Commentary
During an interview with MSNBC’s Rachel Maddow on Nov. 24, Hillary Clinton spoke about the need to regulate the cryptocurrency market. Without necessary protections, she warned, China and Russia have the power to use the likes of bitcoin and ethereum “to their advantage.”
Should we heed Clinton’s warnings? More importantly, is she right?
Considering there are now at least 6,000 cryptocurrencies in existence—many of them worthless and dangerous—Clinton certainly has a point. The world of crypto is similar to the Wild Wild West, largely lawless. Moreover, cryptocurrencies are vulnerable to serious attacks. China and Russia, it’s important to note, have some of the best hackers in the world.
Although the Chinese Communist Party (CCP) is no fan of cryptocurrencies, it’s important to ask why it’s not. Beijing views bitcoin and its brethren as a direct threat to its digital dreams. How so? Because cryptocurrencies, by design, are the antithesis of highly-centralized, fiat currencies like the U.S. dollar. As the CCP rolls out its new digital currency, the e-CNY, it seeks to become the dominant force in all things finance. This involves making sure that bitcoin never becomes the global reserve currency (which is the goal of many bitcoin proponents).
Even Sen. Rand Paul (R-Ky.) believes bitcoin could become the global reserve currency. Is he right? Probably not. But if he is, then the CCP'S digital currency will have to settle for second or third place. As you can see, bitcoin is very much a direct threat to the CCP’s financial plans.
Many Americans—around 21 million Americans, or 14 percent of the United States’ adult population, to be exact—now own cryptocurrencies. With no regulations currently in place to protect their digital assets, millions of investors are exposed to known and unknown dangers.
Hacking the Blockchain and Stealing the Loot
Blockchain is the underlying technology that allows bitcoin and other cryptocurrencies of merit to exist. Without blockchain, the verification of transactions wouldn’t be possible. Although blockchain technology is highly impressive and reasonably secure, it is not unhackable, contrary to popular belief.The crypto world has a dark underbelly, inhabited by hackers with nefarious agendas. In simple terms, a hack involves bad actors exploiting some area of the blockchain, thus allowing them to exchange or illicitly withdraw a victim’s funds. Not only are these attacks (and that’s what they really are) becoming more frequent, they’re also becoming more sophisticated in nature.
Take the “51 percent attacks,” for example, whereby a hostile group (or groups) seizes control of at least 51 percent of the network. With this level of control, the group has the power to prevent new transactions from occurring; payments between users can be halted and compromised. Transactions already completed can be reversed. In 2016, Krypton and Shift, two lesser known cryptocurrencies, suffered 51 percent attacks. Two years later, Bitcoin Gold, a bitcoin “variant,” also suffered a similar attack. At the time, it was the 26th-largest cryptocurrency in existence—meaning, a lot of people lost a lot of money. The hackers stole somewhere in the region of $18 million worth of Bitcoin Gold. Then, in 2020, Bitcoin Gold was hit yet again. Earlier this year, the Bitcoin SV (BSV) network was hit with a 51 percent attack.
Cryptocurrency mining. Pixabay
Who was behind these attacks? In truth, we don’t know.
However, there is reason to believe that Russian hackers played a significant role in some, if not all, of the above attacks. Similar to the world of crypto, Russia also has a dark underbelly. Home to the best hackers and code crackers on the planet, the largest country in the world has had a profound impact on the cryptocurrency market.
According to a recent report from local site Izvestia, a daily broadsheet newspaper, the country is looking to regulate the crypto mining industry and promote it as an entrepreneurial activity. Russia’s Ministry of Economic Development, the Ministry of Energy, and the State Duma want Russian crypto miners to be recognized as legitimate businessmen and women. What could this mean going forward? Quite a lot, actually.
After the United States and neighboring Kazakhstan, Russia is the world’s third-largest crypto mining country. Considering Kazakhstan is currently experiencing an energy crisis, Russia may very well move up to second place very soon. If the Russian government agrees to make crypto mining an officially recognized, state-approved activity, expect Russia to dislodge the United States and occupy the mining throne.
Even if the government doesn’t greenlight crypto mining as an “empire-building” activity, Kremlin-backed hackers will still exert a nefarious influence over the crypto ecosystem, compromising the blockchain and making off with vast sums of digital money. In other words, expect more 51 percent-style attacks.
As the author Vijai Maheshwari previously warned, “Russia has the resources to hack the bitcoin network for its own personal gain.” Furthermore, with its “20 gigawatts of excess power capacity and consumer electricity prices as low as $0.01 per kilowatt hour, the country is in a unique position to dominate the mining of cryptocurrencies.”
Either way, through legal and/or illegal means, the power appears to be in Russia’s hands. Add Beijing into the mix and you have a recipe for crypto-fueled disaster. The cryptocurrency market must be regulated. The question, though, is how?
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
