Crime Pays…in Crypto

Market capitalizations of cryptocurrencies as of January 27, 2018.
Source: Cryptocurrency Market Capitalizations. CoinMarketCap. Retrieved on 2018-01-27., including all (1132) cryptocurrencies with known market capitalization.

All press is good press, or so the idea goes. In the case of bitcoin, and the cryptocurrency environment, this may not be true. The users, developers, and victims of cryptocurrency technologies and their resulting scams would probably rather hear no news. The cycle of press focused on crypto and bitcoin has been dominated by scam after scam, initial coin offerings (ICOs), mass hacks, fraud, and generic theft all feature in the ongoing plunder of digital loot. What is going on?

Technology is exciting. The original Dotcom boom and bust of the late 90’s has returned in a new flavor, focused less on internet technology in favor of blockchain. Banks, manufacturers, finance firms, and entrepreneurs have all begun adding blockchain to their pitch in an attempt to grab the attention and investment now pouring in. Developing useful blockchain-based technology may create a new generation of millionaires, much like Silicon Valley and the Bay Area have. Unfortunately, many of the newly rich may be beneficiaries of scamming users rather than providing users with value. Any new technology is messy. The dangerous combination of attaching valuable assets to a new, and poorly secured, technology is ripe fruit for criminals to plunder. Users and developers are not assisting themselves much, either.

A prevailing feature in the crypto and bitcoin universe is the political ideology. At the fringe of politics in the mainstream, libertarians are in the majority in the digital currency space. Buoyed by what they see as an answer to the nation state monopoly on currency distribution, enthusiastic and technically savvy libertarians took to crypto rapidly. An uncompetitive byproduct of this crowd is the inclination to blame users for inadequate personal precautions, or trusting a product or service with their property. This zero sum blame game shifts the onus of security and safety to users rather than the providers of technology, blaming the victim for not preventing themselves from being robbed. This backwards logic creates less incentive for robust products with baked in security features, and creates a status quo that tolerates scams and badly designed products. For criminals, this is a dream scenario; a docile user base more interested in private property and anonymity than security and control.

Imagine you live in a nation that doesn’t extradite. You have an advanced degree in technology, but local jobs don’t pay much. Immigration is challenging due to language, cultural, and new legal hurdles. A friend from university has a new project, he makes a lot of money, but he has some sketchy friends. He asks you to join. All you must do is take anonymous digital money from people you’ll never meet, in a country you don’t know, and you get to keep most of what you take. Your education has given you a good grasp on software, and most of the targets use poorly written software products with lots of exploits, and their personal security isn’t good either. Simple phishing emails get pretty good results. Pretty soon you’re making more in a month than you would in a year, and the spigot seems to go on forever. The police never bother you, the software you target doesn’t improve, the users can’t seem to stay away. They’re gambling, and you’re the house. This is the situation playing out today. It isn’t hard to see why scammers all over the planet focus on crypto as a means to get rich with little risk.

The immaturity of cryptocurrency as a technology prevents opportunity. Developers and users can get in on the ground floor of a new and potentially massively valuable innovation. The scale of bitcoin and cryptocurrency success could multiply investors’ money many times over. Negatively, criminals and hackers see the same level of opportunity to exploit the general unpreparedness of users and developers as they race to get products to market with little thought to security. This battle is far from over, and could end in improved security, or in the abandonment of technology as too risky. It is a dangerous time to be in cryptocurrency, but when hasn’t it been?

Image credit – Public domain image (CC0 1.0) by Mikael Häggström