Radio show notes - week beginning 12th November 2018

Source: Wikipedia

The Bitcoin edition

Given the level of interest, the constant flow of questions and people seeking advice, we were asked to comment once more on the issue that still obsesses so many people:

Bitcoin

What is it? Is it safe? Is it genuine? Is it a good investment?

The "sextortion" scam

Let's start with an issue that came to us the day before we spoke about Bitcoin on DumaFM.

A consumer received the following email:

"I know [removed] is one of your passwords. I installed malware on a pornography web site and you visited this web site. While you were watching video clips, your browser started working as a Remote control Desktop that has a keylogger which gave me access to your display screen as well as cam. Right after that, my software collected your entire contacts. Next I created a double-screen video. 1st part displays the video you were viewing, and 2nd part displays the recording of your web cam.
You do have 2 solutions. 1st alternative is to ignore this message. in that case, I will send out your very own tape to all of your personal contacts and then consider the embarrassment that you receive. or should you be in a loving relationship, how it would affect? Next solution would be to pay me $7000. And I will quickly eliminate your video footage. You will carry on with your daily routine like this never happened and you will not hear back again from me. You'll make the payment by Bitcoin in 2 days."

The consumer asked "Is this real?"

The answer is no, it's not a genuine threat. Although the technology to do all these things exists, that doesn't mean they've been used on this occasion. The clues are simple. If they've hacked your computer, surely they'd know your name? Surely they could be a bit more specific? Surely a real hacker would include a screenshot of you being naughty to prove their claim?

This is just a case of what they call "sextortion". If you receive this email, and we've received it several times, just delete it and don't panic.

But the interesting issue is that these scammers wanted payment using Bitcoin. Why would they want that?

It's a cryptocurrency

Bitcoin is perhaps the best know example of a cryptocurrency, defined by Wikipedia as:

"a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets"

Bitcoin and the other cryptocurrencies are media of exchange, just like any other currency such as the Pula, Rand, US dollar or Euro except that they're not physical, You can't hold Bitcoin notes or coins because there aren't any. Bitcoin is virtual, it's "out there", not in one place.

The blockchain

Perhaps more interesting that Bitcoin is the technology that underpins it, the blockchain and the distributed ledger. Instead of records of transaction being held in a single, central ledger like your bank might have, the ledger for Blockchain is everywhere. That means several things. It's great if you want to keep your transactions secret but it also means that cryptocurrencies like Bitcoin are entirely unregulated. In December  2013 the European Banking Authority warned consumers that:

"No specific regulatory protections exist that would cover you for losses if a platform that exchanges or holds your virtual currencies fails or goes out of business."

If Bitcoin collapses or someone steals your Bitcoins, you're screwed. Nobody will listen to your complaint, you're on your own. And that has happened several times.

An investment?

Is it a good investment? No, Bitcoin is not an investment, it's certainly not a good one.

This graph shows the value of one Bitcoin over the last 18 months. Does this look like a good investment to you? Or does it look like an economic bubble that burst?

Source: Coindesk

Why would you "invest" in something that chaotic?

Andrew Bailey, Chief Executive of the UK's Financial Conduct Authority, told the BBC that:

"If you want to invest in Bitcoin, be prepared to lose all your money."

The future?

More recently, the economist Nouriel Roubini said this about blockchain technologies: 

"No serious institution would ever allow its transactions to be verified by an anonymous cartel operating from the world’s authoritarian kleptocracies" … “a small group of companies – mostly located in Russia, Georgia, and China – control between two-thirds and three-quarters of all crypto-mining activity”

So...

Bitcoin and the other cryptocurrencies are fascinating. The technology may well offer us amazing new opportunities to do many things but for now? Be careful.