IT’S OFFICIAL: NSA TRACKING BITCOIN TRANSACTIONS

On of the things that has always concerned me about crypto-currencies and the almost religious faith that some have placed in them as a tool to "outflank" central banks and to ensure privacy in transactions, is that no cyber-system has, ultimately, any integrity. Inevitably, humans figure out a way through or around almost any system. The perfectly secure, invincible system - the impenetrable battleship, the "unrobbable " vault, the secure communications line, doesn't exist.

More recently, I've blogged about some groups - very nefarious groups - using cryptocurrencies speculation to finance their "activities." The relative anonymity of crypto-currencies makes this a surefire bet that they would be used for such purposes. This is not to speak against crypt0-currencies per se. After all, hard cash has been used by such groups for centuries for similar purposes, as its relative anonymity makes it easy for them do utilize it for such purposes.

But now there's a whooper doozie of a story which has emerged and which, if true, contains some sweeping implications. Here's the article from Zero Hedge shared by Mr. R.B.:

NSA Has Been Tracking Bitcoin Users Since 2013, New Snowden Documents Reveal

Here I want to cite several paragraphs, as they are germane to today's high octane speculation:

n a blockbuster report published Tuesday in the Intercept, reporter Sam Biddle cited several documents included in the massive cache of stolen NSA documents that showed that the agency has been tracking bitcoin users since 2013, and has potentially been funneling some of this information to other federal agencies. Or, as Biddle puts it, maybe the conspiracy theorists were right.

It turns out the conspiracy theorists were onto something. Classified documents provided by whistleblower Edward Snowden show that the National Security Agency indeed worked urgently to target Bitcoin users around the world - and wielded at least one mysterious source of information to "help track down senders and receivers of Bitcoins," according to a top-secret passage in an internal NSA report dating to March 2013. The data source appears to have leveraged the NSA’s ability to harvest and analyze raw, global internet traffic while also exploiting an unnamed software program that purported to offer anonymity to users, according to other documents.

...

The documents indicate that "tracking down" Bitcoin users went well beyond closely examining Bitcoin’s public transaction ledger, known as the Blockchain, where users are typically referred to through anonymous identifiers; the tracking may also have involved gathering intimate details of these users’ computers.

The NSA collected some Bitcoin users’ password information, internet activity, and a type of unique device identification number known as a MAC address, a March 29, 2013 NSA memo suggested. In the same document, analysts also discussed tracking internet users’ internet addresses, network ports, and timestamps to identify "BITCOIN Targets."

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The NSA’s budding Bitcoin spy operation looks to have been enabled by its unparalleled ability to siphon traffic from the physical cable connections that form the internet and ferry its traffic around the planet. As of 2013, the NSA’s Bitcoin tracking was achieved through program code-named OAKSTAR, a collection of covert corporate partnerships enabling the agency to monitor communications, including by harvesting internet data as it traveled along fiber optic cables that undergird the internet.

...

Civil libertarians and security researchers have long been concerned that otherwise inadmissible intelligence from the agency is used to build cases against Americans though a process known as “parallel construction”: building a criminal case using admissible evidence obtained by first consulting other evidence, which is kept secret, out of courtrooms and the public eye. An earlier investigation by The Intercept, drawing on court records and documents from Snowden, found evidence the NSA’s most controversial forms of surveillance, which involve warrantless bulk monitoring of emails and fiber optic cables, may have been used in court via parallel construction. (Emphases in the original)

So herewith my high octane speculation. And it comes in two broad threads, or streams. The first is, that the extent of surveillance of Bitcoin appears to be quite sweeping and extensive. And while the focus of these revelations is on Bitcoin itself, by parity of reasoning one may rationally assume that other crypto-currencies are probably subject to the same type and extent of surveillance. In the rising tensions between the West and Russia, it would seem to hold especially for the Russian crypto-currency, Etherium. The focus of all of this is on the alleged privacy of crypto-currencies, which, given the revelations, are not private from the capabilities of the signals intelligence agencies:

Emin Gun Sirer, associate professor and co-director of the Initiative for Cryptocurrencies and Contracts at Cornell University, told The Intercept that financial privacy “is something that matters incredibly” to the Bitcoin community, and expects that “people who are privacy conscious will switch to privacy-oriented coins” after learning of the NSA’s work here. Despite Bitcoin’s reputation for privacy, Sirer added, “when the adversary model involves the NSA, the pseudonymity disappears. … You should really lower your expectations of privacy on this network.”

Green, who co-founded and currently advises a privacy-focused Bitcoin competitor named Zcash, echoed those sentiments, saying that the NSA’s techniques make privacy features in any digital currencies like Ethereum or Ripple “totally worthless” for those targeted.(Emphases in the original)

What concerns me here is that these revelations ought at the minimum to change the narrative that emerged along with crypto-currencies, the narrative that this (at last) was a technological end-run around the power of central banks and a restoration of privacy. If anything, the implication would seem to be that a meme was created to stampede some people into the use of cyrpto-currencies precisely to eliminate cash, and the last vestiges of financial privacy.

But my high octane speculations have a second stream, and this stream is much more speculative than the first. The article hints at broad and deep capabilities of signals intelligence to monitor and track such transactions as may interest them, and, through a process of "parallel construction," construct cases against those they are monitoring. The role being envisioned for such agencies in the revelations is thus a passive one. But given the capabilities revealed, I strongly suspect that the capability exists to capture or reconstruct the passwords that enable the whole blockchain "ledger in the cloud," and thus, I strongly suspect that an active capability exists to concoct evidence against individuals for whatever reason through the creation of entirely fake, and criminal, transactions. Extending this principle, one has a perfect new vehicle for theft - literally laundering money by stealing it from money launderers - and for the manipulation of crypto-currencies themselves.

In other words, what this article suggests to me is that the relationship between the rise of crypto-currencies as systems of finance and the intelligence agencies was there ab initio, and that the relationship is direct and immediate.

I remain skeptical, and that skepticism has increased.

See you on the flip side...