Digital Friday >>> Crypto is the safest. Really?
When Bitcoin first exploded back in 2009, it was safe to assume that crytocurrency was the safest, most decentralised, and anonymous way to conduct transactions that were out of bounds from the tradititional financial system. However, an investigation into the recent Colonial Pipeline ransomware attack suggests otherwise.
Whilst US federal officials managed to retrieve most of the Bitcoin ransom, this exposed an underlying problem and fundamental misconception about crytocurrencies: It is not as hard to track as one might have previously thought.
It was announced that 63.7 out of the 75 Bitcoins had been traced, an estimated $2.3 million out of the $4.3 million that Colonial Pipeline had paid to the hackers as the ransomware attack shut down the company's computer systems. This in turn, resulted in fuel shortages and a spike in gasoline prices.
Bitcoin is traceable. Each payment is recorded in a fixed ledger called the blockchain. Anyone who is plugged into this blockchain can view Bitcoin transactions. Although they are outside the jurisdiction of any government or financial institution, they are all essentially out in the open.
Ransomware attacks have now put unregulated cryto exchanges under the microscope. Many people use Bitcoin through a digital intermediary like a crypto exchange whereby anti-money laundering and identity verification laws require services to maintain who their customers are, and create a link between identity and account.
As Lee Reiners, the executive director of the Global Financial Markets Center at Duke Law School once said, "We can live in a world with crytocurrency or a world without ransomware, but we can't have both". The phrase demonstrates the volatile nature of digital currency and how it is an inevitable consequence.