APRIL FOOLS! NEW VISTAS IN REHYPOTHECATION, AND OTHER CRYPTO-CURRENCY ...
Our friend Catherine Austin Fitts at Solari.com has found an interesting article from the Massachusetts Institute of Technology from 2019, and I just couldn't resist blogging about it today, April Fools' Day, because if you were one of those who believed the initial hype about the security and "unhackability" of blockchains - the technology behind so-called crypto-currencies - and how they were going to sweep aside all that central banking fraud, think again. This is my way of saying "we told you so," because as we shall discover, not only are blockchains "hackable" but it is the very security of blockchain technology that attracts thieves:
So let's dive in:
Early last month, the security team at Coinbase noticed something strange going on in Ethereum Classic, one of the cryptocurrencies people can buy and sell using Coinbase’s popular exchange platform. Its blockchain, the history of all its transactions, was under attack.
An attacker had somehow gained control of more than half of the network’s computing power and was using it to rewrite the transaction history. That made it possible to spend the same cryptocurrency more than once—known as “double spends.” The attacker was spotted pulling this off to the tune of $1.1 million. Coinbase claims that no currency was actually stolen from any of its accounts. But a second popular exchange, Gate.io, has admitted it wasn’t so lucky, losing around $200,000 to the attacker (who, strangely, returned half of it days later).
In total, hackers have stolen nearly $2 billion worth of cryptocurrency since the beginning of 2017, mostly from exchanges, and that’s just what has been revealed publicly. These are not just opportunistic lone attackers, either. Sophisticated cybercrime organizations are now doing it too: analytics firm Chainalysis recently said that just two groups, both of which are apparently still active, may have stolen a combined $1 billion from exchanges.
We shouldn’t be surprised. Blockchains are particularly attractive to thieves because fraudulent transactions can’t be reversed as they often can be in the traditional financial system. Besides that, we’ve long known that just as blockchains have unique security features, they have unique vulnerabilities. Marketing slogans and headlines that called the technology “unhackable” were dead wrong. (Boldface emphasis added)
Stop and consider what has thus far been said - and we're only just beginning: (1) one can gain control of a crypto-currency network, and once one does, one can rewrite the transaction history. Let that sink in for a moment, because both Catherine Fitts and I have been constantly warning that a central bank digital currency will be nothing but a corporate coupon whose value is determined by your social credit score. But now add to this the ability to rewrite a transaction history, and whole transactions could be rewritten after the fact. Say your local central bankster wants to punish you, not only by taking value away from your crypto and making you pay more for your upcoming transactions (because you've been a bad little boy or girl), but wants to reach in and modify previous transactions by insisting that completed transactions are still owed money, or cancelling the transaction altogether: "Woops, we're sorry you thought you paid off your mortgage with Sh*tcoin, but our records show no payments on your mortage for a year and we're here to repossess your house."
Nor would the fraud and malfeasance be limited to that sort of thing. I've long been arguing that an entirely hidden system of finance was created after World War Two, not just a "black budget", but an entire black system, reliant upon recovered gold and other bullions, kept off the books, and used as a secret reserve within certain participating banks, which banks promptly began to rehypothecate that secret reserve via a whole system of various frauds: bearer bonds, certificates of deposit, and so on. Now add the ability to rehypothecate reserves based upon an ability to "rewrite transaction history" and you get the idea.
Then you have (2) the growth of "sophisticated cybercrime organizations." In the atmosphere outlined above, there is little to distinguish the activity of a central bank-digital currency system, and that of the so-called "criminals," save perhaps the ability of central banks to command more computing power to hack a crypto-currency network in order to "rewrite the transaction history." Would they do it? Well, they've been manipulating various markets - LIBOR, gold, you name it - for some time, so the answer is: "Of course they would," particularly if it made them richer. In fact, with that ability, who's to say that they themselves weren't involved in some - perhaps the majority - of the theft that has so far occurred?
So how is "rewriting the transaction history" actually done? By creating, essentially, an alternative timeline or "fork":
Susceptibility to 51% attacks is inherent to most cryptocurrencies. That’s because most are based on blockchains that use proof of work as their protocol for verifying transactions. In this process, also known as mining, nodes spend vast amounts of computing power to prove themselves trustworthy enough to add information about new transactions to the database. A miner who somehow gains control of a majority of the network's mining power can defraud other users by sending them payments and then creating an alternative version of the blockchain in which the payments never happened.This new version is called a fork. The attacker, who controls most of the mining power, can make the fork the authoritative version of the chain and proceed to spend the same cryptocurrency again.
For popular blockchains, attempting this sort of heist is likely to be extremely expensive. According to the website Crypto51, renting enough mining power to attack Bitcoin would currently cost more than $260,000 per hour. But it gets much cheaper quickly as you move down the list of the more than 1,500 cryptocurrencies out there. Slumping coin prices make it even less expensive, since they cause miners to turn off their machines, leaving networks with less protection.(Underlined & boldface emphasis added)
Note that the bigger the currency, the bigger the player must be to take over the network, but the principal remains the same: the whole system is dependent on electrical and computing power.
The bottom line is, that the only way to retrieve crypto-currency from a history of fake transactions is to create a new timeline and, as the article states, "have everyone on the network agree to use that one instead." But this too presents a cornucopia of opportunities for rehypothecations and frauds of a wholly new order, namely, the obfuscation of transactions by hacking multiple "forks" or timelines all at once or at nearly the same time, a kind of "counterfeiting" that could easily break trust in the system rather quickly. Indeed, I would argue that these deficiencies should give anyone advocating crypto-currencies pause, for the system is already in that state.
The system of crypto-currencies and its advocates - especially the central banksters - are advocating a system whose flaws and faults already doom it to failure.
See you on the flip side...
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