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The End Of Crypto Currencies
The hype about crypto currencies is coming to an end.
I have always been distrustful of crypto currencies like Bitcoin and Ether. They made no sense to me. The person who invented the scheme stayed anonymous. The concept foresaw a limited number of total coins with new ones becoming exponentially harder to generate or 'mine'. This would continuously require exponentially more energy. At the core of crypto currencies is the blockchain, a public ledger which holds a record of every transaction. The 'mining' is needed to verify the blockchain ledger. This concept thus had always limits in its design which at some point would make a further expansion impossible.
While people who use Bitcoins can hide behind anonymous wallets which hold their coins any transfer from and to real money would need de-anonymization at some point of exchange. These entry and exits points from and to normal currencies were another major weakness of the whole scheme. Another one was the obvious usefulness of Bitcoins for spies, criminals and tax evaders. Sooner or later authorities would clamp down on them. That is why Yves Smith of Naked Capitalism had christened crypto currencies "prosecution futures".
Crypto currencies are not money. One can not pay ones taxes with them.
In the first years most Bitcoins were acquired to buy drugs or child porn on the darknet. There was then little police activity against those markets. But over time the officials got smarter. When they caught a child porn dealer they could use his wallet address and the public ledger to find everyone who had ever paid for the 'service'. Some of the exchanges, which also have bank-like functions, turned out to be run by criminals. They went bust and the people who had parked their bitcoins at that 'bank' lost their money.
Other exchanges, like Coinbase, went 'official' and even became listed at stock exchanges. But they soon had to agree to turn customer records over to the Justice Department for possible tax evasion and other investigations.
Some claim that crypto currencies are a good investment or inflation hedge. But their value can be manipulated which makes them extremely volatile.
via Heisenberg Report – bigger>
There have been offers to donate to Moon or Alabama in crypto currencies. I never accepted any. It was not worth the potential risk of getting caught up in this or that criminal investigation.
2021 will probably be the year in which Bitcoin finally dies.
The U.S. regime change agent in Russia, Alexey Navalny, received a significant amount of money through Bitcoin 'donations'. That 'foreign money' was quoted as one reason to shut his organization down. Regulation of cryptorcurrencies in Russia is strict. Over the last months China has also started to crack down on everything crypto. Some Chinese geeks used cheap subsidized electricity to 'mine' new Bitcoins. That has now been prohibited:
China’s Qinghai province has announced a new ban on virtual currency mining operations, a government document announced Wednesday.
It follows other provinces, including Xinjiang and Inner Mongolia as part of a broader crackdown on the energy-intensive crypto sector in the country.
Chinese crypto miners were doing a large part of the blockchain verification work. That will now become more troublesome.
Kidnapping for ransom had become rare in 'western' societies as the police had learned to catch the culprits when they came to fetch the money. Getting the money is indeed the most difficult part of any ransom operation. With the availability and wider use of Bitcoin, ransom-ware operations, blackmail by hostile encryption of computer drives, became so easy that some criminals offered them as a service.
The recent Colonial pipeline attack put a new light on that:
"Attacks on critical US infrastructure facilitated by cryptocurrencies will not go unnoticed by the US government and other countries. I would argue that the regulatory threat to cryptocurrencies has increased exponentially."
Critics of bitcoin and other cryptocurrencies have long argued that they facilitate crime thanks to their anonymous and decentralized nature, which means they are very hard to trace and link to individuals.
Treasury Secretary Janet Yellen said in January that she was concerned about cryptocurrencies for this reason. "I think many are used – at least in a transaction sense – mainly for illicit financing," she told lawmakers during her confirmation hearing.
Gary Gensler, the Chair of the Securities and Exchange Commission markets regulator, has made similar criticisms in the past.
"Beyond use on the darknet, there are those around the globe who seek to use these new technologies to thwart government oversight of money laundering, tax evasion, terrorism financing, or evading sanctions regimes," he told Congress in 2018.
In the case of Colonial the FBI managed to retrieve a part of the ransom money the company had paid. This shows that there are ways and means to bust the use of bitcoins for criminal purposes. The Internal Revenue Service is also asking Congress for new authorities to go after crypto users.
With regulators and police all over the world cracking down on the usage of Bitcoin and other crypto currencies these have lost a main purpose of their existence. Using them will become stigmatized. Owning some will be seen as suspicious.
It is time for them to wither away.
Was unable to post last night using my normal proxy server…maybe it was blacklisted or something.
I disagree with b’s take on the Colonial ransom recovery. The FBI exploited common poorly guarded password type vulnerabilities. That they were able to coerce/subpoena one of the parties involved tells me that it was an American citizen and that the crypto exchange was registered with American authorities.
FBI exploited sloppy password storage to access wallet information
Disclaimer: I don’t believe anything the FBI says without some sort of corroborating evidence, but an additional wrinkle to the scenario if it played out like they’re hinting, is that there were no “Russians” involved. No US court has jurisdiction over any Russian national or server in Russia.
How the FBI likely seized bitcoin
Until the FBI is more transparent with its methods, it’s not possible to know exactly how federal investigators managed to retrieve the private key in question. But there are a few possible scenarios.
DarkSide, the cyber criminal gang that targeted Colonial, reportedly used a payment server to collect the funds. A centralized platform like this is relatively easy for the FBI to track.
“Following the money remains one of the most basic, yet powerful, tools we have,” said Deputy Attorney General Lisa O. Monaco in a statement on Monday.
“Because these transnational, organized criminal groups are facilitating these payments in cryptocurrency, and because of the transparency and traceability that cryptocurrency provides, you can actually more effectively follow the money and potentially mitigate and arrest illicit activity within this ecosystem, than you can with traditional finance and fiat currencies and payments,” explained Jesse Spiro, Global Head of Policy for Chainalysis, a company that provides blockchain forensic and investigative services to private sector companies, including crypto exchanges.
When a ransomware-related payment is made, Chainalysis is actually able to produce and generate what Spiro characterizes as “unprecedented intelligence and information in relation to the supply chain.”
Chainalysis was not able to speak to any specifics on the Colonial investigation.
Once the FBI had that wallet in hand, it’s extremely unlikely they broke something called the “Elliptic Curve Digital Signature Algorithm,” which is how the digital currency ensures that bitcoin can only be spent by the rightful owner.
“In fact, that is so far-fetched, as to be impossible,” said Nic Carter, founding partner at Castle Island Ventures.
What’s much more likely, according to Carter, is that they were able to access a server where the hackers stored private key information. That points not to any fundamental flaw in bitcoin’s security, but rather a case of bad IT hygiene for a criminal organization.
Just take the 2014 hack of Mt. Gox, once the leading bitcoin exchange. It was the first high-profile hack in cryptocurrency history. The exchange filed for bankruptcy and lost 750,000 of its users’ bitcoins, plus 100,000 of its own.
“Bitcoin itself functioned perfectly, but what functioned imperfectly was their system of storing your private keys,” explained Carter.
This is why some cyber criminals take their coins offline to cold storage, in order to insulate nefariously earned tokens from the government and law enforcement.
“If you want to store your coins truly outside of the reach of the state, you can just hold those private keys directly. That’s the equivalent of burying a bar of gold in your backyard,” said Carter.
Hence, if you’re a crypto-criminal don’t use payment servers, don’t use crypto exchanges that have agreements with or that are in the jurisdiction of the USA and keep your ‘coins’ in a hardware wallet, i.e., cold storage.
Also, this isn’t the death knell for crypto (despite my own dislike of the BTC POW methodology compared to POS). Some are seeing this as proof that crypto can and will integrate within the international legal system because some criminal activity associated with blockchains can in fact be policed.
Setting a good precedent
One former chairman of the U.S. Commodity Futures Trading Commission thinks the FBI breaking into the crypto wallet of a cyber criminal actually sets a good precedent for acceptance of cryptocurrency.
“It proves that the bitcoin blockchain is not hostile ground for law enforcement,” said Chris Giancarlo. “It proves that it is not a perfect tool for criminal activity.”
Mati Greenspan, portfolio manager and Quantum Economics founder, agrees that the breach bodes well for bitcoin.
″Many market participants, myself included, were expecting President Joe Biden to use crypto as a scapegoat for the hack and to come out with crushing reforms,” said Greenspan. “Instead, they were clued in to what we already knew: That it is easier for authorities to catch criminals who use crypto than anything else.”
Carter also appeared unfazed. “We’ve seen these kinds of seizures before, and I’m sure we’ll continue to.”
Despite the common stereotype, there’s no data to indicate that criminals disproportionately use cryptocurrencies like bitcoin. In fact, Chainalysis estimates that less than 1% of cryptos are used for illicit purposes.
-KYLE (normally post as _K_C_ or K_C_ depending on how fat my fingers are for the device I’m using at the time)
Posted by: KYLE | Jun 10 2021 3:26 utc | 82
When I first learned of Bitcoin – fairly early I think, but time flies – I was excited because I wanted a strong currency to live my life in.
Bitcoin had the one, crucial characteristic required of sound money – its quantity was known. Its quantity was predetermined to be limited, finite, and known. This is the supreme quality of money if, like me, you say that money is a measure, used to measure values of things and to be an intermediary for their exchange.
For money to be a store of value, it simply needs to remain stable itself as the measure that it is – nothing else is needed. And if it works well as a medium of exchange, that’s either because its quantity is not changing, or because any changes are notorious, well known.
So Bitcoin right now serves only as a commodity, and as such it works just fine – have at it, all you market traders.
But if it reaches its full capitalization, and the full amount has been created (or an effective approximation – I’m not technical enough to know if some could be left unmined) – when it becomes a finite resource, then it could achieve a stable buy/sell value.
Then it could serve as money, or perhaps the backing for money – perhaps in the form of the Bitcoin Cash that arby cites upthread.
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To have a money that measures value accurately, the units have to be defined in some stable way, in the same way that the centimeter derives from a scientific measure of an existing physical property.
We end up with 21 million BTC in the world. And maybe they’ve hit a million USD each BTC by then – maybe much higher, maybe much lower. It doesn’t matter because we then have a finite quantity – similar to gold and silver that has a relatively known scarcity and a relatively low newly mined addition to the stock such that its scarcity is not appreciably altered.
So maybe then we have sub-units backed by the BTC. That’s a money, if the sub-units are redeemable in BTC, and if they’re accepted to buy and sell things. Doesn’t matter if the government takes it as tax – if it does, that currency just became damn near sovereign, and if it doesn’t, odds are good that government will eventually outlaw its usage.
Governments of and by the people are the final determinants of what is legal tender. That’s not to say you can’t have one hell of a black market going on, if governments set unreasonable conditions.
Bitcoin was almost a money when it was dirt cheap, but it had no great manifestation in the world. Now, on its way to its limit of quantity, it’s only a commodity. When it hits full and stable existence, it might be usable as money, and it might come to be used as money. But it’s a crap-shoot of history whether this happens or not, whether it gets held in stable reserves, and whether users adopt it as a currency.
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There’s nothing intrinsic in Bitcoin (except its quantity). There’s nothing intrinsic in ANY money – except its quantity.
In fact, I would suggest that you don’t really want an intrinsic value in money – what you want is the guarantee of its quantity, or the certified knowledge of its change in quantity. It’s only the known scarcity of gold and silver that make them useful to measure the true quantity of the money that they redeem. When the money is stable, it’s as good as gold (unless you want jewelry).
Money has to act as a measure of value, across time. That’s all.
Anyone interested in the qualities required of money, and the US Constitution created by people who knew intimately and existentially what money is, might care to read Pieces of Eight by Edwin Vieira, Jr. To me it’s the seminal work.
And apparently it’s now a free download, although it’s lost the original title it had when I discovered it as a mind-blowing book, and goes simply by what was then the subtitle:
The Monetary Powers and Disabilities of the U.S. Constitution – Edwin Vieira, Jr
Posted by: Grieved | Jun 10 2021 4:57 utc | 86
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