Over the past few months, a new worrisome trend has emerged in the Bitcoin ecosystem: ransomware. While ransomware itself is nothing new in the world of technology, most creators are only willing to let users decrypt their files after paying a ransom in Bitcoin. Not the most convenient method, as obtaining Bitcoin can be a painstaking process due to verification procedures. In the end, Bitcoin’s public image has taken a few serious blows because of this evolution in ransomware.
Confusing Bitcoin’s Pseudonymity with Anonymity
Anyone with a clear understanding of how Bitcoin transactions are recorded on a public ledger – called the blockchain – will know that virtual currency payments are a far cry from anonymous. Granted, there is no personal information attached to a Bitcoin wallet address, but that makes the user pseudonymous and not anonymous.
Everyday consumers still see Bitcoin as an anonymous payment method, making it a perfect candidate for illegal activities, including ransomware. Although, sending Bitcoin to a specific address discloses nothing about the recipient’s personal information, that same amount can be traced everywhere it goes. Doing so might eventually lead to a moment in time where these coins are converted to fiat currency and voila, loss of anonymity.
That being said, Bitcoin’s pseudonymity is still making it an attractive payment method for people who think they can hide their personal information. Until funds are being moved around, there is no point in trying to figure out who the wallet belongs to. Even the best blockchain analytical company won’t be able to give much insight into that person’s identity.
Ransomware + Bitcoin = A Worrying Combination
However, Ransomware is putting a whole new spin on the “pseudonymity vs. anonymity” debate. Every infected user will be asked to send a Bitcoin payment to a randomly generated address; otherwise they will not be able to access their computer files ever again. Quite a few ransomware stories have been covered on this website in recent months.
To make matters even worse, there is no quick and easy fix to get rid of ransomware once it has infected a machine. Unlocking the files is all but impossible and formatting the computer means affected data will be lost forever unless there is a backup. Most infected users simply decide to pay the required amount in Bitcoin, even though doing so is not a guaranteed way of restoring access to computer files.
While security experts continue the battle against ransomware infections, financial losses for consumers and companies are mounting month over month. Earlier this year, the FBI announced a total of US$18m was “stolen” due to ransomware infections, a number that is based on reports stemming forth from the US and Canada alone;
The most worrying part of these ransomware infections is the fact these tools can also encrypt existing Bitcoin wallets installed on a computer. Should an infected user possess Bitcoins, he or she might not be able to pay the ransom from their own wallet at that time. Needless to say, ransomware is a real threat and not just because most infections can only be resolved by paying in Bitcoin.
Security experts expect the number of ransomware infections to further increase over the next few months. Discovering and pinpointing vulnerabilities in these ransomware code bases is proving to be a very difficult task. Until a permanent solution can be introduced to the public, Bitcoin ransomware attacks will continue relentlessly.
Images courtesy of Shutterstock, Cryptolocker