Bitcoin is the most popular cryptocurrency and the oldest. It is a virtual asset free of any central regulations recorded on a ledger-based system or a Blockchain. Bitcoin and other currencies operate on a virtual platform. Experts believe that this innovative technology can leave the global economy more resilient, empowered, and open. However, the question that remains pertinent is – How can Bitcoin be misused by bad people?
Various internet exchanges have boomed over recent years to facilitate hassle-free and regulated buying and selling of cryptocurrency. But these platforms can become sites of criminal activity and unauthorized use of currency in the following ways.
1. No central authority – Since central authority does not regulate cryptocurrency, it becomes easier to overthrow the standard procedure of currency trading and investment. Financial institutions and legal bodies cannot mediate in bitcoin evolution transactions and oversee their flow. As a result, the advent of bitcoin can bring about changes in monetary investments and tradings that are harmful.
2. Illegal transactions – Bitcoin transactions enable people to participate in money laundering and tax evasions. Bitcoin flows in untraceable paths. No legal body can oversee bitcoin transactions. Due to this reason, several malpractices and illegal activities can find monetary support and regulate money through bitcoin. Drug trafficking, prostitution, human trafficking, fake money, terrorism, and many other
3. Unlawful activities – Bitcoin’s no paper-based mode can imply that anyone who fails to purchase a contraband substance can easily use cryptocurrency to buy them. The most famous instance of this was the Silk Road case beginning in 2011 as an underground digital platform selling illegal substances like marijuana and LSD.
4. Hacking – With bitcoin’s success, it has unknowingly attracted a series of hacks that jeopardize the information and security of traders. They threaten to release sensitive information of that particular company or group in the public domain unless a ransom amount is paid. A program called CryptoLocker encrypts the hard drive of the target computer. It then displays a timer and demands a ransom amount to be paid in bitcoin to decrypt the drive. In November 2013, the Massachusetts police department had reportedly paid a two bitcoin ransom that was worth $1300 at that time.
5. Selfish mining – Selfish mining poses a threat to development and innovation in creating virtual assets. Miners sometimes withhold a newly discovered block and do not broadcast it to other potential miners leaving them behind in the race.
6. Theft of wallets – Since offline wallets are non-custodial and can attract hackers to introduce malware, theft of wallets is common. Bitcoin wallets are prone to online attacks and spyware.
7. Illegal mining – Several phishing websites are in operation that is involved in the illegal collection of bitcoin wallet keys worth millions of dollars. In January 2018, a website had reportedly stolen MIOTA tokens and collected wallet keys worth $4 million.
Therefore, Bitcoin proves to be a double-edged sword. It fails to keep spotless record sanctions, though it promises low transaction rates as compared to fiat currencies.