Chandra Shekhar Chitrala
There’s a popular web series on Netflix called Startup. It’s about three very different individuals – a corporate honcho, a Haitian thug and a brilliant Stanford dropout – who create a new cryptocurrency. When cheated out of their company, they create a new darknet that is more secure than Tor. While it is about the human side of the story, the implications about technology and its potential to affect all of us are worth considering.
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We read about the price of Bitcoin and about the mythical darknet but don’t really concern ourselves as we feel we aren’t affected by them. Unfortunately, this is no longer the case.
Take cryptocurrency – central banks across the world are highly concerned about it as it is beyond their control and its availability and value are dependent completely upon demand and supply – not within national boundaries but across the world.
There are other issues as well – the process of generating or mining cryptocurrency is highly power intensive. As more and more of it is created, the mining process becomes more complex, requiring enormous amounts of computing power which in turn requires enormous amounts of electricity.
By its very nature, the ownership data of cryptocurrency is spread across thousands of computers 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 many of the computers) where the ledger is stored crashes or is hacked, the data still remains safe.
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 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 it facilitates crime, both digital as well as physical, with criminals demanding payment in cryptocurrency to evade law enforcement agencies. An example of this is the rise in ransomware events across the world.
Cryptocurrency’s anonymity is due to its use of the darknet – 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 – it can be used to access websites with a .onion domain, which cannot be accessed by regular browsers.
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. Everytime we use the Tor browser, it generates a unique set of hops or servers spread throughout the world. For example, 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 we access any website, the IP address that the webserver would see and record would be the IP of the server in the US – not our actual IP address. Similarly, even if our internet service provider tracks our browsing it wouldn’t know which websites we visited.
This anonymity, while ensuring individual privacy, comes at a great cost as it is used by criminals. Practically every type of illegal activity is thriving on the darknet – drugs, rape and child pornography, sale of fake identity documents and currency and even murder for hire. All paid for in cryptocurrency.
With it being available easily, cryptocurrency can wreak havoc on ordinary citizens too. With the amount of any cryptocurrency that can be mined being limited, as the limits are approached, there is a rise in its value due to higher cost of mining. This causes the impression that it has value by itself and can be an investment. This tempts people to buy, not to purchase something with it, but in the hope of profiting by selling it when its value increases. Like the housing bubble of the USA, where people bought houses, not to live but to sell at a higher price, it is just a matter of time before this bubble bursts too.
The darknet, despite the anonymity it offers, is highly dangerous for the ordinary user. There are many predators who constantly look out for newbies, and by offering apparently free access to illegal content, infect the users’ computers with a variety of dangerous malware that could lead to identity theft, monetary loss or even legal prosecution.
It needs to be kept in mind that the Tor network is funded by the US government along with other governments like that of Sweden. While the management of the network says it is independent and ensures privacy, what remains to be seen is how strong it can remain if put under pressure.
The writer is an alumnus of XIMB, an IT entrepreneur and a startup mentor.
