Are cryptocurrencies and breaches inseparable ?
Sometime in 2012, I made up my mind that I was done with my Bitcoin stash. I had a small collection, which at that time I thought wasn't much. Those were the good old days; I remember websites giving you free coins just for visiting them. Back to the point, I said to myself: “If I needed them later, I will get them again but for now, there's no sense in holding onto them”. So, off I went, transferring my coins to a [presumably] very reputable exchange and sell them for cash. Alas, before I could blink, I saw my account getting drained in small increments. It was almost like a scene from a popular CSI episode that nerds would make fun of for being too good to be true! Well, money was lost and I tried to wipe the experience from my memory somehow believing that it's just a matter of time before cryptocurrencies would be dead anyway. Boy, was I wrong!
Not only have many alt-coins of varied popularity sprung up with large communities thriving around them, they are getting unusual attention, both good and bad from researchers to financial organizations to oppressive governments. And while their fate is still a bit uncertain, news of breaches and stolen bitcoins are still not uncommon. One begs the question: Are cryptocurrencies really solving a problem and introducing another ?
Researchers are often so engrossed in solving a specific problem that they seldom look at the potential advantages of the bad by design (no pun intended) problem. And the cryptocurrencies solution seem to fall into this category. Ofcourse, Anonymity and Decentralization all sound like a step forward and they might be inherently desired but do they always work for the better ? Probably not. One of the many reasons why you don't hear about major breaches at your local bank is because by design, paper currency and the economy that encompasses it make transactions trackable. So, while they do expose your identity which might be undesirable in the greater scheme of things, maybe, a medium of exchange system could mostly benefit from being easily trackable and controlled by a central authority for it to work fairly. It would be difficult to ignore the evidence that paper money's long and successfully history provides in support of this theory.
On the other hand, while the anonymity advantage that digital currencies offer does sound appealing, it's worth pondering if it contributes to making it more difficult to protect it as well. Allow me to explain with an example: A regular bank transaction, by definition, requires an identifiable account holder. Even assuming that someone does hack into your account, there's a certain degree of responsibility that the exchange (read: the bank) has when it comes to protecting your investment. Ofcourse, once alt-coins get widespread recognition and there are standards put in place to protect users, this would be applicable to them too but that's exactly my point! With conventional currency, it's impossible for just anyone to setup an exchange without proper security protocols in place to protect users. That's because the creator of the currency (the government in most cases) has the authority over its usage and disbursement. On the other hand, with the decentralized nature of digital currencies, light regulations have led to rampant fraudulent activities. If there's any consolation, all attacks are on the associated services and not the core software and protocol. But to reiterate on my point, it's worth considering whether the large number of unpleasant hesists associated with bitcoins are directly proportional to the design intended to make it decentralized.
Understandably, it's easy to blame this thought on conservative bias. I do wonder however whether research and innovation and their applications are entirely two separate beasts and worth analyzing very carefully with differently colored eyeglasses. With our constant desire to improve our lives, I believe this ideology should be universally applicable. As a different example, let's consider Autonomous Driving too! Advances in Machine Learning is all good but can a machine's logic really replace the empathetic decision making of a human at the time of a crisis ? That's a topic for some other time!