For the general public, Bitcoin’s reputation has taken a pretty severe beating over the last year. The latest scandal to hit is news out of Hong Kong that the purported Bitcoin mining operation MyCoin has gone belly up with all its investors’ money. The take was an astonishing 386 million dollars.
The signs were all there, of course. The site purportedly was promising to double investors’ money every four months. We saw these kinds of promises with Maddoff, we saw them with BTC-ARBs, and we’ve seen them, frankly, over and over again. The story is always the same; and this story is always a promise that seems almost too good to be true.
It would be easy to say that the fact that these scams still work speaks to the unsophistication of the scammers, but the fact of the matter is that people don’t invest on information, they invest on greed. Some of the people who invested with Maddoff were seasoned financial professionals, but when presented with year-in, year-out rising numbers, they couldn’t help but want to get in on the good deal. With BTC-ARBs, a much smaller Ponzi that I watched rise and fall in the spring of last year, I followed the chatter on the message boards closely: The people investing and chatting all knew that the thing was a scam and all seemed to think that they would be able to pull their money out, with a profit, before the scammers folded and fled. The scammers folded more quickly than most on the boards anticipated and most lost their shirts. It’s hard to feel sorry for them, though, since they were planning on profiting off a scam by just being quicker than the scammers – but they were still in the ethically compromised position of profiting off the loss unsuspecting shmucks who they thought couldn’t spot the scam as well as they could.
With or without Bitcoin, we need to recognize that the world is becoming a more technologically connected place, and that security needs to develop to keep up. It is true that BitStamp, one of the currently premiere Bitcoin exchanges had their hot wallet hacked to the tune of five million. It’s also true that Anthem Blue Cross was hacked recently and may have lost the personal information for as many as 80 million people. Ars Technica is reporting that phishing emails have already begun to be sent to many of those people. Most of those people will ignore or delete the emails, but with a pool of 80 million, only a small percentage of hits will likely to make this a big payday for the hackers.
As Bitcoin takes hits again and again for its supposed lack of security and for the many and massive hacks and scams run in and on the community, it’s important to remember that security is not a Bitcoin problem, but a 21st century problem. The Internet has developed quickly, and its systems were never really designed to provide the kind of security the billions of people using it now require. Security needs to be strong enough that people can feel comfortable working, shopping, and living in a virtual world. No security will be fool-proof or perfect, but it can be made to be good enough so that normal people can live their lives without undue fear that they are going to lose everything to some shadowy individual a world away.
In Bitcoin’s short history, we have seen some pretty spectacular failures. These were, unfortunately, part of the natural growth and development of the technology. Without those failures, Bitcoin would have not continued to change, to develop, and to become even better. In the case of all the hacks that Bitcoin has experienced, those working the problem will one day, and probably not too far off in the future, make it possible to hold and transact bitcoins without having to worry about how they’re secured outside of a simple safety precautions anyone can do. And for cases like MyCoin, well, when businesses become open-source and transparent, then maybe these Ponzi schemes won’t be able to survive either.
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Over the weekend, I listened to the latest StarTalk Radio with Neil Degrasse Tyson and Bill Nye. One of the questions during the show was if the failures of the Antares rocket and the Virgin Galactic ship might make people want to give up their quest for space. Nye responded:
A few hundred [rocket launches] is not that many. Look at how many flights take off and land every day. I was charmed by the many, many news stories after the failure of the Antares rocket, and then after the Virgin Galactic crash: Does this mean the end of space exploration? Are you kidding? Those people are going to redouble their efforts. They’re going to go back at it harder than ever. They’re going to work as hard as they possibly can to solve these problems because they see great promise. … When something goes wrong, you just try even harder.