The Biden administration has pointed, with alarm, to the national security implications of both cybersecurity and cryptocurrency. It’s just a matter of time before the government begins worrying about their intersection—cryptocurrency security. All of the United States’ international adversaries are in the business of exploiting bad cybersecurity, and many of them monetize their exploits using cryptocurrency. There’s nothing more natural for North Korean state hackers, Russian organized crime, or partially privatized cyberspies in China and Iran than to steal cryptocurrency to finance their national security operations. They’ll find an open door; because, as bad as overall cybersecurity is, the security of cryptocurrency is worse.
You only have to follow cryptocurrency news casually to be struck by the size and frequency of cryptocurrency security failures. That’s not your imagination, or press bias. Cryptocurrency really does have worse security than other digital technologies, and there’s a good chance it always will.
Here’s why: In other parts of the digital economy, companies quickly patch security flaws, many of which have been found and responsibly disclosed by outside researchers. But as I’ll explain below, the “disclose-and-patch” cycle doesn’t work for cryptocurrency systems. There are ways to make disclose-and-patch work better for cryptocurrencies, but they will require compromises, institutional innovation, and maybe even new laws. That’s a tall order, but until it happens, cryptocurrency security will never match even the low security standard set by other digital technologies.
How Responsible Disclosure Works
Software security flaws like these are ubiquitous in digital products. Like writers who can’t see their own typos, most coders have trouble seeing how their software can be misused. The security flaws in their work are usually found by others, often years later. Indeed, security researchers are still finding serious holes in Windows today—30 years after it became the world’s dominant operating system.
Companies like Microsoft have improved their products’ security by making peace with those researchers. There was a time when…