Cryptocurrency security: someone needs to audit it

Securing new cryptocurrency may soon become just as important as securing people’s identities, cybersecurity expert Tyler Clark-Smith warned.

“The biggest threat to the future of crypto isn’t you and me,” Clark-Smith said during a presentation at the EC CEO roundtable at the Australian Tech Week event in Sydney last night.

“It’s [cryptocurrency] security. When you go to a store and there’s a new version of something you’ve never used before, how does the manager of the store think this product or service is secure?

“We don’t know what a server works like. We’re not sure what the backend is or what our file system does. We don’t know what a client does.”

The only reliable security for bitcoin is taking it private and locking it up in the centre of the business network, Clark-Smith said.

Australia’s banking industry also faces the task of becoming more secure. The Australian Transaction Reports and Analysis Centre (AUSTRAC) is pushing hard for crypto to be added to its watch list because it can be easily stolen using someone’s private key.

The node tool included in the current bitcoin blockchain is ineffective, Clark-Smith said.

“The only way they’re going to be able to [keep track of cryptocurrency] is if they add their bitcoin name to the ‘other names’ list, which will help them trace where that stuff is,” he said.

But the cryptography is so weak that if they used reverse-engineering techniques to pull out bitcoin’s private key, they’d be looking at between $2 million and $100 million worth of new bitcoin immediately, he warned.

Another cryptocurrency, ethereum, will soon be added to AUSTRAC’s watch list, and Clark-Smith predicts that list will eventually include every cryptocurrency on the market.

But there are two main reasons ethereum is set to become the most popular cryptocurrency of the next year.

The first is ETC, the smart-contract technology that ETC uses to make its transactions valid, said Clark-Smith.

With this, online buyers can make payments to ETC sellers via ethereum, rather than with traditional cryptocurrency exchange services like Coinbase.

So far, 10% of all transactions and 50% of them are in ETC, Clark-Smith said.

The second is called block network development, he said.

“The block-network technology keeps [the number of blocks on ETC] growing very rapidly,” Clark-Smith said.

“There’s 1 million blocks created [on the ETC blockchain] at the moment and if they keep growing that way, it will triple the block network size every 24 hours in about a year and half,” he said.

No bitumen can support that many blocks, so everyone who wants to make ETC-enabled transactions is having to make changes to the chain, he said.

It’s generally a good thing, Clark-Smith said, because the idea of giving bitcoin owners a way to send all the ETC bitcoin owners have will ultimately happen.

There are already some major pros and cons to creating a Bitcoin-like economy, he said.

“There are Bitcoin citizens, there are Bitcoin users, there are ETC users.

“People will fight to control what [ethereum] becomes,” he said.

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