Five Reasons the CISO is a Cryptocurrency Skeptic—Starting With Bitcoin
Image by Eva Rinaldi / License Creative Commons
3. The Nation State
One of the supposed benefits of bitcoin and other cryptocurrencies is that they aren’t tied to any particular nation state. This prevents bitcoin assets from being frozen by the state, and gives consumers the freedom to do anything they want with their money.10
State sponsorship of a currency has obvious benefits, though. Consider:
In the 1990s, George Soros nearly single-handedly destroyed the pound sterling by betting that it was overvalued.11 To keep the pound from a precipitous fall, the UK government had to raise the interest rate to 15 percent. Pledging the resources of 80 million Britons kept the pound afloat. Had the defense failed, however, the pound would have fallen against all other currencies, possibly leading to a nationwide depression.
Who’s going to defend cryptocurrency from the next Soros?
And consider this—in the United States, the Secret Service has only two jobs:12 protecting the president, and protecting the currency (mostly against counterfeiting).
Where is the Secret Service for cryptocurrency?
4. All Those Flipping Thefts
For a currency that was designed to make theft impossible, bitcoin has a terrible and ironic history of constant, massive thefts. You can read the entertaining Blockchain Graveyard13 list of 44(!) cryptocurrency bank failures, most of which were due to theft. Mt. Gox, the world’s largest repository of bitcoins, failed after 744,000 bitcoins (representing 6 percent of the worldwide total) were stolen. Today’s market value of those bitcoins is $3 billion. They are still out there somewhere, and they haven’t been used. One of the benefits of distributed ledgers is that everyone will know as soon as someone tries to use one of them.
IRL, banks fail all the time.14 Occasionally it is due to mismanagement, but often it’s just market forces at work. The FDIC in the United States guarantees the first $100,000 in deposits for each customer in any failed bank, and then ensures the easy transition of assets as the failed bank is folded into another bank. After 4,000 years of banking,15 ;the financial community still hasn’t figured out how to avoid bank failure—but at least there’s a process for cleaning it up. Cryptocurrency banks appear to fail all the time16 as well, but there is no depositor guarantee. The associated monies just vanish.
If, IRL, bank failures are inevitable, why would anyone think that it would be different for cryptocurrencies?
5. Quantum Expiration
Bitcoin and most other cryptocurrencies seem like the bleeding edge of cryptographic technology, but they are actually heavily dependent on asymmetric encryption algorithms that are decades old. And those underlying algorithms are not resistant to quantum computing, should a quantum computer ever be built. Bitcoin private keys are just 256-bit Elliptic Curve Digital Signature Algorithm (ECDSA) keys, so a quantum computer with just a few thousand qubits could, in theory, find every wallet’s private key in the bitcoin universe. Won’t that be a fun day!
Infrastructure Isn’t Just Technology
The financial community has the largest cybersecurity budgets in the world. And even with regulation, nation-state support, security teams, threat intelligence, and every security inspection device imaginable, they are just barely capable of keeping hackers from stealing all the monies. The CISOs for those companies know that they need more, way more, than just technology to secure a bank.
If you think all you need is technology to defend against bad guys, you shouldn’t be a CISO. But that’s all cryptocurrency is: technology.
Does the underlying blockchain technology have a place? Maybe. Distributed cryptographic ledgers are pretty cool, after all. And people are talking about using it for identity and access management for IoT. Yeah, that smells like a solution in search of a problem, but you could assert IoT as an answer to our vexing question, “Are we doing anything with blockchain?”
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Image by Eva Rinaldi / License Creative Commons 3. The Nation State One of the supposed benefits of bitcoin and other cryptocurrencies is that they aren’t tied to any particular nation state. This prevents bitcoin assets from being frozen by the state, and gives consumers the freedom to do anything they want with their money.10 State sponsorship of…