An interesting article from Times of India compared the evolution of cryptocurrency to the Tulipmania of the 17th century. The article predicted that the demand for cryptocurrency will collapse one fine day similar to what happened to tulips back then. The contract prices for the tulips skyrocketed against all possible laws of economics causing irreparable pains to the investors who invested their lifelong savings; they thought that a bulb of tulip will fetch them luxuries of the future! Looking back, you might think how insane it was to bet millions on just a “flower”! But, being part of the system, psychologically it is very difficult to think differently than the rest of the crowd; in fact, the story repeated itself in every bubble of financial history again and again.
It has never been easy to define what a perfect currency is. The barter system, which probably worked excellently for the early civilizations could not scale up to meet the demands of the connected world. We tried bronze, silver, gold, and finally, paper currency made its inroads into commerce. Now, crypto enthusiasts contemplate cryptocurrency as yet another parallel currency; it works on the principle of decentralization. I don’t know if I should call this a currency (rather leave it to the pundits of economics!), but I have my cybersecurity views on this.
People claim that cryptocurrency is hackproof. It is on the basis that the strong data integrity offered by the underlying blockchain. Understand that “Integrity” is arguably a key principle of security. However, can we blindly invest in cryptocurrency thinking that it is going to make us super-rich? The answer is No!
Fake Initial Coin Offering (ICO): Fraudsters take advantage of people making investments without enough due diligence. Investors get enticed into fake higher returns promised by fraudsters and fall prey to ICO scams. The advice is to stay away from the investments, we don’t understand.
Lookalike fake cryptocurrency websites: Hundreds of fake websites resemble legitimate ones. Look and feel as well as similar URLs make us believe that we are interacting with the website of a renowned company. Even after you would have done the right amount of homework about the specific cryptocurrency investment, you might end up paying a fraudster.
Fake Cryptocurrency apps: Just because an app gets listed on Google Play or the Apple App Store, doesn’t mean the mobile app is genuine. People are getting cheated by the fake cryptocurrency apps as reported by Bitcoin News
Social Engineering attacks: Criminal hackers use various social engineering tactics to entice people to gain sensitive information or to gain victims’ trust. Once they gain the victims’ trust, the fraudsters manipulate the victims in acting at their behest. This could include transferring money to the fraudster. Please refer to my article on preventing identity theft and protecting and protecting ourselves.
Cryptocurrencies are also used for many other illegal means. For example, cryptocurrency has been a choice of payment in case of ransomware attacks. Illegal financial transactions are also facilitated (example: drug trafficking, money laundering, human trafficking, etc.) through cryptocurrencies. The fact that cryptocurrencies are yet to be brought into a complete regulatory framework as well as a higher degree of anonymity, makes it easier for criminals to use cryptocurrencies for running their rackets.
Today one Bitcoin is valued at close to $40k. Such a high valuation and the mad rush to be part of this success story drives naïve investors toward cryptocurrency as an investment choice. The idea of investment is not bad. But, investments without knowing what we are getting into is a recipe for bankruptcy. While I don’t know if cryptocurrency will see the fate of tulips, all that is needed is to secure ourselves from the fraudsters. The illegal usage of cryptocurrencies doesn’t make it bad either. The concept behind cryptocurrencies is amazing. If cryptocurrencies are used for the betterment of human society, I think it is justice to the people who brought this innovation to the fore. The good news is that governments around the world have started enacting laws and regulations around cryptocurrencies. Hope to see a great future for one of the greatest innovations of mankind!