The Dark Side of Technology

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There’s a popular web series that’s playing currently on Netflix called Startup. It’s about three very different individuals – a corporate honcho, a Haitian thug and a brilliant Stanford dropout who are thrown together and create a new cryptocurrency. When they are cheated out of their company, they create a new darknet that is more secure than the one running on Tor.

While the web series is obviously more about the human side of the story, the underlying implications about technology and its potential to affect all of us are worth considering.

As ordinary citizens, we read about the price fluctuations of Bitcoin based upon tweets by Elon Musk and about the mythical darknet that apparently exists and is many times larger than what we can see and access on the Internet.

We read about them but don’t really concern ourselves for we consider them the domain of nerds and geeks and are confident in our belief that we cannot be affected by them.

Unfortunately, this is no longer the case.

Take cryptocurrency for example. Today, we have a situation where central banks across the world are highly concerned about the effect of this form of currency that is beyond their control. While economists would understand how currency is an important tool in the central banks armory for protecting and promoting the economy of the nation, as ordinary citizens, we can understand how the prices of commodities rise when there is too much currency chasing too few goods, and conversely, how the prices of goods and services can fall if people do not have the cash to buy them. When we see that the availability and value of cryptocurrency too is dependent completely upon demand and supply – not within national boundaries but across the world, you can understand why central bankers are a troubled lot.

There are other issues that are of concern as well – the process of generating cryptocurrency is highly power intensive. In order to ensure that the cryptocurrency maintains its value, as more and more of it are created, the process to generate more becomes even more complex, requiring enormous amounts of computing power which in turn requires enormous amounts of electricity.

Secondly, by its very nature, the ownership data of cryptocurrency is not stored on any one computer but spread across millions through what is called blockchain, which essentially stores the ledger in a serverless peer to peer environment. 

The advantage is that even if one or even many of the computers where the ledger is stored crashes or is hacked, the data still remains safe, preventing double spending or stealing of the currency. 

However, the blockchain system is also highly power intensive and in a recent study conducted at Cambridge University, it was found that Bitcoin consumes 121.36 terawatt-hours annually – more than Argentina (121 TWh) and the Netherlands (108.8 TWh). According to Digiconomist, a platform dedicated to exposing the unintended consequences of digital trends, typically from an economic perspective, one Bitcoin transaction requires about 707.6 kilowatt-hours of electrical energy, the amount of energy the average US household consumes in 24 days. 

To put it in an Indian context, the annual per capita consumption of electricity in 2019-20 was 1,208 kilowatt-hours. In other words, the average amount of electricity an Indian would consume in seven months is needed for one one Bitcoin transaction.

This completely virtual existence of cryptocurrency has another facet – forgetting the password to the wallet containing the cryptocurrency can mean that it is lost forever. Even if you can prove that it belongs to you, there is no way anyone can help in retrieving it – as Stefan Thomas, a German-born programmer who lives in San Francisco found out to his dismay, when he lost access to nearly $220 million in Bitcoin.

The core attraction of cryptocurrency lies in its anonymity. But that is also one of the reasons its popularity could encourage crime, both digital as well as physical, where criminals, by demanding payment in cryptocurrency, can evade law enforcement agencies.

This is the reason we are seeing so many ransomware events across the world, and it is a rare event when law enforcement authorities are able to recover a portion of the ransom, as was the case with Colonial Pipes in USA, where the Department of Justice was able to recover 63.7 of the 75 Bitcoin paid as ransom. But then, this was not due to any flaw in the technology, but most likely due to human intelligence that gave them access to the wallet password.

Cryptocurrency’s anonymity is due to its use of the darknet. This is nothing but a private network built upon the traditional Internet. To access it, one uses a web browser called The Onion Ring or Tor for short. 

Tor has two basic features – while normal websites can also be accessed through it, websites with a .onion domain, which cannot be accessed by regular browsers, can also be accessed through it. 

Secondly, when accessing a website, the browser uses a unique Tor network that hides the user’s IP address from the server on which the website resides. The way it does this is ingenious. Everytime the Tor browser starts up, it generates a unique set of hops, or servers spread throughout the world. For example, when you start it, it may first connect with a server in France, then to one in Indonesia, from there to a server in Brazil and then to one in the US. Now, when you access any website, the IP address that the website server would see and record would be the IP of the server in the US – not your actual IP address. Similarly, even if your ISP provides your browsing history to law enforcement authorities, it is practically impossible for them to track which websites you may have visited as the IP recorded by the ISP would be the first server of the Tor network, not the IP of the website that you actually visited.

This anonymity, while admirable in terms of ensuring individual privacy, comes at a great cost. Like everything else that provides an opportunity, it is made full use of by criminal elements. Even a cursory visit to the darknet shows how practically every type of illegal activity is thriving there. From buying and selling drugs, pornography of the most despicable kind that includes exploitation of children, rape and every type of perversion, sale of fake identity documents and currency and even hitmen who can commit murder for hire – it is an open market for anyone across the world.

The mode of reaching out to procure these products and services is through the darknet and the currency of choice is cryptocurrency. Is it any wonder that governments and law enforcement authorities are at their wits end trying to come up with ways to counter this threat.

There is another insidious way in which cryptocurrency can wreak havoc on ordinary citizens. As the amount of any cryptocurrency that can be mined or created is limited, as the limits are approached, there is a rise in its value due to the increase in the cost of mining it. This rise then leads to the impression that instead of just being a currency, it has value by itself and can be treated as a store of value – an investment. And this tempts people buying the cryptocurrency – not to buy something with it, but to hold it in the anticipation of making a profit by selling it when its value increases. 

Like the housing bubble of the USA, where people began buying houses with cheap loans, not to live in them but to make a profit by selling when the prices increased, it is just a matter of time before this bubble collapses too, leading to many many people losing everything that they have invested in cryptocurrency – for after all, like the paper that currency notes are printed on, its value is completely dependant on perception.

Finally, a word of caution. While it may be tempting to explore the darknet, and exploit the anonymity it offers, it would be highly dangerous for the ordinary user. There are plenty of predators who are constantly on the lookout for newbies, and by offering apparently free access to illegal content, infect the users computers with a variety of malware that could lead to a host of consequences that could include loss of identity, monetary loss or even legal prosecution. 

Secondly, it would be wise to remember that the Tor network, for all its proclamations of privacy and independence, is funded by the US government along with other governments like that of Sweden. While the management of the network say they do not collaborate with the government or release the identities of users, it remains to be seen how strong they can remain if put under pressure.

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