Cryptocurrencies had an exceptional year in 2017. Both the technology and the value of virtual currencies have experienced historic breakthroughs. At the same time, the rise of these digital currencies is causing serious concerns in the world of cybersecurity. Are cryptocurrencies mainly a tool for criminals?
What are cryptocurrencies?
Cryptocurrencies first appeared due to the need to make anonymous transactions. While the idea of a decentralized digital currency first came about in 1998, it wasn’t until 2009 when the first cryptocurrency was created: Bitcoin. Currently, more than 1,300 cryptocurrencies exist. Each one has a different origin and characteristics, but all are alike in that they are digital and attempt to ensure anonymity in transactions.
Cryptocurrencies guarantee a complete, balanced and secure way to make transactions. That’s why they are used as a currency for the exchange of goods and services. They can also be exchanged for money, including other cryptocurrencies. Some digital currencies are only used to buy certain types of goods or other cryptocurrencies, while the best-known cryptocurrencies, such as Bitcoin, Ethereum and Litecoin, can be used like regular money.
One of the most common concerns surrounding cryptocurrencies is the fact that they have to be mined. Many digital currencies are obtained through performing mathematical computations, and much like powering any other computer, cryptocurrencies are obtained through the energy expenditure these operations produce. The legality of cryptocurrencies is currently a hot topic. There are countries considering prohibiting the use of the digital assets, while in others they are stuck in a sort of legal limbo.
Blockchain and digital security
Naturally there are genuine concerns regarding the safety of cryptocurrencies. After all, one wonders if their digital foundation could be exploited by cybercriminals, or if there is a possibility of cryptocurrencies being hacked and created from scratch. As we explained earlier, the reality is cryptocurrencies are generally very safe. Although cracking the existing security of a cryptocurrency is mathematically possible, the cost of doing so is prohibitively high.
It would require more computer power than any large technology could possibly have. This is mostly due to the fact that cryptocurrencies use blockchain technology. A blockchain consists of a distributed database, and by design, blockchains are completely tamper-proof. To that effect, cryptocurrencies use trusted timestamping, which proves the exact time that data existed along the chain. Any altering or tampering of the timestamp would break the integrity of the digital currency and devalue it to zero.
Blockchain technology is extremely useful in cryptocurrency mining. So much so that without this technology, digital currencies would not exist or would be very different. Blockchain technology is the cornerstone of cryptocurrencies’ impenetrable defense as well as of their anonymity.
A tool for cybercriminals?
Cryptocurrencies’ solid defense is however a double-edged sword. The anonymity of cryptocurrencies is one of the most appealing aspects for cybercriminals. After all, a digital currency that assures transparency and a simple transaction would appear to be an ideal method of payment for outlaw hackers.
Currently practically all ransomware attacks ask for payment through Bitcoin or other cryptocurrencies. However, this is not the only appeal for cybercriminals. The “PandaLabs Annual Report 2017” states that cryptocurrency mining infections are set to increase in frequency.
One of the newest attacks consists of infecting browsers, causing users to behave like cryptocurrency miners. This sort of attack will probably only become more common. While theft or loss of a user’s cryptocurrency wallet is much more difficult, it is still possible. One example is the recent freeze of hundreds of millions of dollars’ worth of Ether, Ethereum’s digital currency.
Despite the unfortunate fact that the use of cryptocurrencies will probably always be linked to cybercrime, this is a mere unintended result. Cryptocurrencies continue to be of great use, despite their extreme volatility. There are increasingly more businesses and countries using digital currencies to exchange services or influence the economy in a secure way. That said, security can sometimes manifest itself in strange ways and have the opposite effect of its original intent, which can lead to catastrophic consequences for a company if it is not well prepared.