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Bitcoin and cryptocurrencies – what digital money really means for our future

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Bitcoin and cryptocurrencies – what digital money really means for our future

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read this article out of The Guardian and comment on the questions you will find in th page - you can also raise you own questions or post comment you deem relevant!

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What is a cryptocurrency? Is it like bitcoin?In a word, yes. Bitcoin was the first cryptocurrency, and is still the biggest, but in the eight years since it was created pretenders to the throne have come along.

All of them have the same basic underpinnings: they use a "blockchain", a shared public record of transactions, to create and track a new type of digital token - one that can only be made and shared according to the agreed-upon rules of the network, whatever they may be. But the flourishing ecosystem has provided a huge amount of variation on top of that.

Some cryptocurrencies, such as Litecoin or Dogecoin, fulfil the same purpose as bitcoin - building a new digital currency - with tweaks to some of the details (making transactions faster, for instance, or ensuring a basic level of inflation).

Others, such as Ethereum or Bat, take the same principle but apply it to a specific purpose: cloud computing or digital advertising in the case of those two.

What exactly is a bitcoin? Can I hold one?
A bitcoin doesn't really exist as a concrete physical - or even digital - object. If I have 0.5 bitcoins sitting in my digital wallet, that doesn't mean there is a corresponding other half sitting somewhere else.

What you really have when you own a bitcoin is the collective agreement of every other computer on the bitcoin network that your bitcoin was legitimately created by a bitcoin "miner", and then passed on to you through a series of legitimate transactions. If you want to actually own some bitcoin, there are exactly two options: either become a miner (which involves investing a lot of money in computers and electricity bills - probably more than the value of the bitcoin you'll actually make, unless you're very smart), or simply buy some bitcoin from someone else using conventional money, typically through a bitcoin exchange such as Coinbase or Bitfinex.

A lot of the quirks of the currency come down to the collective agreement about what constitutes "legitimacy". For instance, since the first bitcoin was created in 2009, the total number in existence has been growing slowly, at a declining rate, ensuring that at some point around 2140, the 21 millionth bitcoin will be mined, and no more will ever be created.

If you disagree with that collective agreement, well, there's nothing stopping you from splitting with the wider network and creating your own version of bitcoin. This is what's known as a "fork", and it's already happened multiple times in the past (that's what competitors such as Litecoin and Dogecoin are). The difficulty is persuading other people to follow you. A currency used by just one person isn't much of a currency.

What can I actually do with cryptocurrencies?
In theory, almost anything that can be done with a computer could, in some way, be rebuilt on a cryptocurrency-based platform. Building a cryptocurrency involves turning a worldwide network of computers into a decentralised platform for data storage and processing - in effect, a giant hive-mind PC (that this no longer sounds like it has much to do with "currencies" is part of the reason some instead suggest the name "decentralised apps" to cover this sector).

We've already seen proposals for YouTube clones, collectible card games and digital advertising exchanges built on top of cryptocurrencies: "x but on the blockchain" is the new startup pitch du jour, now that "Uber for x" and "x but on the iPhone" are passé. There's already Dentacoin (Yelp for Dentists but on the blockchain), Matchpool (Tinder but on the blockchain) and even Cryptokitties (Tamagotchis but on the blockchain).

In practice, however, the available uses are rather more limited. Bitcoin can be used as a payment system for a few online transactions, and even fewer real-world ones, while other cryptocurrencies are even more juvenile than that. The excitement about the field is focused more on what it could become than what it actually is.

Digital currency illustration

Why does it matter that it's decentralised?
At their heart, cryptocurrencies are basically just fancy databases. Bitcoin, for instance, is a big database of who owns what bitcoin, and what transactions were made between those owners.

In its own way, that's little different from a conventional bank, which is basically just a big database of who owns what pounds, and what transactions were made between those owners.

But the distinction with bitcoin is that no central authority runs that big fancy database. Your bank can unilaterally edit its database to change the amount of money it thinks you have, and it does so often. Sometimes that's to your advantage (if your debit card gets stolen and used, for instance, your bank will just return the money) and sometimes it's not (if your bank thinks you're money laundering, it will freeze your account, potentially crippling your business).

With bitcoin, no one can do either of those things. The only authority on the network is whatever the majority of bitcoin users agree on, and in practice that means nothing more than the basic rules of the network are ever enforced.

Is this all about crime?
It is ... a lot about crime. The flip side of cryptocurrencies being decentralised databases is that for most people, most of the time, there's no downside to a centralised database. If you trust the financial system to store your funds, or Dropbox to store your files, or YouTube to host your videos, then you don't need to use less efficient decentralised versions of those services.

But if you are planning to commit financial crime, store illegal downloads, or host pirated videos a decentralised version of those services becomes much more appealing. That's why bitcoin, for instance, has become the currency of choice for online drug dealers and cybercriminals demanding ransoms to restore hacked data.

"Crime" is a broad term, though. In many countries, having a political opinion contrary to that of the ruling regime is considered broadly criminal; many more limit the freedom of their citizens in ways that citizens of liberal democraciesmight view as unethical and inhumane. If cryptocurrencies allow those limitations to be overcome, it may technically be promoting crime, but not in the way most cryptocurrency critics mean.

You keep saying "blockchain". What does that actually mean?
The concept of the blockchain lies at the heart of all cryptocurrencies. It is the decentralised historical record of changes in the ownership of the asset, be it simply spending a bitcoin or executing a complex "smart contract" in one of the second-generation cryptocurrencies such as Ethereum. Whenever a cryptocurrency transaction occurs, its details are broadcast throughout the entire network by the spending party, ensuring that everyone has an up-to-date record of ownership. Periodically, all the recent changes get bundled together into one "block", and added to the historical record. And so the "blockchain" - a linked list of all the previous blocks - serves as the full and complete record of who owns what on the network.

So what do miners actually do?
They build the blockchain. How precisely they do that varies from cryptocurrency to cryptocurrency, but bitcoin is a good example: every 10 minutes or so, one miner is semi-randomly selected to do the work of taking all the transactions they've heard about, declaring them confirmed and bundling them up into one block of transactions, which they then add to the chain. In return for doing the work, the winning miner is also allowed to "print" some new bitcoin to pay themselves a reward in bitcoin, currently worth about $140,000.

Anyone can be a miner - all you have to do is run the bitcoin software in mining mode. The tricky part is being a profitable miner. The actual work of bundling the transactions together is easy, but the real expense comes from the way the winner is selected. Think of it as a raffle, where buying a ticket involves using your computer to solve a very complex, but ultimately useless, arithmetic problem. To be in with the most chance of getting that $140,000 reward, you need to solve those problems thousands or millions of times a second to enter the raffle with as many tickets as possible, and that means building specialised computers, negotiating cheaper sources of electricity, or just hacking innocent people and using their hardware for nothing instead.

How are people making so much money?
That's the $190bn question - the value of all the bitcoin in the world at the time this article was published. The short answer is "buying low, and selling high": the value of one bitcoin has increased from essentially nothing eight years ago, to $1,200 eight months ago, to a high of almost $20,000 in December and settling at $11,000 now. Anyone who got hold of enough bitcoin early enough is now really quite wealthy - on paper, at least.

The real question is why one bitcoin is worth $11,000 (and why Ethereum is worth $1,040, and why one particular Cryptokitty is worth $100,000). There, you can find two answers. The sympathetic one is that all these cryptocurrencies are, by their nature, scarce assets - only a certain amount exist in the world. If they are to be widely adopted for real-world use, then people will need to buy those scarce assets, and so their value will necessarily be higher than they are today. The current price, in that story, simply reflects the probability that any particular cryptocurrency will actually be widely used.

Is there trouble ahead?
There is if you take the more hostile, second answer to be correct: that collective greed has fuelled a speculative bubble that will eventually come crashing down. As people hear stories of others making money from cryptocurrencies, they buy their own - which inflates the price, creating more stories of wealth and more investment. The cycle continues until eventually the price of the underlying asset is out of kilter with reality. Eventually, the bubble bursts, and a lot of people look around to find they've lost everything.

What next?

Takeoff
Cryptocurrencies could achieve their ambitions, and become a widely used facet of daily life. A few people will become very rich as a result, but not really more so than early investors in other foundational technologies such as computing or the internet.

Hard landing
Or this speculative bubble could end with a crash so severe that it destroys faith in the entire sector, driving the investors out, bankrupting the miners who've spent thousands or millions on single-purpose hardware that requires a high bitcoin price to turn a profit, and leaving cryptocurrencies as a technological dead-end alongside cold fusion and jetpacks.

Cruising altitude
But maybe things will continue as they have done for the past five years. Cryptocurrencies' actual use stays stable, mostly illegal, largely underground, and completely disconnected from a market price that fluctuates wildly based on the whims of a class of financial speculators with little link to the ground truth. Instability, it turns out, is an oddly stable and predictable state of affairs.

Further Reading

Digital Gold: The Untold Story of Bitcoin by Nathaniel Popper
Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts by David Gerard
Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business and the World by Dan Tapscott and Alex Tapscott
Topics

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Bitcoin and cryptocurrencies - what digital money really means for our future

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What is a cryptocurrency? Is it like bitcoin?In a word, yes. Bitcoin was the first cryptocurrency, and is still the biggest, but in the eight years since it was created pretenders to the throne have come along.

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Can you list the most salient features of  cryptocurrencies?

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Can you list the most salient features of  cryptocurrencies?

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What are the advantages of using cryptocurrencies instead of traditional currencies?

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What are the advantages of using cryptocurrencies instead of traditional currencies?

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In what way do cryptocurrencies relate to the deep/dark web?

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In what way do cryptocurrencies relate to the deep/dark web?

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The dark web is the World Wide Web content that exists on : overlay networks that use the Internet but require specific software, configurations, or authorization to access. Through the dark web, private computer networks can communicate and conduct business anonymously without divulging identifying information, such as a user's location. The dark web forms a small part of the deep web, the part of the Web not indexed by web search engines, although sometimes the term deep web is mistakenly used to refer specifically to the dark web.

The darknets which constitute the dark web include small, friend-to-friend peer-to-peer networks, as well as large, popular networks such as Tor, Freenet, I2P, and Riffle operated by public organizations and individuals. Users of the dark web refer to the regular web as Clearnet due to its unencrypted nature. The Tor dark web or onionland uses the traffic anonymization technique of onion routing under the network's top-level domain suffix .onion.

Terminology

Definition

The dark web has often been confused with the deep web, the parts of the web not indexed (searchable) by search engines. The term dark web first emerged in 2009; however, it is unknown when the actual dark web first emerged. Many internet users only use the surface web, data that can be accessed by a typical web browser. The dark web forms a small part of the deep web, but requires custom software in order to access its content. This confusion dates back to at least 2009. Since then, especially in reporting on Silk Road, the two terms have often been conflated, despite recommendations that they should be distinguished.

The dark web, also known as darknet websites, are accessible only through networks such as Tor ("The Onion Routing" project) that are created specifically for the dark web. Tor browser and Tor-accessible sites are widely used among the darknet users and can be identified by the domain ".onion". Tor browsers create encrypted entry points and pathways for the user, allowing their dark web searches and actions to be anonymous.

Identities and locations of darknet users stay anonymous and cannot be tracked due to the layered encryption system. The darknet encryption technology routes users' data through a large number of intermediate servers, which protects the users' identity and guarantees anonymity. The transmitted information can be decrypted only by a subsequent node in the scheme, which leads to the exit node. The complicated system makes it almost impossible to reproduce the node path and decrypt the information layer by layer. Due to the high level of encryption, websites are not able to track geolocation and IP of their users, and users are not able to get this information about the host. Thus, communication between darknet users is highly encrypted allowing users to talk, blog, and share files confidentially.

A December 2014 study by Gareth Owen from the University of Portsmouth found that the most commonly hosted type of content on Tor was child pornography, followed by black markets, while the individual sites with the highest traffic were dedicated to botnet operations (see attached metric). Many whistleblowing sites maintain a presence as well as political discussion forums. Sites associated with Bitcoin, fraud-related services, and mail order services are some of the most prolific.

As of December 2020, the number of active Tor sites in .onion was estimated at 76,300 (containing a lot of copies). Of these, 18 000 would have original content.

In July 2017, Roger Dingledine, one of the three founders of the Tor Project, said that Facebook is the biggest hidden service. The dark web comprises only 3% of the traffic in the Tor network.

A February 2016 study from researchers at King's College London gives the following breakdown of content by an alternative category set, highlighting the illicit use of .onion services.

Ransomware

The dark web is also used in certain extortion-related processes. Indeed, it is common to observe data from ransomware attacks on several dark web sites (data sales sites, public data repository sites.

Botnets are often structured with their command-and-control servers based on a censorship-resistant hidden service, creating a large amount of bot-related traffic.

Darknet markets

Commercial darknet markets mediate transactions for illegal goods and typically use Bitcoin as payment. These markets have attracted significant media coverage, starting with the popularity of Silk Road and Diabolus Market and its subsequent seizure by legal authorities. Silk Road was one of the first dark web marketplaces that emerged in 2011 and has allowed for the trading of weapons and identity fraud resources. These markets have no protection for its users and can be closed down at any time by authorities. Despite the closures of these marketplaces, others pop up in their place. As of 2020, there have been at least 38 active dark web market places. These marketplaces are similar to that of eBay or Craigslist where users can interact with sellers and leave reviews about marketplace products.

Examination of price differences in dark web markets versus prices in real life or over the World Wide Web have been attempted as well as studies in the quality of goods received over the dark web. One such study was performed on Evolution, one of the most popular crypto-markets active from January 2013 to March 2015. Although it found the digital information, such as concealment methods and shipping country, "seems accurate", the study uncovered issues with the quality of illegal drugs sold in Evolution, stating that, "the illicit drugs purity is found to be different from the information indicated on their respective listings." Less is known about consumer motivations for accessing these marketplaces and factors associated with their use.

Bitcoin services

Bitcoin is one of the main cryptocurrencies used in dark web marketplaces due to the flexibility and relative anonymity of the currency. With Bitcoin, people can hide their intentions as well as their identity. A common approach was to use a digital currency exchanger service which converted Bitcoin into an online game currency (such as gold coins in World of Warcraft) that will later be converted back into fiat currency. Bitcoin services such as tumblers are often available on Tor, and some - such as Grams - offer darknet market integration. A research study undertaken by Jean-Loup Richet, a research fellow at ESSEC, and carried out with the United Nations Office on Drugs and Crime, highlighted new trends in the use of Bitcoin tumblers for money laundering purposes.

Due to its relevance in the digital world, Bitcoin has become a popular product for users to scam companies with. Cybercriminal groups such as DDOS"4" have led to over 140 cyberattacks on companies since the emergence of Bitcoins in 2014. These attacks have led to the formation of other cybercriminal groups as well as Cyber Extortion.

Hacking groups and services

Many hackers sell their services either individually or as a part of groups. Such groups include xDedic, hackforum, Trojanforge, Mazafaka, dark0de and the TheRealDeal darknet market. Some have been known to track and extort apparent pedophiles. Cyber crimes and hacking services for financial institutions and banks have also been offered over the dark web. Attempts to monitor this activity have been made through various government and private organizations, and an examination of the tools used can be found in the Procedia Computer Science journal. Use of Internet-scale DNS distributed reflection denial of service ( DRDoS) attacks have also been made through leveraging the dark web. There are many scam .onion sites also present which end up giving tools for download that are infected with trojan horses or backdoors.

Financing and fraud

Scott Dueweke the president and founder of Zebryx Consulting states that Russian electronic currency such as WebMoney and Perfect Money are behind the majority of the illegal actions. In April 2015, Flashpoint received a 5 million dollar investment to help their clients gather intelligence from the deep and dark web. There are numerous carding forums, PayPal and Bitcoin trading websites as well as fraud and counterfeiting services. Many such sites are scams themselves. Phishing via cloned websites and other scam sites are numerous, with darknet markets often advertised with fraudulent URLs.

Illegal pornography

The type of content that has the most popularity on the dark web is illegal pornography-more specifically, child pornography. About 80% of its web traffic is related to accessing child pornography despite it being difficult to find even on the dark web. A website called Lolita City, that has since been taken down, contained over 100 GB of child pornographic media and had about 15,000 members.

There is regular law enforcement action against sites distributing child pornography - often via compromising the site and tracking users' IP addresses. In 2015, the FBI investigated and took down a website called Playpen. At the time, Playpen was the largest child pornography website on the dark web with over 200,000 members. Sites use complex systems of guides, forums and community regulation. Other content includes sexualised torture and killing of animals and revenge porn. In May 2021, German police said that they had dismantled one of the world's biggest child pornography networks on the dark web known as Boystown, the website had over 400,000 registered users. Four people had been detained in raids, including a man from Paraguay, on suspicion of running the network. Europol said several pedophile chat sites were also taken down in the German-led intelligence operation.

Terrorist organizations took to the internet as early as the 1990s; however, the birth of the dark web attracted these organizations due to the anonymity, lack of regulation, social interaction, and easy accessibility. These groups have been taking advantage of the chat platforms within the dark web to inspire terrorist attacks. Groups have even posted "How To" guides, teaching people how to become and hide their identities as terrorists.

The dark web became a forum for terrorist propaganda, guiding information, and most importantly, funding. With the introduction of Bitcoin, an anonymous transactions were created which allowed for anonymous donations and funding. By accepting Bitcoin, terrorists were now able to fund money to purchase weaponry. In 2018, an individual named Ahmed Sarsur was charged for attempting to purchase explosives and hire snipers to aid Syrian terrorists, as well as attempting to provide them financial support, all through the dark web.

There are at least some real and fraudulent websites claiming to be used by ISIL (ISIS), including a fake one seized in Operation Onymous. With the increase of technology, it has allowed cyber terrorists to flourish by attacking the weaknesses of the technology. In the wake of the November 2015 Paris attacks, an actual such site was hacked by an Anonymous-affiliated hacker group, GhostSec, and replaced with an advert for Prozac. The Rawti Shax Islamist group was found to be operating on the dark web at one time.

Social media

Within the dark web, there exists emerging social media platforms similar to those on the World Wide Web, this is known as the Dark Web Social Network (DWSN). The DWSN works a like a regular social networking site where members can have customizable pages, have friends, like posts, and blog in forums. Facebook and other traditional social media platforms have begun to make dark-web versions of their websites to address problems associated with the traditional platforms and to continue their service in all areas of the World Wide Web. Unlike Facebook, the privacy policy of the DWSN requires that members are to reveal absolutely no personal information and remain anonymous.

Hoaxes and unverified content

There are reports of crowdfunded assassinations and hitmen for hire; however, these are believed to be exclusively scams. The creator of Silk Road, Ross Ulbricht, was arrested by Homeland Security investigations (HSI) for his site and allegedly hiring a hitman to kill six people, although the charges were later dropped. There is an urban legend that one can find live murder on the dark web. The term " Red Room" has been coined based on the Japanese animation and urban legend of the same name; however, the evidence points toward all reported instances being hoaxes.

On June 25, 2015, the indie game was reviewed by YouTubers Obscure Horror Corner which they claimed to have found via the dark web. Various inconsistencies in the channel's reporting cast doubt on the reported version of events. There are several websites which analyze and monitor the deep web and dark web for threat intelligence.

Policing the dark web

There have been arguments that the dark web promotes civil liberties, like "free speech, privacy, anonymity". Some prosecutors and government agencies are concerned that it is a haven for criminal activity. The deep and dark web are applications of integral internet features to provide privacy and anonymity. Policing involves targeting specific activities of the private web deemed illegal or subject to internet censorship.

When investigating online suspects, police typically use the IP (Internet Protocol) address of the individual; however, due to Tor browsers creating anonymity, this becomes an impossible tactic. As a result, law enforcement has employed many other tactics in order to identify and arrest those engaging in illegal activity on the dark web. OSINT, or Open Source Intelligence, are data collection tools that legally collect information from public sources. OSINT tools can be dark web specific to help officers find bits of information that would lead them to gaining more knowledge about interactions going on in the dark web.

In 2015 it was announced that Interpol now offers a dedicated dark web training program featuring technical information on Tor, cybersecurity and simulated darknet market takedowns. In October 2013 the UK's National Crime Agency and GCHQ announced the formation of a " Joint Operations Cell" to focus on cybercrime. In November 2015 this team would be tasked with tackling child exploitation on the dark web as well as other cybercrime. In March 2017 the Congressional Research Service released an extensive report on the dark web, noting the changing dynamic of how information is accessed and presented on it; characterized by the unknown, it is of increasing interest to researchers, law enforcement, and policymakers. In August 2017, according to reportage, cybersecurity firms which specialize in monitoring and researching the dark web on behalf of banks and retailers routinely share their findings with the FBI and with other law enforcement agencies "when possible and necessary" regarding illegal content. The Russian-speaking underground offering a crime-as-a-service model is regarded as being particularly robust.

Journalism

Many journalists, alternative news organizations, educators, and researchers are influential in their writing and speaking of the darknet, and making its use clear to the general public. Media coverage typically reports on the dark web in two ways; detailing the power and freedom of speech the dark web allows people to express, or more commonly reaffirms the illegality and fear of its contents, such as computer hackers. Many headlines tie the dark web to child pornography with headlines such as, "N.J. man charged with surfing 'Dark Web' to collect nearly 3K images of child porn", along with other illegal activities where news outlets describe it as "a hub for black markets that sell or distribute drugs".

Specialist Clearweb news sites such as DeepDotWeb and All Things Vice provide news coverage and practical information about dark web sites and services; however, DeepDotWeb was shut down by authorities in 2019. The Hidden Wiki and its mirrors and forks hold some of the largest directories of content at any given time. Traditional media and news channels such as ABC News have also featured articles examining the darknet.

References

External links

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The dark web is the World Wide Web content that exists on : overlay networks that use the Internet but require specific software, configurations, or authorization to access. Through the dark web, private computer networks can communicate and conduct business anonymously without divulging identifying information, such as a user's location.