Tag Archive for: Cryptocurrencys

US Agency Raises Questions about Cryptocurrency’s Decentralized System

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A report by a U.S. government research agency raises questions about the decentralized system of cryptocurrency technology.

The report comes as major cryptocurrencies suffer large drops in value and several companies supporting the technology experience business difficulties.

A cryptocurrency is a digital form of money that is not overseen by governments or banks. A network of computers records cryptocurrency activity between users. This activity is included in a “ledger,” or list, known as the blockchain.

Because the blockchain involves a network of computers across the world, the system is considered decentralized. The blockchain was designed this way with the goal of preventing a single person or group from controlling the system.

The new report on blockchain technology was recently published by the U.S. Defense Advanced Research Projects Agency, or DARPA. The agency seeks to carry out research and development activities for the Department of Defense.

The DARPA report was called “Are Blockchains Decentralized?” It was completed over the past year in cooperation with the U.S.-based computer security and research company Trail of Bits.

The study centered on blockchains for the two most popular cryptocurrencies, bitcoin and ethereum. The researchers looked at the current level of decentralization with those systems and examined possible security risks.

The report suggests these blockchain systems can be subject to “unintended centralities” that could result in security issues for cryptocurrency investors.

Trail of Bits said in a statement the research found that some people involved in the blockchain process can gain “undue, centralized control over the entire system.” Such control can happen when individuals “subvert the properties” of current rules related to the blockchain’s networking process.

More security risks

In addition, the company said that while the encryption system used in cryptocurrency activities is generally considered secure, “it does not guarantee security.” The term encrypt means to change information from one form to another in an effort to improve security and prevent attacks.

Specifically, Trail of Bits said blockchain traffic…

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Cryptocurrency’s promise met with skepticism – Twin Cities

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Old-time vaudeville star Jimmy Durante’s catchphrase, “Everybody wants ta get inta the act!” well describes the current state of cryptocurrencies. These are forms of electronic money, the accounting and control of which are outside usual banking and government-sanctioned central banking orbits, and for which encryption and anonymity plays a key role.

Edward Lotterman

These are not new. Bitcoin started in 2008. Millions of people reportedly now are owners and users. Additional millions certainly follow its value.

But some developments are new: Federal Reserve Chair Jerome Powell recently issued a cautious statement affirming cryptocurrencies. Minnesota GOP Rep. Tom Emmer has taken an enthusiastic interest in such currencies as do some other elected officials.

The most concrete recent development is the pending IPO of Coinbase, a cryptocurrency company that would be the first as a publicly-traded corporation. Its reputation is clouded by reports of accountholders who saw hundreds of thousands of dollars disappear from their accounts. But the company says these losses were due to lax security of account numbers and passwords by the depositors and not from any misstep by of Coinbase. The IPO is expected to be successful. Expectations are that Coinbase will assume a significant role in payments systems.

Traditional credit cards such as Visa and Mastercard, entrenched within traditional banking systems, are running scared. They have held — and abused — monopoly positions for decades. PayPal and other new competitors already have eroded their power. Cryptocurrencies will hurt them further.

I am sure Powell is right that cryptocurrencies, or features of their technologies, will grow as payment platforms. Yet history also demonstrates there will likely be major hiccups along the way. Unbreakable codes, like computer security systems and “impenetrable,” tank armor, always get broken into or penetrated. Much of the attraction of cryptocurrencies is their opaqueness and hence their utility in helping users evade taxes and launder money. Those very features will also make it hard to solve any inevitable electronic heists.

Enthusiasts argue that criminal uses of cryptocurrencies…

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