financial assets. Any stock in the S & P 500 could be priced not in terms of future earnings prospects but on the basis that people choose to value it highly.” [11] One thing can be certain though, anything that someone believes has value will probably be stolen by someone else if it’s not protected.
More on keynote speaker and cryptography expert Ian Thornton-Trump:
Ian Thornton-Trump has been a ubiquitous user of cryptographic systems for a long time. His experiences range from his time in the military handling classified information to understanding how cryptography impacts sensitive law enforcement investigations, into the activities of cyber criminals.
Thornton-Trump provides an excellent perspective on how modern society and criminal groups have embraced and abused cryptography. By carefully studying indictments of cyber criminals, insight can be gleaned into how cryptography provides an illusion of security for nearly everyone – especially cyber criminals.
To read more about Ian Thornton-Trump, click here.
To book Ian Thornton-Trump as a keynote speaker for your next event, click on our ‘contact us’ page or send us an email.
[1] https://www.bloomberg.com/view/articles/2017-12-08/to-value-bitcoin-now-think-back-to-internet-startups
[2] https://bitcoinist.com/former-goldman-sachs-vp-believes-that-bitcoin-is-the-next-internet/
[3] https://skeptikai.com/2016/07/15/the-real-story-behind-the-quote-theres-a-sucker-born-every-minute/
[4] https://www.investopedia.com/ask/answers/100314/why-do-bitcoins-have-value.asp
[5] https://www.marketwatch.com/story/in-one-chart-heres-how-much-it-costs-to-mine-bitcoin-in-your-state-2017-12-15
[6] https://uk.businessinsider.com/nvidia-gtx-1080-gpu-impossible-to-find-buy-because-of-bitcoin-2018-1
[7] https://www.bankinfosecurity.com/criminals-hide-billions-in-cryptocurrency-europol-warns-a-10653
[8] https://www.zdnet.com/article/uk-government-websites-ico-hijacked-by-cryptocurrency-mining-malware/
[9]https://info.resilientsystems.com/hubfs/IBM_Resilient_Branded_Content/White_Papers/2017_Global_CODB_Report_Final.pdf
[10] https://www.independent.co.uk/news/world/europe/russia-bitcoin-cryptocurrencies-sarov-supercomputer-federal-nuclear-centre-latest-a8204161.html
[11] https://www.bloomberg.com/view/articles/2018-02-11/the-economy-is-full-of-crypto-and-collective-delusion
