Yves here. This Real News Network segment covers another one of our pet themes, “cryptocurrencies = prosecution futures,” by looking at scams perpetrated against cryptocurrency users.
MARC STEINER: Welcome to The Real News Network. I’m Marc Steiner. Great to have you with us.
Bitcoins, cryptocurrency, are all a mystery to me and to many others. Are they real money? Why should I – why should that be the concern of hackers? One group known as a group called Alpha – a huge group apparently, as one article put it – quoting an organization called Chain Analysis – “is driven by non-monetary goals and means.” But a second, much smaller hacking group that is known as Beta, is focused only on the money. And they are both brazen about it, apparently. Add to that, as reported in this Fortune article recently, Gerald Cotten, who owned Quadriga – hope that I said that right – CX – QuadrigaCX – died in December. The company has $190 million in cryptocurrency stores inside the company and its computers, as the article points out, has roughly 26,000 bitcoin, 11,000 bitcoin cash, 200,000 LikeCoin, over 400,000 Ether, and other cryptos. But they’re not kept in a public computer, so neither his widow, nor anyone else seems to be able to access it, and people fear they could have lost all their investments.
So why should we care? What does this mean? What is this cryptocurrency? Why is it important? And what is the real danger associated with all of these hacking groups that are coming after these companies? Well, to help us sort all this out and all the vagaries of capitalism to go with it is Bill Black, Associate Professor of Economics and Law at the University of [Missouri] Kansas City, joining us today from Minnesota, and author of The Best Way to Rob a Bank Is to Own One. Bill, so, as my grandfather would say in his Yiddish: Nu? What does this mean?
BILL BLACK: And his brother would have responded: Nu? Nu? [laughter] of course. So, what it means is this: These currencies are not ready for prime time. They are not ready to be currencies. They are not actually used as currency. You can’t go and buy things at the store. And they don’t hold their value, necessarily. They can lose enormous amounts of value. And instead of being safe when you put them in the closest equivalent to a bank, they’re actually incredibly exposed to being stolen when you put them into the crypto variant of a bank. And this is so bad, these series of thefts carried out by these hypothetical groups – I want to be clear.
MARC STEINER: Okay.
BILL BLACK: We don’t know that these groups exist, Alpha and Beta, and if they do exist we don’t know what they call themselves.
MARC STEINER: But why is it dangerous if there’s not – if it’s not really money? What does it mean that they’ve hacked into this place and …
BILL BLACK: Right. So it’s just analytically the – you know, forensic clues suggest there might be two groups, one of them, as you said, larger, and one of them relatively smaller, and both of them steal. One of them steals clearly to get rich, and one of them may also steal to destabilize and to move currency, because every time you steal successfully, you know, when the news comes out that the value of cryptocurrencies is going to fall. So if you’ve been betting that the value is going to fall you can make it fall through your theft, as well. That may be one of the things going on.
Now, on top of all those things, you have to actually typically memorize a computer code. Now how many of us forget our computer codes?
MARC STEINER: All the time.
BILL BLACK: All the time. Well, guess what? That’s what happens to crypto crazies. They forget their codes. And then they can’t get their money, because the only way you can get it is a code. So there’s actually arisen a private sector of folks, you know, that are sort of password whisperers. They come and they talk to you, and they try to divine what kind of code you would have created. And then they, you know, spend some months or weeks looking for it. And if they succeed, they get 30 to 50 percent of the proceeds type of thing.
All right. So. You have these nice, responsible, Canadian response to all of this is, well, I’ll be super safe. I won’t put any of the codes online, where they could be stolen by this hypothetical Alpha and Beta type group. I’ll have it all offline, and the – there’ll be only one set of key codes, and only I will know it. And that works great, unless you die.
MARC STEINER: [Laughter] And he died.
BILL BLACK: And he died without telling anybody what the codes were. Even though he had a chronic illness, and had plenty of time to tell people.
MARC STEINER: He didn’t even tell his wife.
BILL BLACK: Including the wife. And you will note that this happened in December, and we’re talking in February. And this is just becoming public. Which is to say, people that had – and here we get flaky again – nearly $200 million. But who knows, because cryptocurrency currency values vary all the time massively. But anyway, lots of it. Those folks are SOL, or they’ve got bupkis, to quote your [inaudible], right? When you get there, there ain’t no there there – type of thing – if you can’t get past the security.
So this is insane, but you can see the two stories are related. He was so worried about the threat of this Alpha and Beta that he took extraordinary security – security so tight that it may have destroyed all the value of the cryptocurrencies. And of course I laugh, but this is sad for the people that have their stuff in this. But they tend to be an interesting subset of folks, you know, very young, male, could never happen to me-type things. So anyway, do not buy Bitcoins or other cryptocurrencies. Don’t let your aunts, your uncles, your grandmother buy it. If you have a moronic friend who decided the way to make a fortune is to sell everything and to buy Bitcoins, get them drunk, I don’t know. Do whatever it takes.
MARC STEINER: So I mean – it would be like a country song. Don’t let your momma buy cryptocurrency. I mean, so – but what I’m saying is, very quickly, explain to me just very succinctly, and for our viewers, what the hell is cryptocurrency, and why do people invest in it?
BILL BLACK: They invested in it for two reasons, and the two are related. And – and it’s all propaganda about this and that. So the first is to get rich, of course. For the same reason people invented cryptocurrency. We don’t know who invented Bitcoins and there – it’s another whole saga – but we know that that person got really rich.
MARC STEINER: How did he get rich, though? How do you get rich from something that doesn’t exist?
BILL BLACK: Because they allocated to themselves a bunch of Bitcoin, right at the beginning. So if people are dumb enough to buy tons of Bitcoin, the value of the the Bitcoins goes up, and they make a fortune.
But of course, there’s no there there, like – Oaklands, the – you know, type of slam – type of thing. So the second thing is it is super – if you talk to folks, and boy have I – you will hear about it. I will hear about it again after this. It’s a combination of libertarian and secrecy. You know, that the government knows everything and tracks everything I do. So I’ll take this, and you know, and I’ll be off the grid. And that’s not true, also, for other reasons – including [inaudible], by the way. But you know, it – it’s some collection of those things, plus, of course, the early folks in any bubble get rich. And then the people that come along say whoa, whoa, what if I had only bought Bitcoin at, you know, day one, even today I’d be a very rich person. But you know, that’s how bubbles work.
MARC STEINER: So is there a danger – really quickly – is there a danger here in the hackers themselves, and what they might be honing in on? Or is this something that is – is this for people who invest in this – in these Bitcoins and cryptocurrency?
BILL BLACK: Yeah, so this is a subset of the population. It’s not going to have any effect on the general economy, but it does show … This is simply one of the amazing dangers of this currency, because it isn’t really a currency from a sovereign government. It is exposed to this unique loss methodology. But the bigger story, I mean, the huge losses, of course, come from the fact that eventually people go, you know, there’s no really ‘there’ there, and then the currency loses 80 percent of its value, and the people that sold everything to, you know, try to become rich without working, then they suffer enormous losses, as well.
MARC STEINER: Well, this has been – I’ve learned a lot in our brief conversation here, Bill Black, and-
BILL BLACK: Always listen to your uncle. Especially if he’s speaking Yiddish.
MARC STEINER: Always listen to your uncle. Don’t buy such a thing.
BILL BLACK: These people – these people are verblandzhet.
MARC STEINER: Right. So, friends, don’t let your friends invest in cryptocurrency. And Bill Black, thank you once again for joining us here on The Real News. It’s always a pleasure to talk with you.
BILL BLACK: Thank you.
MARC STEINER: Enjoy the Arctic weather in Minnesota. And I’m Marc Steiner here for The Real News Network. Thank you all for watching. Take care.