Monday, March 3, 2014

Bitcoin Bank Robbery

The old is new again.  In the Wild West of the online world, perhaps Bitcoin exchanges should be insured as banks: Mt. Gox just declared bankruptcy following an electronic heist.

The ease of moving electronic currency works against, as well as for, users.  The alternative to anonymous cryptographic e-currency is authenticated cryptographic currency exchange, in which every transaction is logged and signed and verified – and subject to oversight and reversal, as with a credit card back-charge.  Even that wouldn't end Bitcoin theft.  Attacks would just shift toward subversion of the transaction oversight process, or elimination of complaining parties.  And what price would we pay for this 'security'? Every bit spent or gifted could be scrutinized by whomever obtained access to the records.  Instead of freedom, we'd find ourselves vulnerable to analysis by whomever accessed records to learn whom you spent money to protect, whom you depended on for security, whom you feared losing or what you treasured. Maybe ransom and blackmail would skyrocket even as injury-free Bitcoin filching plummeted.

Perhaps our best bet is to take banks seriously, and their insurance – but also our freedom to do things in private without oversight of strangers with no business in the things that make our lives worth living.

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