As technology develops and evolves, so too does the opportunity for new forms of crime. But if you're still trying to understand the basics of blockchains and cryptocurrencies then be sure to join us when the cybercrime experts from the MS-ISAC are back for this special, two-part webinar series!
- an introduction to the cryptocurrencies and the blockchain,
- a discussion of how we got to where we are today,
- explores the history of virtual, digital, and cryptocurrencies,
- how they operate and what differentiates them from traditional currencies.
- a deeper look into the criminal aspects of cryptocurrencies and block chains
- an in-depth look at the four types of crimes currently associated with cryptocurrencies,
- the no-longer-theoretical 51% attack on the blockchain,
- and the impact these crimes have on the cyber threat landscape
- what the future holds and what it means to you, as well as some of the resources that can help you in dealing with this new technology.
Justice Clearinghouse Editors (JCH): There is a lot of buzz these days about cryptocurrencies… about people becoming rich from Bitcoin, etc. For those of us who aren’t so techno-savvy, what are cryptocurrencies?
Eugene Kipniss: We like to go with the definition from a recognized authority, the Merriam-Webster Dictionary. Cryptocurrencies are any form of currency that only exists digitally, that usually has no central issuing or regulating authority but instead uses a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions.
Stacey Wright: Cryptocurrencies are a type of virtual currencies. Like virtual currencies they are mostly unregulated money that exists only online. They are a subcategory within virtual currencies because unlike some virtual currencies, they rely on encryption (hence the “crypto” in their name) and are decentralized. Although the decentralization portion of their definition is currently a topic of debate among the cryptocurrency community because there are instances where they are not decentralized… It’s confusing. In large part because the definitions aren’t fully agreed upon within the cryptocurrency communities.
Breaking it down, because as a co-worker says – that makes my brain hurt – think of cryptocurrencies as an agreement among a bunch of people. Just like in centuries ago when we all agreed that a bag of flour was worth so much money, today we’re all agreeing that a digital asset is worth so much money, too. Only it’s online and you can’t touch it.
Just like in centuries ago when we all agreed that a bag of flour
was worth so much money, today we’re all agreeing that a digital asset
is worth so much money, too.
Only it’s online and you can’t touch it.
JCH: What other terminology is going to be important for justice professionals?
Eugene: I definitely think justice professionals might want to familiarize themselves with the following terminology:
- Public and Private Addresses – These complex numbers are what allow users to send or receive cryptocurrency. The importance for justice professionals is that in truly public ledger systems like Bitcoin, individual users’ activity can be publicly seen by following transactions using their address.
- Tumblers – Services that allow users to move their cryptocurrency between many wallets and types of currencies to launder or obfuscate the use of the assets. These make it harder to track use of cryptocurrencies and where they are transferred.
- Cryptojacking – The act of illegally utilizing another person or organizations’ computing equipment to generate cryptocurrency.
Just like everything that is valuable,
there’s crime attached to it.
JCH: Why are cryptocurrencies an important thing for justice professionals to understand?
Stacey: There are really three reasons why justice professionals should understand cryptocurrencies.
The first is simple, many justice professionals are going to run into them, and the people that use them, in the course of your duties. Cryptocurrencies are a new way of paying for items that is gaining a lot of traction. Overstock accepts 12 different cryptocurrencies for payment. Expedia, Dish network, and Microsoft all accept them. Intuit provides PayByCoin services for small businesses and some foreign governments are experimenting with cryptocurrencies to replace their fiat currencies.
Secondly, cryptocrime. That’s crime that involves or is related to cryptocurrencies. Just like everything that is valuable, there’s crime attached to it.
And finally, whether or not you think cryptocurrencies are a fad, they are tied very closely to the blockchain. As we’ll talk about during Part 1 of this series, the blockchain drives some cryptocurrencies while other cryptocurrencies drive the blockchain. In both cases, cryptocurrencies and the blockchain are pretty tightly linked at the moment and the blockchain is a revolutionary idea that you should be paying attention to.
In the cryptocurrency world, the blockchain is the ledger that stores and makes public all the cryptocurrency transactions. However, there is so much more than can be done with the blockchain. It can be used to store and share data or images, such as real estate titles, banking transactions, and identities. With these developments happening, it’s likely that justice professionals will encounter and need to use the blockchain in the future. Think about it – digital evidence stored in a way that no one can accidentally modify. Court cases documented. A person’s full medical history available to responding EMTs. Real estate titles. Driver’s licenses. The possibilities for using blockchain are huge and right now, using the blockchain means using cryptocurrencies.
The possibilities for using blockchain are huge and right now,
using the blockchain means using cryptocurrencies.
JCH: Why is crime seeming to explode around cryptocurrencies?
Stacey: Cryptocrime is alluring for a couple of reasons. The first is that cryptocurrencies are worth a lot of money. A small piece of paper with your private key on it can be worth millions of dollars, which is driving physical, real-world crime, including B&Es, kidnappings, and robberies. Plus, cryptocurrencies are just another currency, so malicious actors are interested in using them in Ponzi schemes and in money laundering and as payment for ransom demands.
Eugene: Also, the way cryptocurrency works is that miners, the people doing the work to make the blockchain, are rewarded by earning cryptocurrencies. However, mining costs money to buy the equipment and expensive electricity to run the equipment. This means that, just like anything else, malicious actors want to save their money and let you do the work for them. That drives some of the crime, too, where criminals use your equipment to illicitly mine for cryptocurrency for their gain.
Cryptocurrencies are just like any other currency –
they aren’t bad,
they are just sometimes used by bad people for bad things.
JCH: What are the biggest myths or misconceptions justice professionals have when it comes to cryptocurrencies and crime?
Eugene: Cryptocurrencies are just like any other currency – they aren’t bad, they are just sometimes used by bad people for bad things. Owning, using, and mining cryptocurrencies does not make someone suspicious. In fact, a significant majority of cryptocurrency transactions don’t happen on the dark web or for illegal activities.
Stacey: I’d like to see justice professionals understand that in most cases, cryptocurrencies aren’t anonymous. All transactions are on the public ledger. U.S. banking regulations, like Know Your Customer and the FinCEN network rules, apply. Which means that it’s frequently possible to use tools to track transactions and identify account holders. Just like every other currency, there are ways to avoid the laws, but you have to really know what you’re doing and take some extra steps.