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Cryptocurrencies, blockchains and the dark side: 4 essential reads

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After an intense ride, it might be at the tipping point.

Bitcoin and other cryptocurrencies exploded in 2017, only to spend most of 2018 losing huge profits. Units of bitcoin, the most popular cryptocurrency It rose from under $900 at the end of 2016 to a high of nearly $20,000 in December 2017, and has since dropped to just under $6,000.

The extreme volatility and huge profit potential are catching the eye of both hackers and regulators. Both of which could be detrimental to the future of cryptocurrencies.

Here are four stories from our archives to help readers understand. cryptocurrencies and their dark weaknesses

What is money in the era of bitcoin?

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Before we talk about cryptocurrencies We should first define what money is.

The answer is more complicated than you might think. According to University of Buffalo professor and philosopher David Koepsell, money has recently shifted so drastically that it has become a “The format that hardly comprehends”

So Koepsell asked, as blocks of zeros and blocks representing cryptocurrencies replace colorful paper and coins. Is the money still there? and if so What is its value?

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“Without government insurance or contractual guarantees Only mutual trust maintains the value and integrity of the system,” he wrote. “What the owner of bitcoin owns is a liability. Like those who own money in the bank, there are liabilities recorded in bits. They do not own the bits containing the information representing that debt. or the data itself They own the social object – money – that those bits represent.”

The bitcoin logo featured at the Consensus 2018 blockchain technology conference.
Reuters/Mike Segar

value of blockchain

What makes bitcoin and other cryptocurrencies work is the underlying transaction system known as the blockchain. Basically It uses a decentralized database to track and store data in a reliable and secure manner.

In addition to protecting money, however, blockchain may solve the problem. “A lot of remarkable things like stabilizing the financial system. Identification of stateless persons Building ownership of real estate and media and efficient supply chain management,” argue Ari Juels and Ittay Eyal, computer science researchers at Cornell.

Blockchain Technical Challenges Remain But Bitcoin is proof that it works, they write.

enable criminals

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One of the pitfalls of cryptocurrencies is that their major strength – anonymity to users – is also its major weakness.

That’s because their privacy drives crime by enabling criminals to evade identification by law enforcement, explains Cornell’s Juels and Eyal story with postdoctoral fellow Iddo Bentov. They believe that the problem will only get worse as cryptocurrencies strengthen. without a simple solution

“Criminal-fighting tools require the empowerment of the authorities,” the authors argue. “Cryptocurrency is an inherently anti-authority technology. How this tension is resolved will determine the future of the global financial system.”

Mining new technology for cryptocurrencies at HydroMiner cryptocurrency farm operation
Reuters / Leonhard Foger

manage bitcoin

A long-standing problem with financial assets is fraud and price manipulation, for example, when traders work together to try to fix the price of a financial instrument.

Cryptocurrencies are thought to be more immune to that kind of behavior. Research by Neil Gandal of Tel Aviv University and Tyler Moore of the University of Tulsa suggests price manipulation in bitcoin and other companies is taking place on a large scale. This helps explain the rapid ups and downs in prices over the past few years.

The Department of Justice recently opened an investigation into whether prices are manipulated in the cryptocurrency market.

“Challenges for auditors and others. To detect current price distortions is that the person’s trading style is not transparent enough. with more regulated assets such as publicly traded stocks and bonds such as the Dow Jones and Nasdaq,” Gandal and Moore wrote. “The important lesson is the market. cryptocurrency It requires increased cooperation between financial regulators and trading platforms.”

“The consequences of not taking this direction. may lead to loss of faith in digital currency,” they concluded.

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