Does Encryption Guarantee Security and Privacy for Cryptocurrency?
Digital privacy has become a hot-button item throughout 2018, with the likes of Facebook and Google stumbling under the onslaught of concerns from users who are demanding more control of their personal information. As alternative means of communication continue to rise in popularity, like WhatsApp with its end-to-end encryption, it’s becoming increasingly clear how dearly customers value their privacy online. The use of cryptocurrency falls right into that desire, as users are drawn to its encryption and focus on security. Unfortunately, not even that emphasis always equates to a guarantee of privacy.
Blockchain encryption occurs thanks to each member of the network having a public and a private key. It is theoretically impossible to deduce the private key of any user because of the inherent encryption that powers the blockchain. Therefore, a user can send their public key to anyone else to move funds without fear of an ill-willed actor gaining access to their private key. Of course, no technology is foolproof, as some crypto companies (and investors) have learned to their chagrin (e.g. the $500 million Coincheck hack this year). However, as vulnerabilities have cropped up, crypto organizations and members of the community continue to innovate and improve crypto security. This article will explore some of these developments in greater depth.
Encryption Technology is Evolving
Encryption technology reaches far beyond the realm of cryptocurrency. In communications, for instance, Cisco has stakes in an encrypted messaging platform that would make group chats truly private. Encryption also allows cryptocurrency to do what fiat currency cannot — eliminate counterfeiting. And while many fear the use of encryption to promote terrorism, it’s also used by people oppressed by their own governments to communicate and make purchases.
As hackers, cyber-criminals, and other nefarious individuals continue their attempts to cheat the blockchain, organizations must constantly improve their security systems. Encryption has never been and will never be foolproof. Those who believe it can allow them to do anything anonymously — including illegal activities — are in for a rude awakening from law enforcement. In some cases, blockchain can even make it easier for police to prosecute crypto criminals. For example, pursuing someone who committed fraud on a website would require officials to request and serve subpoenas, which can take months or years to get approved and filled. With a decentralized blockchain system, however, no subpoena is needed; a transaction number links to an account number, without any need for courts or judges to get that information.
Encryption is also evolving in the form that it takes. For instance, while most cryptocurrencies use private keys of character strings, China’s SafeWallet is branching out with a QR code-based user ID system. The codes will be personalized and encrypted and must be followed by answering pre-set security questions. In order for organizations to keep their data as secure as possible, they must be open to adapting to new evolutions like this.
Security Breaches and How to Protect Against Them
Even though encryption is the underlying technology that keeps one’s cryptocurrency assets secure, the most common threats to investors’ wealth are price manipulation, phishing, and malware scams. In early August, the Wall Street Journal reported that organized “trading groups” have made $825 million so far in 2018 by manipulating markets with “pump and dump” schemes to raise prices and then quickly sell their shares. Phishing usually occurs through email or Twitter, tricking investors to send coins to an account to get many more in return. Malware’s presence in cryptocurrency skyrocketed in the first quarter of 2018, with more than 2.9 million samples viewed by researchers, up from 400,000 in the last quarter of 2017.
These three methods all have one thing in common: they aren’t trying to break through the security systems or break down blockchains’ encryption. Instead, they are relying on the gullibility of individual users to steal credentials and currency. Investors should learn about effective methods for minimizing risks posed by crypto scammers. These precautions include storing private keys offline, installing security software on PCs, recognizing suspicious emails, and others.
But can the blockchain itself be decrypted, nullifying the very foundation of what keeps cryptocurrency private and secure? The majority of experts believe this to be extremely unlikely (or even impossible). However, there is a minority view that the rapidly-approaching age of quantum computers can pose a risk to the core encryption technology behind blockchain. There is no projected date for quantum computers coming online, but they have the power to solve complex mathematical problems — like encryption algorithms — much faster than normal computers. For now, however, such potential threats to cryptocurrency encryption are likely decades away.
As much attention as is being paid to vulnerabilities in encryption, it might not even be the biggest lurking risk when it comes to cryptocurrency and blockchain. That title could fall to the Foreshadow vulnerability. Foreshadow affects Intel’s Software Guard Extensions (SGX), a part of the chip that stores sensitive information and is in the tech plans of many current and future cryptocurrency projects. In August, it was reported that a group of researchers informed Intel of a vulnerability that allowed them to attack the chip and steal the information it stores.
For the present, having pundits and critics challenge the safety and security of cryptocurrencies’ encryption is a blessing for the industry. The more challenges that can be posed and met in the present, the longer cryptocurrencies can endure as a long-term payment solution and investment opportunity. Challenges will continue to come cryptocurrencies’ way as cybercriminals and hackers attempt to unlock their encryptions and collect on illegal paydays. Mitigating those risks — both on an institutional level and by the average investor — will greatly help build up cryptocurrency as a valuable long-term asset
Andy Klein serves as the Director of Strategic Planning at BitIRA, a national company that helps Americans diversify their retirement accounts with cryptocurrency.