Could Silicon Valley be the Encryption Killer?

If you value your privacy online then you logically must also be a supporter of encryption. It frightens governments, because encryption prevents them from undertaking mass surveillance on all of our communications. For the longest time, Silicon Valley has been the defender of encryption, but Kalev Leetaruwriting for Forbes, believes that the one-time protector of our privacy may be taking another road and rolling back the protections that encryptions provides us with.

The reason behind this change of heart is not to help out governments: it is. Leetaru suggests, “for their own profit-minded needs to continue mining, monetising and manipulating their users.”

Encryption puts a dent in profits

Encryption is a way of securing Internet communications and keeping them away from the prying eyes of the ‘Deep State’ as well as cybercriminals. In the early days of Silicon Valley, encryption was “a value-add that had no impact on their own use of their users’ data.” Then came Edward Snowden and the Valley firms portrayed themselves as standing up against governments on behalf of their users. However, what was also happening was that they were “encouraging their users to share ever more intimate information to be mined.”

As Leetaru points out, “The movement from HTTP to HTTPS was an easy sell for the major internet companies,” simply because the cost of migrating from SSL certificates and all the other changes required, were all borne by the websites; not Silicon Valley. The only thing they had to pay for “was the added cryptographic computational cost, necessitating some additional hardware investment.”

And here is something important to consider in this debate: SSL only protected user communications in transit. The major Internet companies could still access user data in unencrypted form and use it to monetise their users.

What will Facebook do?

However, end-to-end encryption is a threat to these Silicon Valley companies and the cash they can make from our personal data. Look at Facebook and Whatsapp, which uses end-to-end encryption. Leetaru remarks that Facebook’s “entire existence is prefaced on the ability to mine its users’ most personal and private communications.” And you can bet that Facebook is looking at ways of working around the protections of the Whatsapp encryption in order to continue mining its users’ private communications.

Unfortunately, “the rise of end-to-end encryption is finally aligning the interests of both governments and Silicon Valley,” and while we see governments as the enemy of privacy; it is Silicon Valley that poses a threat in the name of profit.

Hype: a manipulator of the Bitcoin market

From time to time some people get on their high horse about the potential for manipulating the price of bitcoin. And there may be a compelling argument for thinking this. Michael K. Spencer thinks there is, or at least there was.

He writes, “as Bitcoin’s volatility rose from a minority pre 2015 to a hype “get rich” story of 2017 and into 2018 that went a bit mainstream, it was clear to me Bitcoin’s price was and is, incredibly manipulated.” He cites the idea of a ‘Bitcoin World’ that “has its own terms, norms and what’s considered normal might not actually be accurate.”

In his opinion, “Bitcoin’s price was clearly manipulated and vulnerable to pump-and-dump schemes,” and then adds, “The positive social network effect had grave consequences to a sort of collective fraud taking place.” However, as he says, he has been willing to play devil’s advocate with this topic while personally being able to see both sides of the story.

Crypto turns from cool to not so cool

The downturn in the market price certainly had the effect of making Bitcoin less cool than it had previously seemed to many. There was also the issue of the media’s approach to cryptocurrency, which has been either exceedingly negative to overly positive, and in a nutshell, all over the place. There is also the accusation that the crypto-focused media is corrupt and that the mainstream financial media has created a series of clickbait articles that are deliberately negative about Bitcoin and have thus engendered mistrust of crypto amongst readers.

What Spencer is talking about is the manufacture of hype “in an era of existential innovation that always seeks to re-create the wheel, in this case the value, money, transactions, digital assets and investment communities on the blockchain.”

Did the hype scam us all?

He points to a Bitwise study that claims 95% of “spot bitcoin trading volume is faked by unregulated exchanges.” The takeaway question from this and the media behaviour is: Did the hype make the public feel that cryptocurrencies were bigger than they really are?

Spencer also points to another Bitwise finding. In a March 2019 report it said that “substantially all of the volume” reported on 71 out of 81 exchanges was wash trading. This refers to the practice of buying and selling the same stick simultaneously to give the appearance of market activity.

All these factors raise concerns over the potential for abuse of the manipulation of the price of Bitcoin, and as Spencer writes, “If a lot of Bitcoin’s movement was “faked” or was and is falsified data, than essentially companies like Coinbase and Binance grew up in the hype with a heart of a lie.”

It’s certainly food for thought, even if you are a crypto supporter.

3 predictions for the digital financial future

The financial industry is going through a sea change. So many aspects of it are under scrutiny: from debates over cashless societies, to universal basic income, and the implications of digital currencies. Money has always been a hot topic, but it has become even hotter.

Blockchain changed the conversation

The advent of blockchain technology is in part a reason for this sudden increase in interest. As Lauren deLisa Coleman writes for Forbes, we are seeing financial giants like JP Morgan enter the digital currency space, alongside Facebook and IBM. And she points out, “But amidst such vast activity around digital currency overall, there is a specific and growing interest toward trend shifts pertaining particularly to token exchanges.

Talking about Token Exchanges

Coleman reports on the discussions at a New York event: Token Exchanges: The promise of liquidity, compliance and stability, where lawyers comprised the majority of the audience. Joel Telpner, partner and Chair Fintech & Blockchain Practice at Sullivan & Worcester LLP, addressed the issue of turbulence in the digital currency space: “We’re all collectively paying the price at the moment, but it’s important to keep in mind that this is not a bad thing. Most all new forms of technology have experienced a high level of unreasonable exuberance in the early days and after that period, business becomes much more stable.”

A more mature environment

Interestingly, he also suggested that now is the time to create a new ecosystem with new players: “”We’re at the end of the beginning,” he remarked. “This is about moving from the wild, wild, west to a more mature level of the digital currency space and tokens. Those that remain have to work hard and understand that success will come from fundamental principles in business and governance, and it will certainly pay off.”

3 key things to watch out for

He then identified what he believed are the three key regulatory areas to watch this year that could be game changers:

1. He believes the US Securities and Exchange Commission (SEC) will make a statement about the status of digital currencies and tokens — which are tokens and which are not.

2. The CFTC (Commodity Future Trading Commission) will become more involved in the token space given that this collective regulates commodities.

3. Stablecoins will come under a regulatory spotlight and decisions will be made about how to regulate this particular type of digital currency.

The event also revealed that a consensus of opinion indicates the issue of custodianship will come under focus this year as well. In addition, there will also be an eye to how trade is conducted in this space and how securities are managed securities once they are issued.

But, one of the most hotly debated topics in the industry is which jurisdiction will establish itself as a leader in the space: Telpner’s response to this was: “”But this approach was wrong in 2017, 2018 and still wrong to think like this in 2019, because all countries are working hard to regulate this space. Stop chasing jurisdiction.”

Cryptojacking in 2019 is not dead — it’s evolving!

Cryptojackers have shut down university networks and government websites, but there was one case that attracted a lot of attention, and that is the use of Coinhive mining service focused on mining Monero.

With the closure of Coinhive it appeared that cryptojacking might be coming to an end. Coinhive was a cryptocurrency mining service that relied on a small chunk of computer code installed on websites. It released its mining code in 2017, pitching it as a way for website owners to earn an income without running intrusive or annoying advertisements. However, although Coinhive was not an inherently malicious code, it became popular among hackers for cryptojacking. The more people visited a site, the more processing power was siphoned off to mine Monero.

Coinhive malware

The platform had seemed like a good idea until the software went on to form the foundation of the notorious cryptojacking malware that ended up affecting millions of user devices, spiking electricity bills, and draining batteries to secretly and illicitly mine cryptocurrency, as Conor Maloneywrites for CCN. Furthermore, as more and more criminals hacked sites and planted the Coinhive file, the issue shot completely out of control. Maloney writes: “Coinhive was listed as the world’s greatest online malware threat by cybersecurity firm Check Point for 15 consecutive months, and an estimated 5% of all Monero was mined through cryptojacking.”

Coinhive announced that it would be shutting down operations on 8th March 2019, and many thought that would be the end of intensive cryptojacking activity. However, Maloney points out that while the cryptojackers can’t turn to Coinhive anymore, they will look for other means of attack.

The Coinhive vacuum is waiting to be filled

Chris Dawson, Threat Intelligence Lead at Proofpoint, a security company, commented that Coinhive was far from the only cryptojacking malware on the market, adding “the fall of Coinhive leaves a power vacuum waiting to be filled,” as he told Maloney. Dawson sees a thrat coming from other forms of malware, such as “banking trojans, credential stealers and pieces of malware which sit on machines.”

Others, such as Jerome Segura of Malwarebytes, believe the criminal industry is slowing down. He told ZDNet the criminal industry is slowing down: “There are still a lot of hacked sites with Coinhive code, but I have a feeling these are mostly remnants from past hacks. Most of what I see these days is CoinIMP [a Coinhive competitor] and it’s been active again with Drupal hacks recently. But overall, I think the trend is nearing out.”

Is Segura too optimistic? Ransomeware like WannaCry and Petya have dealt catastrophic blows, taking down services at hospitals, car factories, government facilities, and airports as well as infecting personal devices to extract a ransom that is usually payable in Bitcoin. And cryptojacking malware still exists — Cryptoloot being one example, the second most lethal after Coinhive. There is also Emotet, a banking Trojan, which can infect a computer as a malicious attachment and be used to spread other forms of malicious software, plus a host of password-collecting bots.

It may be good news that Coinhive has closed down, but we cannot be complacent and believe the threat of cryptojacking has gone away. As long as there is cryptocurrency for the taking, cryptojackers will be evolving their tactics for getting their hands on it, and we need to be more vigilant than ever.