For the first time in a while, I find myself somewhat unprepared for Monday. As such, I want to review some of the thoughts I’ve had lately on technology, Vietnam, and the law.
Crypto Thefts and Implications
This weekend the web was a buzz with news of the theft of nearly 200 million dollars in Bitcoin. I was also informed by an article on the topic that served to explain some areas of the technology that I had yet to fully comprehend and that acted to lead my thoughts in a new direction regarding cryptocurrency.
E-wallet Thefts
From the very beginning, blockchain was designed in such a way as to decentralize banking, but in so doing it also created a very large loophole in its programing, the wallet in which the cryptocurrency registration code was stored.
Now blockchain, and Bitcoin, first hit the scene as an answer to centralized banking. What would happen if we could create a secure, decentralized ledger that would allow everyone to check the legitimacy of every transaction while at the same time preventing anyone from identifying anyone else in the ledger.
And then some guy with a Japanese sounding name (or maybe it was many guys and a few ladies as well) released the bitcoin cryptocurrency utilizing blockchain. In the beginning users had a few options for securing their transactions by using a unique code that would identify them to the blockchain and allow them to transfer money or take other actions beyond simply keeping accrued funds in one place on the ledger.
The choices were simple, you use an e-wallet, you secure the code for your transaction on your own ledger/computer/whatever, or you print out the code and secure it in your own safe along with your gold jewelry bearer bonds and whatever else you find most precious.
After some major losses to private holders, the idea of keeping the code to access transactions fell out of favor and was largely replaced by what have since been named e-wallets. These involved a digital venue for securing your blockchain identification. These also have become the largest weak link of the entire blockchain experiment.
A few months ago Axie Infinity last over 600 million USD. Now Solana has reported approximately 200 million USD stolen from e-wallets. Almost every big theft in the last year or two has involved weaknesses in the e-wallets, not the blockchain.
And that is, ultimately, the weakness. Well, one of the weaknesses, of distributed ledger technology. Similarly to NFTs, there is no body in existence to certify the reliability of an e-wallet. Blockchain may present itself trustworthy of users, but absent policy regarding blockchain and the role of e-wallet providers as potentially credit or finance organizations, there is no one but themselves conducting significant self-aggrandizement.
I do not possess enough knowledge to provide a review of a company like BlockChain, but there is a huge information bias between the user and the provider. And who can certify companies as capable of trustworthiness in a global market that is not confined to American users but is an international organization. Yet once more, we come up against the need for international forms of regulations and the creation of new, digital inspectors.
Blockchain’s Potential versus It’s Negative Implications
When I read through the above LinkedIn article, I had a sudden clarity of one part of the concept I haven’t had a grasp of to date. And this, unfortunately, is a major element of the Blockchain. It is the very central idea behind blockchain. With each block in the chain able to bear its own information or smart contracts and each block can be doubly compressed into chains, there is huge potential for usage in myriad industries.
Previously, I thought that blockchain was rather silly, a waste of time and money, a gimmick to get fools to buy into a ponzi scheme. (My opinion on cryptocurrency remains largely unchanged). What has changed is my respect for the Blockchain technology. That is capable of such massive amounts of compression of data is huge.
What is silly is proof of work–other process of each miner to compile and compress the information that will be added as a new block in the chain. While it allows for the decentralization and massive scale of global currencies, it is intended use is frivolous and fictitious. But that requirement is avoided by is a silly way to waste lots of energy in decoding information that can more efficiently be stored and updated on a limited number of server. Proof of stake, on the other hand, allows for a centralized system to assign access to the compressed chain and have the ability to add additional blocks that will act as permanent pieces of the chain. And with that in mind, there is a great deal of good that blockchain can do beyond cryptocurrencies.
