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Paying for your crimes with Bitcoin

Posted on 27 Jan 2012 at 10:04

Davey Winder examines the online equivalent of cash-in-hand payments

It’s become increasingly clear over only two years that Bitcoin is now the currency of choice for the discerning cybercriminal. “Bit-what”, do I hear you ask?

I wouldn’t be surprised if Bitcoin has flown in below your radar, because many dismiss it as play money, a variation on World of Warcraft’s Gold theme. However, there’s far more to Bitcoin than gamers’ virtual gold – it’s a complete digital crypto-currency with no real-world regulation to interfere with its value, and no proprietary ties to hold back its spread.

Bitcoins, usually abbreviated to “BTC”, are binary tokens stored in digital wallets, and the important point about them is that they’re totally decentralised, with no equivalent of the Bank of England to determine what they’re worth at any given time.

It's a complete digital crypto-currency with no real-world regulation to interfere with its value, and no proprietary ties to hold back its spread

There can be nothing similar to “quantitative easing”, printing money, in the virtual Bitcoin economy, because there can never be more than 21 million BTCs in circulation. In fact, there are no banks at all, not even virtual ones, since BTCs are bought, sold and exchanged directly between people via a peer-to-peer network.

They’re far more like real-world gold than Warcraft Gold, because they’re finite in quantity, and you have to mine them in the first place. Yes, that’s right – you donate your computing resources to the Bitcoin network via a mining client and are rewarded with cryptographically signed BTC blocks in return, assuming that you donate sufficient CPU power.

This may sound pretty libertarian and cool, a blow struck against the demon bankers – and perhaps it is, until you introduce an inevitable note of caution concerning cybercrime.

Paying for crime

The bad guys quickly realised that they can “mine” BTCs using botnets of malware-infected PCs, and have started creating and distributing malware for that sole purpose.

They’ve also understood that its lack of an audit trail makes Bitcoin the ideal currency for nefarious transactions. Dodgy geezers have traded in hard cash for years, and the bad guys who deal online now use this online equivalent of untraceable cash-in-hand payments.

However, there’s currently a debate going on within the cybercrime research community as to how anonymous Bitcoin really is.

Its anonymity is what attracts money launderers and illicit traders in the first place, and if this turns out to be not quite so anonymous, then the whole edifice is built on unstable ground from the criminals’ viewpoint. The main argument is that there can be no real anonymity when using an open-source project such as this, because it employs a public database of transaction data.

This database, or master registry, of confirmed transactions, is known as the “block chain” and is maintained collectively by all the computers that use the Bitcoin network.

Now I’m not a lawyer, but it would seem to me that obtaining a warrant to analyse this transactional data ought to be dead easy, given the open nature of the block chain.

Financial data investigation tools are pretty advanced these days, and both software pattern matching and expert forensic accounting could be applied to extract the kind of evidence required to identify perpetrators and take them to court.

Bitcoin mixer

This argument certainly has some force, but I’m not sure that it fully grasps the nettle of BTC anonymity, which involves something called a “Bitcoin mixer”.

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User comments

A factual article, but lacking in true context.

This article was decent, in that it contained honest, factual information about Bitcoin and the Bitcoin network. However, I think its journalistic value and integrity is questionable when continuous links between Bitcoin, and the illicit anonymous marketplace, Silk Road, continue to exist and draw media attention.

To the layperson, it might seem as though Bitcoin and Silk Road are parts of one system and issue. Nothing could be further from the truth.

The truth is that Silk Road is an anonymous entity operating on the distributed tor network whose purpose is to facilitate unregulated, anonymous transactions between buyers and sellers worldwide. Characterized by brazen, open sales of illicit products and services (as defined by traditional regulatory values), The Silk Road is a topic and issue all its own.

That such an anonymous service would choose to use Bitcoin as its sole method of paying for transactions can hardly be considered a surprise.

Like the tor network that protects the anonymity of all parties involved in the use of the Silk Road marketplace, Bitcoin is yet another open-source, decentralized, P2P network facilitating unregulated asset transfer, holdings, and conversion. I.E. it's merely a payment tool that has attributes that happen to coincide with the requirements of markets and transactions of a questionable nature.

As the increasingly worthless fiat currencies are the tools of an "old-school" economy that is literally on the brink of collapse, radical technology and decentralized universal currency and commodities are providing the foundation of a new economy that is beyond the corruption and economically destructive policies that have been systematically implemented the around the world.

I'd like to see more articles, blogs, and op-ed pieces that look at emerging digital currency solutions in light of how they can be of benefit now, and potential uses and ideas for their future.

In the hands of a carpenter, a hammer is an efficient and safe tool for driving nails. In the hands of someone less scrupulous, that hammer can be a murder weapon. Similarly, Bitcoins are a tool with the tremendous potential of redefining how the world economy operates. Let's not brand it a "murder weapon" just because it could conceivably used for questionable purposes.

By swalter718 on 27 Jan 2012

What am I missing?

If there's a finite (21 million) Bitcoins in circulation and you can only mine them using CPU resources, then how can you received them, if they're all in circulation? Does somebody else lose their's?

By Steve_Adey on 27 Jan 2012

What am I missing?

If there's a finite (21 million) Bitcoins in circulation and you can only mine them using CPU resources, then how can you received them, if they're all in circulation? Does somebody else lose their's?

By Steve_Adey on 27 Jan 2012


The computers work out complex mathematical problems, the complexity increases, so at the beginning BitCoins were generated quickly, but the process is slowing down, now that so muc coinage is in circulation.

More Bitcoins will be generated, as and when the next iterration of the problem is solved, but this is a hard work problem, so they can't just "print" new currency, it can only come onto the market once it has been mined - like real gold, you go panning for gold, you can't just whack out a few thousand new nuggets on a printing press.

By big_D on 27 Jan 2012

"so they can't just "print" new currency"

No wonder central bankers don't like it.

By Lacrobat on 27 Jan 2012

Mr. Winder seems to assume that because many Silk Road products are illegal, the existence of the site is "a bad thing:"

...honour among online thieves...
...Silk Road and the nefarious trading that takes place there...

Neither Silk Road buyers nor sellers are thieves. Silk Road simply provides a marketplace for mutual, voluntary trade. Scammers are flagged and honest people refuse to deal with them.

No one should be able to prevent me from trading or using drugs, as long as I'm not coercing, robbing or otherwise committing aggression against someone. In fact, it's the government that commits acts of aggresion, by locking us up because we smoke a joint, shooting the family dog during drug raids, and giving guns to violent drug gangs.

Silk Road is agorism in action, folks!

By Plato on 28 Jan 2012


I can't decide whether Plato is genuine in the points being posted, or taking the mick.

If genuine, are they really saying that locking people up for " guns to violent drugs gangs" is a bad thing?

If genuine, whilst I can accept your right to hold such views, at best I find them dangerously naive. And at worst self-deceiving.

Also, discussing anti-drugs policies is a bit outside the remit of an IT magazine site. Whereas the use of IT for currently illegal activities isn't.

By Penfolduk01 on 29 Jan 2012

I see

Thanks big_D for the explanation. Does that mean when quantum computers come a long, there will be another flurry of a few million coins then?

By Steve_Adey on 30 Jan 2012


Very possibly, plus computers in general are getting faster each year.

Some people are using nVidia CUDA and Tesla arrays, for example, running 24/7, trying to earn coin.

By big_D on 1 Feb 2012

Diminishing returns

I'm guessing these people have enough money to blow away on high-end graphics cards and CPUs. That must outweigh the value of the coins.

By Steve_Adey on 1 Feb 2012

BBC pinched your story without giving you credits

Hi Dave,

See "investigative journalism" from BBC

By eezvmt on 3 Feb 2012


I heard that at the weekend on No Agenda.

Talk about scare mongering! The BBC should talk to Dave about how to do proper investigative reporting and journalism!

By big_D on 8 Feb 2012

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Davey Winder

Davey Winder

Davey is a contributing editor to PC Pro, having covered the internet as a topic since the magazine started in 1994. Since that time he's won numerous awards for his journalism, but remains a small-business consultant specialising in privacy, security and usability issues.

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