Question

Explain and analyse some policy/privacy/security/ethical concerns that arise in Cryptocurrency. ( write at least 500 words )

Answer 1

Cryptocurrencies become digital financial assets that are built to serve as an exchange medium using cryptography science for securing transactions, establishing global monetary structures, eliminating government regulation and exchange-rate issues and regulating the production of additional currency units.

As a revolutionary financial technology ( fintech), cryptocurrencies were introduced that would enable, quicker and safe global transactions by placing power directly in the hands of the parties concerned. Banks and money transfer systems may also be withdrawn.

Digital currencies claim to stable, super-fast, and unaffected by charges, exchange rates, or public regulations to store, invest and pass digital currency.

However, it is not just for financial institutions, currencies and transacts that cryptocurrency and its underlying technologies are targeted. Securitization of information, identity security, decentralised economy and the protected storage of personal information are some of the initial uses of blockchain technology.

Although there is a range of use of blockchain technology behind cryptocurrencies, blockchain identity cases are what technology enthusiasts and advocates are most appealing to the world.

Applications can now be detected in the areas including digital identification, passport, e-Residence, birth certification, wedding certification and other IDs using blockchain technology.

Security Issues

A blockchain takes advantage of the decentralised existence of its nodes ( i.e. the computers that manage blockchain transactions). Since the leader (transaction record) is public, nobody can make changes secretly. And when a change is made, before it reaches the record, all other nodes on the system must consent to the change.

But all public blockchain are vulnerable to 51 percent attacks because of the architecture of blockchain technology.

A 51% attack happens when a hacker (or group of hackers) creates over 50% of the computational power of a blockchain. This allows the hacker to make double-displacement coins, prevents others to build blocks and prevents transactions. They can also monitor the entire blockchain.

For less miners, the risk is higher as the amount of calculating power required to monitor 51% is smaller. The risk level is higher.

In comparison, certain blockchain architectures, such as IOTA's Tangle, are vulnerable to 34 percent attacks, are in fact less vulnerable. Due to its different decentralisation of its data, someone with only 34% of the hashing power of the network may gain control of the blockchain.

And other security concerns continue to afflict the larger crypt culture apart from the blockchain itself. Exchange security is the most pressing problem. There are many cryptocurrency hacks in a long history, some of which have massive amounts of money for exchange users.

Through using cold stores for your coins, you can minimise the problem of vulnerable exchanges.

Privacy Issues

If a blockchain is public, anyone can watch any transaction that is ever documented on the blockchain.

This does not necessarily mean , of course, that anyone will recognise you. Nevertheless, it is against longstanding principles, particularly in the financial, legal, and healthcare fields, that much information is accessible in the public domain and which usually have strict criteria for privacy.

Legal Issues

There are various legal problems in Blockchain technology, many of which are not yet addressed. The society faces some of the crucial issues:

Jurisdiction: How do we set the right set of rules and laws to apply in a decentralised system where nodes reside across the planet? The methods to titles, possession, contracts and liabilities are somewhat different in different countries.

Decentralized SAOs: Imagine a typical legal structure with involvement by individuals and organisations. They have also similar rights in many cases. How are DAOs affected? They work on intelligent contracts and need almost null user feedback. They are just lines of code — but like conventional businesses, they can do tasks. Who is responsible for dispute resolution? Who should make a claim against or against what?

Leaving a blockchain: Imagine you were in the healthcare field using a blockchain. What happens when you decide not to use the blockchain service and do not have a copy of the information on the repository? The provider must make sure that all details and a full record of all transactions in the blockchain that refer to your name are given by provisions and processes.

Regulatory Issues

Cryptocurrencies now begin to be faced with regulatory pressure. As their capitalization of the markets continues to rise, the interest of governments is growing.

There are many types of regulatory ambiguity and it will have many implications.

For instance, some governments have made cryptocurrencies illegal within their jurisdictions or have threatened to do so. In 110 countries only, bitcoin is fully unregulated and in Algeria, Morocco, Ecuador, Iran, Pakistan and more, it is outright prohibited. Police in Bangladesh allegedly detained owners of Bitcoin.

Ethical Issues

The technology from Blockchain poses a variety of moral questions, with 1) its environmental consequences and 2) its apparent allowances for crime being the two most significant problems.

First and foremost, the environment. In 22 days, a single transaction utilises the resources of a US household. As Azerbaijan, Bitcoin has its carbon footprint.
Bitcoin currently accounts for 0.31% of overall energy consumption worldwide. In a world increasingly aware of the increasingly high use of resources, developers have a far more effective way of checking transactions.

Secondly, on the topic of cybercrime. Looking back on the early days of Bitcoin, one might argue that price spikes in cryptocurrencies were motivated by illegal activity almost exclusively.

Using dark websites, Internet criminals could safely and secretly sell Bitcoin narcotics, guns and other forbidden items — not to mention the obvious advantages untraceably given to money launderers through financial transactions.