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Bitcoin being used by cyber-criminals to make money without being tracked

Why is bitcoin despised by governments and popular among hackers?



Ever since its advent, bitcoin has been the center of much debate and controversy. Its features and nature make it a phenomenon to be both appreciated and feared. For those of you who might not know what it is, bitcoin is a digital currency "coined" in 2009 while the financial crisis was raging. Its creation was centered on the idea of taking the power out of the hands of bankers and governments by allowing people to make digital payments in a peer-to-peer fashion without the involvement of a third-party broker. It works as simple as installing a "digital wallet" application on your computer or smartphone, through which you purchase bitcoins from exchange hubs or make transfers to and from other users. Governments and financial institutions are in general mistrustful of bitcoin. They consider it a rogue currency because they have no control over it and it is subject to no regulation, and they fear that it opens up opportunities for users to conduct illegal activities, including tax evasion. Bitcoin is not backed by the FDIC.
Conversely, more small businesses find themselves attracted to bitcoin as a payment medium, as it exempts them from credit card service fees. Bitcoin has also emerged as the possible future of remittance market because it makes international money transfers easy and cheap. It can be helpful in many different scenarios, especially in developing countries where mobile communications exist but proper financial infrastructures as sorely lacking. However, companies are reluctant to become too invested into bitcoin, because its value has been fluctuating wildly since its inception. Bitcoin is currently selling at $240. Last year, it was soaring above $1,000. But perhaps one of the parties with which bitcoin has become very popular are hackers and users with malicious intents. The flaws and vulnerabilities of the bitcoin and its payment system have made it daringly appealing to cybercriminals, and it has become a breeding ground for cyber-theft and digital crimes, allowing criminals to earn easy cash, perform quick transfers, and make off with their loot without leaving a trace. Whether stored on user-owned devices or on cloud services, bitcoin digital wallets have proven to be prone to hacking attacks, and the headlines are rife with news over bitcoin thievery stories. Hackers are intercepting bitcoin exchanges or simply breaking into storage vaults, the digital equivalent of picking your pocket or robbing a bank. One the most flagrant cases was Mt Gox, once the largest bitcoin exchanges, which collapsed shortly after it was robbed of 650,000 bitcoins. Bitstamp, a European bitcoin exchange, was hacked earlier this year for $5 million worth of bitcoins.

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Stories of bitcoin theft

Stories of bitcoin theft continue to surface on a weekly basis, and its allure is even attracting law enforcement servicemen: A former U.S. federal agent recently pleaded guilty over the theft of $800,000 worth of bitcoins during the bust of an online drug trafficking network. Since bitcoin wallets aren't federal-insured bank accounts, once your coin disappears, there's no returning it. Does that mean that only owners of digital wallets and large bitcoin repositories are in danger? No. In fact hackers now use bitcoin as their preferred medium to extort their victims instead of previous techniques, which were more cumbersome and riskier for the extortionist. After all, digital wallets are personal property and aren't registered with any government or financial authority. Also, bitcoin transactions remain anonymous and do not reveal the identity of the parties involved. And exchanging bitcoins for hard currency is a breeze, allowing hackers to launder their gains discreetly. And in contrast to PayPal and credit card transactions, bitcoin transfers are irreversible. Many hackers have even taken to naming their groups and products after the popular crypto-currency. A hacking group called DD4BC (DDoS for Bitcoin) has become renowned for threatening to carry out Distributed Denial of Service attacks against targets unless large sums of bitcoins are deposited into their wallet. CTB Locker (Curve-Tor-Bitcoin) is another dangerous malware that has been named after bitcoin. Once it finds its way into your computer, the CTB encrypts your files and ransoms the decryption key for specific sums of bitcoins. If you have a digital wallet to pay the ransom, then good for you. If you don't, the attackers usually set a deadline a few days ahead, by which you have to take the necessary steps to acquire one and procure the digital cash. Despite its pitfalls, bitcoin is continuing to rise in popularity and usage, and what the future will portend for bitcoin is yet to be determined. Many believe that it should be brought under control and regulation. Others are thinking of ways to add layers of protection to their payments and transactions. However, there are those who argue that adding any sort of controlling measure would destroy the very traits that had made bitcoin popular in the first place. Will it become the de-facto global trading currency, or will it eventually lose its hype and fall back into the historical abyss that houses many other innovations that promised to change the world in their first years? Time will tell. In the meantime, bitcoin will continue to remain a popular exchange medium, despised by governments and loved by hackers.


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Ben Dickson -- Bio and Archives

Ben Dickson is a software engineer and freelance writer. He writes regularly about business, politics and technology. Follow him on twitter at @bendee983


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