Juha Saarinen: Save the environment and cut crime: drop crypto currencies

OPINION:

As a writer, I try not to let words fail me but it is difficult to find appropriately strong ones to describe the idea to use the power generation capacity freed up once Rio Tinto pulls up stumps at Tiwai Point for crypto currency mining.

With wholesale electricity prices spiking at $220,000 per megaWatt hour this week because of the cold spell, and the Intergovernmental Panel on Climate Change warning that we really need to move away from internal combustion engines for freight and transportation soon, or else, maybe the right words are “offensively stupid”?

Much has been said about how the proof of work that validates transactions for the original crypto currency, Bitcoin, is incredibly energy hungry. The New Zealand Herald has run several stories about that, how terawatt hours of electricity go towards esoteric “currencies” that anyone can create, but which are impractical for most people to use.

Yes, there are less power demanding ways proposed to achieve a simple majority consensus on the networked, peer to peer blockchain database that records transactions. A fairly recent method devised by the creator of the peer-to-peer BitTorrent protocol, Bram Cohen, involves “proof of space”, through the Chia Network.

As the name implies, Chia uses free storage space on networks to create large files called plots for transaction validation. The more storage you have, the better you’ll fare with Chia. If you wondered why hard disk and solid state storage prices have gone up just like graphics cards used for traditional crypto mining, cast a sideways glance at Chia. Whether or not Chia proof of space at internet scale is environmentally an improvement on traditional crypto mining seems doubtful as well.

Nor does it alter the fact that the effort required to verify transactions for the biggest crypto currency, Bitcoin, is resource intensive by design, as a rate limit technique.

What’s more, the proof of work difficulty is adjusted upwards as more competing speculators join a network of hopeful miners, one that does not have a central authority entrusted to run it. More power usage is the result, through even bigger “mining rigs”, that are by themselves hard on the environment to manufacture and transport and which require ancillary cooling because they output large amounts of heat.

The rush to mint some coin through crypto mining has led to some frankly bizarre developments such as unviable coal mines being used to power the rigs, a concept that in the era of lethal climate change boggles the mind.

That’s for legitimate mining, if it can be called that. Digital miscreants who don’t want to buy expensive hardware and be saddled with the power bills for running it are quite happy to take advantage of vulnerabilities in computer equipment for “cryptojacking”.

This involves breaking into IT gear, sometimes the firewalls that are supposed to protect the computer networks behind them, and even smartphones, to plant crypto mining malware.

Cryptojacking malware is increasingly popular, unfortunately. That brings us to Crime and Impracticality which undoubtedly would’ve been the title of Dostoyevsky’s hit self-published eBook, if he had been around today.

Apart from user-unfriendliness like Bitcoin being divisible into 1/100,000,000 Satoshi subunits, instead of for example cents which are a hundredth of the main currency, and losing all your funds if you forget the password to your digital wallet, there’s the mad exchange rate swings making crypto earnings and day to day spending a rollercoaster game.

One day, your salary might be worth 30 per cent more, or 30 per cent less, depending on some random event on the internet or in the real world that’s spooked Bitcoin holders into selling off their funds. Our tax authority has actually considered the implications of being paid in wildly fluctuating cryptocurrency, but while the IRD might want a slice of the increased capital value, it’s not clear if working stiffs could claim losses.

For ransomware criminals, being able to send files with a perceived value quickly and efficiently over the Internet is a great feature. That’s why they demand ransoms in cryptocurrency. Cashing out their ill-gotten gains is harder though. The blockchain is a write-only database that can’t be tampered with and provides a trail to follow for cybercops.

Trying to withdraw illicit crypto could reveal the identity of the ransomware raiders, opening them up for arrests or drone strikes, depending on the United States’ mood of the day. That’s why there’s a cottage industry of obfuscating networks that break up cryptocurrency ransoms into multiple small transactions that are sent to a large number of destinations, for a fee of course. If not detected and confiscated, eventually the cryptocurrency lands at an exchange, from where it can be swapped for money you can buy things with. That is of course if the exchange itself hasn’t been hacked, or its owners nicked the crypto it held, which seem common enough occurrences.

There’s much more dodginess than the above to cryptocurrency. Adding it all up suggests that making virtual currency illegal could be an easy way for our parliamentarians to earn stars for being tough on crime while saving the planet. Just saying.

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