Is Bitcoin for Criminals?

One of the very common misconceptions about Bitcoin from its inception is that it would make a great currency for criminals and terrorists. A long list of press articles have been published with unsubstantiated claims that terrorists or criminal gangs are using Bitcoin for their activity. Many of these articles have been retracted, 7 but not before they have imprinted the idea into the minds of many people, including misguided criminals. The reality is that Bitcoin's ledger is globally accessible and immutable. It will carry the record of every transaction for as long as Bitcoin is still operational. It is inaccurate to really say Bitcoin is anonymous, as it is rather pseudonymous. It is possible, though not guaranteed, to establish links between real-life identities and Bitcoin addresses, thus allowing the full tracking of all transactions by an address once its identity is established. When it comes to anonymity, it is useful to think of Bitcoin as being as anonymous as the Internet: it depends on how well you hide, and how well the others look. Yet Bitcoin's blockchain makes hiding that much more difficult on the Web. It is easy to dispose of a device,email address, or IP address and never use it again, but it is harder to completely erase the trail of funds to one bitcoin address. By its very nature, Bitcoin's blockchain structure is not ideal for privacy. All of this means that for any crime that actually has a victim, it would be inadvisable for the criminal to use Bitcoin. Its pseudonymous nature means that addresses could be linked to real-world identities, even many years after the crime is committed. The police, or the victims and any investigators they hire, might well be able to find a link to the identity of the criminal, even after many years. The Bitcoin trail of payments itself has been the reason that many online drug dealers have been identified and caught as they fell for the hype of Bitcoin as completely anonymous. Bitcoin is a technology for money, and money is something that can be used by criminals at all times. Any form of money can be used by criminals or to facilitate crime, but Bitcoin's permanent ledger makes it particularly unsuited to crimes with victims likely to try to investigate. Bitcoin can be useful in facilitating “victimless crimes,” where the absence of the victim will mean nobody trying to establish the identity of the “criminal.” In reality, and once one overcomes the propaganda of the twentieth-century state, there is no such thing as a victimless crime. If an action has no victims, it is no crime, regardless of what some self-important voters or bureaucrats would like to believe about their prerogative to legislate morality for others. For these illegal but perfectly moral actions, Bitcoin could be useful because there are no victims to try to hunt down the perpetrator. The harmless activity carried out shows up on the blockchain as an individual transaction which could have a multitude of causes. So one can expect that victimless crimes, such as online gambling and evading capital controls, would use Bitcoin, but murder and terrorism would more likely not. Drug dealing seems to happen on the Bitcoin blockchain, though that is likely more down to addicts' cravings than sound judgment, as evidenced by the large number of Bitcoin drug purchasers that have been identified by law enforcement. While statistics on this matter are very hard to find, I would not be surprised to find buying drugs with Bitcoin is far more dangerous than with physical government money. In other words, Bitcoin will likely increase individuals' freedom while not necessarily making it easier for them to commit crimes. It is not a tool to be feared, but one to be embraced as an integral part of a peaceful and prosperous future. One high-profile type of crime that has indeed utilized Bitcoin heavily isransomware: a method of unauthorized access to computers that encrypts the victims' files and only releases them if the victim makes a payment to the recipient, usually in Bitcoin. While such forms of crime were around before Bitcoin, they have become more convenient to carry out since Bitcoin's invention. This is arguably the best example of Bitcoin facilitating crime. Yet one can simply understand that these ransomware crimes are being built around taking advantage of lax computer security. A company that can have its entire computer system locked up by anonymous hackers demanding a few thousand dollars in Bitcoin has far bigger problems than these hackers. The incentive for the hackers may be in the thousands of dollars, but the incentive for the firm's competitors, clients, and suppliers for gaining access to this data can be much higher. In effect, what Bitcoin ransomware has allowed is the detection and exposition of computer security flaws. This process is leading firms to take better security precautions, and causing computer security to grow as an industry. In other words, Bitcoin allows for the monetizing of the computer security market. While hackers can initially benefit from this, in the long run, productive businesses will command the best security resources.