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A Threat of Cryptocurrencies A Threat of Cryptocurrencies

Bronze medal Reporter Adv. Aneeta Posted 20 Nov 2020
A Threat of Cryptocurrencies

There is a great deal of discussion these days among wealthier clients about the use of “cryptocurrency.” The sound of “cryptocurrency” is very seductive. How cool that one might use Bitcoin or some other form of currency other than the currency guaranteed by the Central Bank of a particular country!

But what is cryptocurrency? The Merriam-Webster dictionary definition: cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Most cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.

It is said that around 50% of the Bitcoin cryptocurrency---the largest and well-known “coin”—is owned by only 1,000 people. Yet the positive aspects of being a Bitcoin owner continue to attract the attention of millions of potential owners who like the following advantages:

  • Cryptocurrencies are generally not issued by any central authority. This decentralized structure allows them to exist outside the control of governments and central authorities.
  • Cryptocurrencies are the easiest way of transferring funds between two parties without the need for a trusted third party like the bank.
  • Cryptocurrency advocates often highly value their anonymity, citing benefits of privacy like protection for whistleblowers or activists living under repressive governments.
  • Cryptocurrencies are ideal units of exchange for speculation, as the value of each “coin” is primarily determined by market value i.e. what the buyer is willing to pay for one coin and the seller is willing to sell.
  • Cryptocurrencies are difficult to “mine” i.e. have all the software and financial records required for the blockchain. So coins are expected to remain comparatively few in number, which increases each coin’s market value.

The dominance of Bitcoin is because it was the first blockchain-based cryptocurrency. Bitcoin was launched in 2009 by an individual or group known by the pseudonym "Satoshi Nakamoto."

Financial professionals of all sorts and lawyers who are professional advisors or whose advice is sought should be aware of the risks of cryptocurrency coin investing, the holding of coins as investment, and speculation in coins.

Risks still remain high in areas of technology easily used for criminal purposes. Much work has been done to have blockchain coins achieve the same reliability as more familiar currency. Much more will need to be done as criminals also have increasing computing talent.

Innocent users are tricked by hackers (“crypto-jacking.”) Outright theft requires the passwords used for protection of the blockchain and is subject to normal IPC sections related to theft, fraud, and misrepresentation. Therefore, outright theft is much less common than crypto-jacking and other hacker attacks.

  • Crypto-jacking is a cyber-attack in which the hacker gains access or control of a computer, mobile, tablet, or internet-connected device.
  • Crypto-jackers usually do not pull out the full amount from coins but instead, do little by little.

There are two types of crypto-jacking:

  • Web browser-based: This is a smart tactic of hackers where they create a website containing crypto-mining code. When users visit websites with a virus(es) or click on pop up ads, the script automatically starts crypto mining. The virus also makes sure you don’t leave the page.
  • Mining malware: This type is a trick used to attract coin owners. Hackers send messages, emails, or harmful malware that runs quietly in the background. People get attracted to the ads and come under the control of hackers.

Hacking is a slow process that takes time. If you are using high-level computer security, it is less likely your computer will be hacked. Otherwise, your cryptocurrency will slowly belong to the hacker.

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