It has been a busy time for hackers.
This was followed by Disney CEO Robert Iger revealing to employees that hackers had stolen one of Disney’s upcoming movies and was demanding a ransom, also payable in Bitcoin, or else they would release the movie on the internet.
It is easy to understand why Bitcoin has become the favored currency for hackers and criminals. It is highly secure, easy and fast to exchange electronically, and provides anonymity. But as a fledgling currency trying to gain wide acceptance, what does this criminal activity mean for the future prospects of Bitcoin?
A Foundation of Trust
Currency is a promise. It enables the exchange, and consequently storage, of value because people believe that other people share a common belief in the promise represented by the currency.
Indeed, in Great Britain this is explicit. On every currency note it bears the words “I promise to pay the bearer on demand the sum of x pounds” and it bears the signature of the Chief Cashier of the Bank of England. It is the trust of the people in this promise that enables the currency to have value.
Most commonly used currencies get their value because that trust is based on the good faith promise of a nation, or in the case of the Euro, a collection of nations, that the whole nation stands behind that promise. If people begin to believe that the nation will default on the promise embedded in the currency, that currency will quickly lose value.
Bitcoin however, is different. It is a currency that is not based on trust in a nation, its government, or indeed any institution. Instead, trust in Bitcoin is based on the security of its underlying blockchain technology.
In brief, blockchain is an encrypted ledger, or record, distributed over a large peer-to-peer network, that is updated and locked frequently, and chained from one iteration to another. Due to its distributed nature and chain structure, it is extremely difficult to hack. So a Bitcoin transaction is recorded on thousands of connected, distributed ledgers, which allows for a secure record of a transaction. Indeed, it tracks the individual Bitcoin as one person transacts it to the next, while preserving anonymity of the owner.
This would be like tracking and knowing where an individual dollar bill was and who it belonged to at any given moment over the course of the note’s life. This actually makes it a very secure currency—but also an ideal one for hackers and other criminals.
The paradox here is that the very thing that makes it a safe currency is the same thing that, at least at the moment, makes it an untrustworthy currency for most people. The more that criminals use Bitcoin, and the more publicity and attention that ransomware gets, the more the general public connects Bitcoin with untrustworthy people and criminal activities. Combine that with what is to most people the mysterious and intangible nature of the currency, and it makes it hard for people to trust in Bitcoin as a currency.
Oh, and by the way, if the hackers do put the Disney movie online, don’t for a minute think that they won’t use it as a Trojan Horse to infect the computers of everyone who downloads it, preparing for another wave of ransomware. Be warned!