A Problem with Cryptocurrency

A problem with cryptocurrency

It’s been a while since I last wrote my Securing My Digital Identity series. LastPass – the password manager service I use for storing almost all of my passwords – was hacked the other day. It made me thoughtful of my security in the web once again. Let me tell you my thoughts about Bitcoin and freedom.

I’m a customer of a large multinational bank operating in Finland – which earned a profit of almost two billion euros in the last year only. However, they don’t seem too happy about it, as they keep closing down offices and discharging people a year after year. The official reasons given are financial and production-related. I guess greed knows no limits.

Ethically concerning? Sure as hell, but that’s not really why or what I wanted to write about.

What if there were no commercial institutions and you alone were the only entity standing between your millions of dollars and the bad guys?

Do you feel safe?

Imagine yourself walking alone in a dark alley on a rainy night thinking: “What if someone knows I’m a millionaire?” Would you feel safe? Would you carry a gun? Or at least a pocket knife maybe? For some people, a human life is not worth much. I would kindly hand over my credentials if being faced by a sociopath with a pin.

Well, in reality, you might not have any money and the bad guys might as well be sitting in tall office buildings. In any case, let’s just follow through here. To protect your assets, you might have divided them into multiple small deposits and spread them around to gain stability, thus more security. You might have invested some in the stock market, but that’s a commercial institution and beyond our scope.


Yubikey NEO

It’s actually quite hard to imagine a world, where there would be no banks, traders, brokers or any other middlemen involved when we’re dealing with money. Keeping large piles of cash at home don’t seem like a viable option either for a various reasons like burglars and home fires. One of your options might be a cryptocurrency, like Bitcoin, a virtual equivalent for cash.

Whatever your weapon of choice might be, your options in terms of security are limited. You might have secured your online wallet using a three-way authentication, including your fingerprint, a device you carry with you (like a Yubikey) and a 64-characters long password that only you know.

What if you hit your head and forget your passphrase? What if you lose your Yubikey or your finger even? Do you have backup codes hidden in a stash buried in the forest with its GPS coordinates written in hieroglyphs in a stone somewhere “safe”? Of course, that would be like geocaching brought into a whole new level.

Problems with cryptocurrency

Problems with cryptocurrency

The best way I can think of to handle large amounts of money without a middleman is to use virtual money a.k.a. crypto currency like Bitcoin. However, while being a closest equivalent of a broker-less decentralized scenario, it has it’s own fundamental problems.

Also some of you may have heard what happened to Mt. Gox, a digital currency exchanger, which closed down after losing all its users’ bitcoins in a theft back in 2014. I never really have trusted the whole Bitcoin thing, but it has grown a far larger thing I had ever predicted. Security experts, like Dan Kaminsky say, even though Bitcoin has it’s problems, the whole idea behind a crypto currency is sound.

Aside from the fact it might not be too safe yet – nor will it ever be without regulation, right now it’s the most reasonable option I can think of to achieve maximum control over your money in a digital world. But with great freedom, comes great responsibility.

Who can you trust? — In fact, who can you NOT trust?

Who do you not trust?

It’s really not practical to give up trust completely. Perhaps you might want to tell your spouse how to open the money stash in case of an emergency – like an invasion of your envy axe-wielding neighbors. Or perhaps you just don’t want to be alone.

These are the fundamental problems behind security, that every one of us face each day. Maybe they’re not all as critical as a concept of an online wallet, but it’s easy to forget the underlying complexity of these things. I despise the idea of supporting those greedy bankers, but I’ll gladly accept the security and convenience they’re offering me. Besides, humans are social animals.

What’s the fun of having a grand in your pocket — if you don’t have anyone to share it with?

Be nice to each other.

Imagery from Pixabay.