Bitcoin non-regulation leaves users vulnerable to theft, fraud
New research points to significant security shortcomings of the popular cryptocurrency
‘Bitcoin provides freedom over one’s assets, but at the same time it no longer provides the security that traditional regulated financial institutions provide’
Cryptocurrency Bitcoin’s blockchain technology is attractive for several reasons – including decentralisation, pseudo-anonymity and its lack of regulation – but new research highlights a downside: users are open to theft and fraud.
Computer scientists at Lancaster University and Universiti Teknologi MARA in Malaysia say that Bitcoin’s design features have shortcomings, some of which are attributable to human error: a lost or forgotten password means waving goodbye to your Bitcoin stash forever, and choosing a weak password leaves your cryptocurrency open to hacking.
Additionally, the irreversible nature of Bitcoin transactions means that once you have transferred funds to another wallet it is impossible to recover in cases of fraud or faulty goods.
“Despite deregulation being a crucial characteristic of blockchain, its users actually desire regulation, mostly because of the challenge of dealing with dishonest traders which, they believe, could be addressed by de-anonymising trading parties,” says Dr Corina Sas, senior lecturer at Lancaster University’s school of computing and communications.
“Bitcoin provides freedom over one’s assets, but at the same time it no longer provides the security that traditional regulated financial institutions provide.”