Ethereum, Bitcoin, and the Saga of Crypto Spying

As the market moves down, Ethereum hit a new all-time high on its hash rate. Not only that, but the number of ETH holders with at least 1 ETH has also hit a new all-time high. Does that sound like a bad week for crypto?

In a single day this week, more than $670 million in bitcoin exited centralized exchanges. Coin Telegraph reports mass “panic” selling, noting that most of the transactions in the past week were for $1 million or more. Meanwhile, in Arizona, one Senator wants to make bitcoin the state’s legal tender.

As pressure on Binance heats up regarding its ignoring of KYC laws, in Nigeria, some users are accusing the crypto exchange of scamming them. Binance has frozen their accounts, but the exchange says it only does so when there is “good reason.” Meanwhile, Binance is taking an interest in operating in Russia amid talk of regulation.

Ripple, embroiled in a long, drawn-out catfight with the SEC, says it is planning to go public—but after the brawl is over.

The International Monetary Fund is attempting to persuade El Salvador to dissolve its $150 million trust fund made up of bitcoin and return those funds to the country’s general treasury.

Was Charles Hoskinson right about Ethereum? Should it have been run by a for-profit corporation?

I reported on this in yesterdays’ short-form Cryptocracy, but it bears repeating. Paul Krugman, the most curmudgeonly curmudgeon in economics—oh, and a Nobel prize winner—has compared crypto to the subprime mortgage meltdown. Why is this significant when there are so many other people criticizing crypto? It’s not, really. Bears just like to growl.

Stellar is gearing up to introduce smart contracts.

Meanwhile, investors are moving toward blue chip cryptos during the market lull. Of course, a bad week for crypto is a good week for crypto investors.

The president of Turkey is urging the country’s ruling class to study cryptocurrencies and the Metaverse.

Qbit Finance was hacked. Hackers stole $80 million in crypto.

First, OpenSea set a limit to the number of NFTs that can be minted using smart contracts, then they changed their minds.

Brewlabs wants to make sure crypto scams go away.

Daniel Larimer, former CTO of EOSIO and Steemit, and cofounder of BitShares, is back in the news after introducing Fractally, the “DAO of DAOs.” Larimer is credited with coining the term “decentralized autonomous organization.”

Crypto lending has surpassed $50 billion, according to a Genesis report. The report also notes that interest in crypto lending has shifted toward institutions. Meanwhile, the SEC is going after Genesis and Celsius Network.

44 percent of banking executives say banks will offer crypto services this year.

If you’ve been watching the NFL this year, you’ve likely seen television ads by Crypto.com. Well, the crypto brand is now aiming for the Super Bowl, as is crypto exchange FTX. Both brands have already bought the naming rights to football stadiums.

Is there really a crypto bubble?

MasterCard-owned CipherTrace uses honeypots for crypto spying.

Enhanced Security

When blockchain developers talk about enhanced security, what they mean is that blockchain technology is inherently more secure than ordinary digital assets and require more computing power to break the security protocols in place.[1] 

Most internet users understand password-level security. When you log into your Facebook account, you enter your password and are admitted based on a record of that password on a server. The longer and more complex the password, the more secure it is from hackers. However, because Facebook is centralized, there is only one attack point for bad actors to use to break the security. No matter how strong your password is, that central attack point makes it easier for hackers to break in.

Even two-factor authentication (2FA) is relatively unsecure compared to blockchain technology. With 2FA, users can authorize a centralized platform to send a text of a 5- or 6-digit code to their mobile phone when they try to log into the platform. Anyone who does not have access to your mobile phone is shut out.

While 2FA is more secure than a single password, it is still fairly easy to break for smart hackers.

Think about your home. You have a front door, a back door, and four windows. That’s six entry points. But your home likely has one security system for all entry points. Simplifying for the sake of clarity, even with a security system involving a complex security code, a burglar can easily hack the system and get in. But what if the burglar had to match a long, complex multiple-character private code with an equally long and complex multiple-character public code while also satisfying the security requirements for at least one of those doors and at least half of the windows in the house? That would certainly complicate things for the burglar, wouldn’t it?

To reiterate, the burglar would have to satisfy ALL of the following criteria in order to break into your home:

1.  Know, or guess, your extra long private security code

2.  Match it with your extra long public security code (which, being public, everyone knows)

3.  Break the security mechanism for one of your two doors

4.  Satisfy the security requirements for at least two of your four windows (the more windows you have in your home, the more difficult it will be for the burglar)

This is somewhat similar to how blockchain security works. The private-public code component relies on what security experts call cryptography (I’ll explain the nuts and bolts of cryptography in Chapter 2). The door and window criteria is what we call decentralization. Because there’s no single point of entry for the burglar to break into, and because to enter the home with the proper authorization requires that he break the security mechanism for 50 percent of the doors and 50 percent of the windows, the number of hurdles the burglar must get over to get into the home increases the home’s security and makes it less likely the burglar will be successful.

An excerpt from my forthcoming book Cryptosocial: How Cryptocurrencies Are Changing Social Media, from Business Expert Press, due to publish in March 2022. Learn how to help me launch my book here.

First published at Cryptocracy. Not financial advice.

Photo credits: Glassnode and CipherTrace