What is business with bitcoin?

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Bitcoin is a digital cryptocurrency. It is dispersed. It is exchanged on a peer-to-peer basis, ie it is only controlled by the people who use it. It is not under the control of any central authority. There are no fees for international transactions. No rules define it, no matter what it is used for. As far as I know, you can get a current bitcoin coin, and apparently in Canada there is even a special ATM for this currency. Real currency, or real money, is a chain of digital signatures that reflect little bitcoin.

Whether you like it or not,  bitcoin is a very convenient money laundering mechanism  and a tool for criminals who want to carry out financial transactions online without leaving a trace.

Of course, you can buy a lot of normal legitimate things with bitcoins. The number of legal goods that can be paid for with bitcoins increases every day. While they can also be purchased with traditional currency, there can sometimes be problems with the conversion or the transaction fee. The restrictions on traditional paper currency include the purchase of illegal hacking tools and weapons, and the concealment of income from the sale of drugs and stolen information or other items  over the Internet. It is all much easier when you have digital currency at your disposal .

Bitcoin appeared in 2008. Initially, it was an experimental idea of ​​some person or group of people operating under the pseudonym Satoshi Nakamoto. When it came time to estimate its value, one bitcoin was worth a fraction of a dollar. Now a dollar is worth a fraction of bitcoin. Many people still cannot comprehend what bitcoin is, how it maintains its value and how it works in general.

I took care of the first aspect. Bitcoin is a digital cryptocurrency. Instead of printing a bill or minted coin, you get a cryptographic sequence of characters. How does bitcoin retain its value? It’s quite complicated, but no less than what is the case with currencies such as the euro and the dollar. The value of each currency goes up and down depending on many different market factors. It’s exactly the same with bitcoins.

Explaining how the bitcoin economy works is also not an easy task. In short, every transaction using it is logged in a huge distributed database called „BlockChain”. This currency is controlled to a greater or lesser extent by a distributed network of „miners”. These miners, as well as anyone else who might be if they so choose (although it is not an easy job), are to devote their computing power to securing a bitcoin transaction from reversal (i.e., before collecting the money spent). As the name implies, the transaction-related data recorded on the blockchain is called „blocks”. Each new block must have a hash (digital signature) of the block that appeared before it. Accordingly, each new block makes a note of the entire bitcoin transaction record. Therefore, if you created an original block that is longer than the newest public block, you can send it and it becomes the master block. Miners who successively create new blocks are rewarded with newly created bitcoins.

Creating a block is a difficult math challenge that is hard to solve, but relatively simple to confirm when a solution is proposed. Most of the newly created blocks are the result of a collaborative effort by groups of miners who share the new bitcoins received equally.

This issue is dealt with not only by criminals and people passionate about technology. The value of bitcoin is also appreciated by investors on Wall Street and abroad, who spend a lot of money on them – which has contributed to the explosion in the value of a single bitcoin. The market value of all those currently available is currently $ 69,466,738,494. As of this writing, one bitcoin is worth $ 4,190.1, up from $ 963.66 at the beginning of this year. Now you know why people are investing in bitcoins.

When it comes to profit seeking, cyber criminals are no different from investors. Now you are probably wondering how many attacks have been against this digital currency. Some malware mines bitcoins using botnets for this purpose, and some Trojans break into bitcoin wallets (places where users store their bitcoins) and steal currency.

The Kelihos botnet had a built-in bitcoin theft feature . Another malicious program incorporated computers into its botnet using Skype, which allowed it to successfully mine bitcoins at the expense of the victim. Trojans also appeared: ZeroAccess  and another one for Mac computers that also mined this virtual currency. Aside from malware, researchers found several vulnerabilities in bitcoin wallets  and applications .

Attacks targeting and selling bitcoin are more common than malicious programs and vulnerabilities. A few years ago, BitFloor , the largest bitcoin exchange in the United States, suspended its operations after attackers hacked the server and stole a virtual currency worth $ 250,000. Another incident hit the Bitcoinic exchange  and caused bitcoin losses of $ 87,000. DoS attack  against Mt. Gox and the bitcoin storage service – instawallet – have disabled both services. Many speculated that the Mt. Gox in April 2013 contributed to Bitcoin’s decline for a long time, but Mt. Gox has denied these reports.

A pair of Cornell University researchers, Ittay Eyal and Emin Gun Sirer, published a scientific paper stating that there is a serious flaw in the bitcoin protocol that could allow a relatively small group of participants to become strong enough to take over the mining process and take a disproportionate amount of money. . Moreover, according to researchers, when the so-called „Selfish miners” will take control of more than 25% of the resources responsible for mining bitcoin, they will be able to reverse the last transactions made with this currency and eliminate the effort made by other participants.

Ittay Eyal and I presented an attack whereby a small group of miners can earn more than their allotment and grow until a majority is achieved. Then bitcoin’s value declines: the currency passes under the wings of a single entity, it is no longer decentralized. The controlling entity can determine who is involved in the mining and what transactions are being performed, and can reverse them at any time. For this scenario to materialize, it doesn’t necessarily take one person with bad intentions: it may be the result of the collaboration of people who want to earn a little more for their mining efforts, the researchers wrote in their post on the conclusions of their study.

Of course, not everyone shares their opinion.

As in any scientific study, information about an alleged bitcoin vulnerability needs to be checked and analyzed by the community , said Sergei Logzkin, senior security researcher, Global Research and Analysis Team (GReAT), Kaspersky Lab. You can see that the nature of this „gap” lies in the realm of economics, not computer technology. Even if a group of people (or, more likely, an influential government entity with near infinite computing power) gained control over the bitcoin mining process, it would not necessarily mean the collapse of the digital currency. Thus, the confusion caused by the authors of this paper is understandable but not justified. Currently, the biggest threat to bitcoin is politics, not technology .

Lożkin aptly summed up the situation. Politics is indeed a big obstacle to this cryptocurrency. The Wall Street Journal indicated that the US Senate has convened a committee meeting to discuss how digital currency can facilitate the trafficking of illicit goods and how it can facilitate tax fraud.

In the United States, money creation can only be commissioned by Congress under the Constitution. Therefore, it is not known whether bitcoin and its mining are legal at all.

Costin Raiu, director of the Global Research and Analysis Team (GReAT), Kaspersky Lab, presented his point of view on the study.

Theoretically, what the researchers say is possible, but the whole attack is based on the idea that some selfish miners might be hiding blocks for quite some time , Raiu said. Statistically speaking, this is not possible because while these selfish miners hide their blocks, other diligent miners will discover them and share them on the blockchain.

Raiu explained that while the Eyal and Gun Sire vulnerability actually exists, the threat posed by it is small.

There is another possibility – these researchers were going to create a panic that would cause people to sell off their bitcoins , Raiu said. The bitcoin currency market could collapse and smart people would start buying bitcoins at a discounted price. If someone finally reported that the whole situation was false, the price would rise again, making some rich. „

Other researchers also noted that the information about the vulnerability that Eyal and Gun Sire detected is not consistent.

Ed Felton of Princeton describes that miners would be more likely to be interested in digging. Any miner might wonder if he should join one of these large block-making groups – or maybe run on two fronts? You can join the dishonest mining group and the one with the best intentions and work for the team that has a better chance of generating a longer block at the moment.

So, is it worth using bitcoin? Everyone has to answer this question for himself. This currency certainly has its benefits: it is easy to use, it is truly international, it is accepted by more and more stores, you can buy with it what cannot be bought with traditional currency, no government can freeze your wallet, you can make anonymous transactions, avoid taxes, launder illegal earnings, and convert all bitcoins to traditional currency at international rates, etc. The possibilities of bitcoin are almost endless, whether you think about legal or illegal things.

If you are tempted about bitcoin, don’t hesitate to use them, but be aware of the risks. Wall Street knows them and still invests in them – although Wall Street is not a good example of a safe investment. Wallets that hold bitcoins are a target of cybercriminals, but so is your bank account. Criminals also attack stock exchanges, just like your bank. My biggest fears can be summed up in a few questions: what if the government decides bitcoin is illegal? What happens if someone controls and takes over a large chunk of this cryptocurrency? What if someone pauses an offline swap for a long time? I’ll tell you what will happen then: many people will lose a lot of money.