Cryptocurrency

[Jolly Blue Giant]

I don't pretend to actually understand the entire ins and outs of crypto and do not have a crypto wallet, but I like to follow what's going on. I refuse to invest in stock in crypto-mining (MARA) or blockchain (RIOT) companies until I see where things are headed with regulations.

The question I have (for any of the cryptocurrency gurus) is:

Last month sophisticated hackers (presumably from Russia) executed a ransomware attack on a major fuel pipeline (Colonial Pipe Line) that negatively effected millions of people in the southeast. Eventually, the company paid the ransom in cryptocurrency to get it up and operating again. I know, old news. However, the part that I struggle with is that the U.S. was able to recover (in unbelievably record time) the ransom which is supposed to be impossible - that is, unless they know far more than they claim. So here's the dilemma: Crypto is popular because there is "no way to trace crypto exchanges or know the individual who owns crypto" thanks to blockchain algorithms that are for all purposes, impossible to break.

The question to any experts on here: "How on earth was the U.S. government able to track the crypto to the hackers to recover the losses if it is impossible to do?" Secondly, the reason Congress and the executive branch is so anxious to regulate cryptocurrency is because they say it's impossible to track and therefore, impossible to tax those who hide their wealth in crypto...but it appears they can track it. So why the need to regulate?

Last, but not least. I understand that it takes banks of mainframe computers to mine crypto, but why does it require more electrical energy to operate than a small city?

[uconnjack8]

I can answer some of your questions. 

First, most crypto is completely traceable.  In fact, that is one of the principles of it's existence.  Through this link you can watch every single Ethereum transaction world wide: https://etherscan.io/
There are some forms of crypto known as "privacy coins" that make it more difficult to see transactions.   Bitcoin and Ethereum are NOT privacy coins and their ledgers can be viewed publicly. 


That being said, all you will see on that link is addresses (long lines of numbers and letters) and not who owns those addresses.

The government was able to recoup that money because of the way the money was being stored. It's amazing that you could be tech savvy enough to hijack a huge corporations systems, but lack such basic crypto commone sense.  So here is what happened:

The hijackers left the money on a US based crypto exchange.  Because that exchange is regulated by US authorities, they were able to freeze the account and take the money back.  Now, had these hijackers spent $75 dollars and purchased a cold storage wallet (there are other ways as well), they would not have been able to access the money that easily. 

It's like they kidnapped a person, got the ransom money and immediately deposited into an FDIC regulated bank.  In this case, there is a public record of what address the money was sent.  Once they FBI (or whoever) realized it was a Binance (I think that's the exchange) address, they were able to contact the company and freeze that address. 

So while these transactions are anonymous, they are not "secret", they are the opposite.  The anonymity goes out the window if you are just logging in from your computer and not taking steps to block tracing (like using a Tor browser for example).  While an average person might not be able to figure out who is making a transaction, a group like the FBI could definitely see your IP address and track where you are logging on from. 

I hope what I wrote makes sense.  I think politicians who want to try and ban crypto are completely wrong.  This form of currency will exist moving forward, it's just a matter of regulation and adaptation. 

BTW, I consider my understanding very rudimentary.  I own some crypto and have used it in some transactions.   I really don't get the full understanding of why mining uses some much electricity. 

[Bob In PA]

Just remember... if the power goes out, your cryptocurrency has NO VALUE.  Bob

[Blue4Life]

Just remember... if the power goes out, you cryptocurrency has NO VALUE.  Bob

If the power goes out, your credit/debit cards have no values either. For that matter, your money in the bank might be hard to access as well, including the ATM machines.

On the other hand, cash under the mattress will work... 

[MightyGiants]

If the power goes out, your credit/debit cards have no values either. For that matter, your money in the bank might be hard to access as well, including the ATM machines.

On the other hand, cash under the mattress will work... 

or beer in the fridge, during times of crisis it can be bartered for goods and services

[Jolly Blue Giant]

I can answer some of your questions. 

First, most crypto is completely traceable.  In fact, that is one of the principles of it's existence.  Through this link you can watch every single Ethereum transaction world wide: https://etherscan.io/
There are some forms of crypto known as "privacy coins" that make it more difficult to see transactions.   Bitcoin and Ethereum are NOT privacy coins and their ledgers can be viewed publicly. 


That being said, all you will see on that link is addresses (long lines of numbers and letters) and not who owns those addresses.

The government was able to recoup that money because of the way the money was being stored. It's amazing that you could be tech savvy enough to hijack a huge corporations systems, but lack such basic crypto commone sense.  So here is what happened:

The hijackers left the money on a US based crypto exchange.  Because that exchange is regulated by US authorities, they were able to freeze the account and take the money back.  Now, had these hijackers spent $75 dollars and purchased a cold storage wallet (there are other ways as well), they would not have been able to access the money that easily. 

It's like they kidnapped a person, got the ransom money and immediately deposited into an FDIC regulated bank.  In this case, there is a public record of what address the money was sent.  Once they FBI (or whoever) realized it was a Binance (I think that's the exchange) address, they were able to contact the company and freeze that address. 

So while these transactions are anonymous, they are not "secret", they are the opposite.  The anonymity goes out the window if you are just logging in from your computer and not taking steps to block tracing (like using a Tor browser for example).  While an average person might not be able to figure out who is making a transaction, a group like the FBI could definitely see your IP address and track where you are logging on from. 

I hope what I wrote makes sense.  I think politicians who want to try and ban crypto are completely wrong.  This form of currency will exist moving forward, it's just a matter of regulation and adaptation. 

BTW, I consider my understanding very rudimentary.  I own some crypto and have used it in some transactions.   I really don't get the full understanding of why mining uses some much electricity.

Thanks for such a well thought out answer. It makes complete sense now. I am with you as to wondering why it takes so much electricity to mine crypto. Some of the mining companies like one of the biggest "Marathon Patent Group, Inc." have literally only 3 employees. Yet there are close to 30 employees running an energy producing system to keep the 3 guys/gals (whatever) up and running. It takes more electricity to run a mining operation than it takes to run a small city. I simply cannot grasp why that it is.

[Bob In PA]

I can answer some of your questions. 

uconn: I had already "liked" your post but was interrupted and forgot to post this...  Your commentary is top-notch and IMO could be one of our top-ten all-time posts on this site.  The analogy is great!!!  Bob