Mea Vita: Carpe Diem

Cryptocurrencies

Cryptocurrencies, like Bitcoin, aren’t yet currencies that we use on a daily basis. I've shared my thoughts in 2017 and 2018. While traders and speculators are making money investing in cryptocurrencies, it’s a closed system in that it’s all technical trading with little insight into the fundamentals that move its price. This is especially true when compared to other commodities and futures. And, a big issue with cryptocurrencies is it’s a bit too much like cash. You still need a place to store cryptocurrencies other than your hard drive (i.e. this is why we don’t store cash under our bed mattress). So, you need a “bank,” known as a wallet, to store your cryptocurrency on someone else’s computer/server. 

Blockchain

Blockchain is a computer science data structure and protocol, similar to other data structures and protocols like stacks, queues, linked lists, binary trees, hash tables, etc. However, blockchain is different in that it’s become an overhyped fad. Outside of software engineering, people don’t run around touting hash tables vs binary trees. Why is blockchain so hyped up? Because it goes hand in hand with cryptocurrencies. And while it has technical utility, both proven and projected, it’s not a business benefit, rather it’s a feature.

NFTs

Non-fungible Tokens (NFTs) are something that I’m not yet a big fan of, as I mentioned last month. As more assets move into the digital realm of cyberspace, NFTs could become the deed of authenticity and ownership.

Quantum Computers

Quantum Computing, as I've written about, is still in its infancy without a practical use that touches consumers. Currently, quantum computers are used to design quantum logic circuits, similar to analog and digital computers of the 1940s and 1950s (and, nand, or, xor, etc). The next step in quantum computing’s future will be programs followed by applications in order for it to touch our lives on a daily basis.

Summary

While in my hot tub, this afternoon, I had a minor Bitcoin epiphany: Since Bitcoin is based on supply and demand, the supply, once it's reached its pinnacle, will continue to decrease in perpetuity meaning its value will continue to increase, somewhat similar to gold but greatly accelerated. We may have reached, or are very close to, the zenith of Bitcoin in circulation because it's probably vanishing faster than it's being created.

Background

I am not a fan of Bitcoin; not so much because of the technology, but because of how it's presented. The Bitcoin movement started as a fad with engineers, not economist or entrepreneurs. If you ask a technically-minded Bitcoin aficionado to described the benefits of Bitcoin, they won't tell you. Instead, they'll spout a list of features such as:

• Laissez-faire: It's a currency that's not controlled by any country or central bank. Keep in mind that organized crime is also laissez-faire and Bitcoin has found a nice home there.
• Anonymity: Transactions can be carried out without revealing the transacting parties. The same is true for cash and cash transactions typically have zero fees.

The truth of the matter is that Bitcoin comes with most of the same downsides as cash or gold. We don't keep cash under our mattresses because it's too dangerous. Bitcoin's personal security solution is the wallet, kept with a third party, which stores a Bitcoin transaction's credentials. So, now the Bitcoin community has effectively created banks without FDIC insurance. In other words, Bitcoin banks that are easily robbed without recourse or recovery.

Some people refer to Bitcoin as a currency and other's consider it an investment. The IRS considers Bitcoin to be property (like gold) which has helped it flourish since it's unconstitutional for any person, company, or state to print or coin money.

As an investment... and this is my key heartache with Bitcoin aficionados... there's no deep fundamental insight into Bitcoin. Rather, all speculation in the Bitcoin market is predominantly based on technical analysis (trading trends). This seems more like gambling at a blackjack table than crossing the British pound with Japanese yen, etc. Yes, people make money investing in Bitcoin, but so do lottery winners.

Conclusion

We've reached a point were it seems that Bitcoin is disappearing faster than it's being created and this trend will likely continue. The anonymous creator of Bitcoin, Nakamoto, has disappeared leaving an estimated one million Bitcoins in virtual limbo. Nakamoto Bitcoin accounts represent billions of dollars that haven't been touched since their creation. That is the equivalent of burning cash, never to be recovered.

So, if you own a Bitcoin, hold on to it as the supply dwindles.

Blockchain is, at best, ahead of its time. It's not yet practical, much like Boolean algebra and asymmetrical (RSA) encryption when they were introduced.

At present, I think an ideal application of blockchain could be used in reducing spam e-mail.

Every so often I write a blog post that immediately receives many thousands of views. Part 1 of this story fell into that category.

Where I last left off, on Thursday, I was in the shower when I had an epiphany. I had figured out how my Amazon Web Services credentials were compromised. At least I suspected, but I was running late, after my call with Amazon, as I got ready for the Spring Fling tech event. I didn't have time to comb through my public repository account so I deleted my entire GitHub account. I had only used it once, years ago, when I checked in an open source WebObjects project I had developed.

Jodi Mardesich interviewed me for the details and gave my story a great write up at ReadWrite.

Coda update: Amazon has confirmed that they'll grant me a one time exception for my faux pas.

$17,000 AWS bill in the making.

4/15/2014 Update: This story was picked up by ReadWrite.

Part 2 Here

The problem with the Heartbleed bug is you never know when and where you'll get hit. Actually, this is true for all security breaches.

Yesterday, I received an e-mail from Amazon asking me to update my credit card info for one of my personal Amazon Web Services (AWS) accounts. I logged in and saw that my running total for April was over $5,300. My typical monthly bill is less than $6.00 which is about 1,000 times less.

At first I thought it was a mistake. I hadn't fired up any EC2 instances this month and my account had no EC2 instances running in my region. I filled out a billing inquiry request form and selected the "call me now" option. Within a minute my phone rang and I was speaking to an AWS customer service rep.

I explained that I've been an AWS customer since 2007 and I've never seen a billing issue like this.

He said, "We've been seeing more and more of this. Check your spot EC2 instances in other regions and you'll see high end instances running."

Sure enough, he was right. In Tokyo, São Paulo, Sydney, and Singapore I had expensive server instances running.

"Your AWS credentials have been compromised," he said.

How did they get compromised? When did it happen? Was my development machine hacked? It couldn't be my Time Capsule since that's encrypted. Were one of my physical servers hacked? Did I have a backup, sitting on a server, somewhere, that was hacked? Am I about to get stuck with a $5,360 bill?

"'They' spin up spot instances which isn't subject to Billing Alerts. You'll need to cancel those spot instances, revoke your AWS credentials, and change your account password," he said.

"When did this happen?" I asked.

"Let me look," he replied.

My mind was still racing as I tried to figure out the source of the breach.

"These instances were spun up on April 2," he said.

Very smart; launch the attack early in the month so the victim won't know anything's wrong until they get next month's bill.

"Is this related to Heartbleed?" I asked. It had to be.

"No, it's just a case of your AWS credentials getting compromised," he answered.

He walked me through the steps to secure my account.

"Can you see what 'they' were doing with these spot instances?" I asked.

"No, we can't see inside the instances. But, they're usually mining for Bitcoin," he answered.

Ahh, now that makes sense. Spend $5,000 of someone else's money to mine, say, $1,000 of Bitcoin for yourself. Can't follow that money trail.

"I'm going to send you a questionnaire. Please fill it out describing what happened and, due to the large amount involved, I'll need a manager to review it. But you won't have to pay for what you're not responsible for," he said.

I let out a sigh of relief.

I was still dripping with sweat since I'd just returned from a run when I saw the initial e-mail from Amazon. While I was in the shower it hit me. I know how my AWS credentials were compromised. But I'll need to do a little more research first.

4/15/2014 Update: How did this happened? See Part 2 of this story to find out.

Author: Joe Moreno

My Bitcoin address

Bitcoin is quickly becoming a way to generate (mine) and transfer funds over the Internet. Anyone can download the Bitcoin ledger detailing every payment ever made since day one, but who actually sent and received the funds is anonymous. It's literally the equivalent of digital cash. Each dollar bill I spend in the real world may be serialized, but I usually don't know the identity of the person I give it to and they don't know my identity – plus, there's no identifiable audit trail.

With the anonymity of Bitcoin comes problems similar to dealing with cash, such as losing it or money laundering. Entrepreneurs are setting up Bitcoin exchanges so people can convert Bitcoin to traditional currency and vice versa. This is how Bitcoin users get money into and out of the system. The big danger for entrepreneurs who run a Bitcoin exchange is that they may end up getting arrested if they do business with a known money launderer which is exactly what happened this week.

At lunch, today, I was discussing Bitcoin with some fellow technologists. Specifically, we talked about a college student who made over $24,000, last month, simply by waving a sign on TV with his Bitcoin address. As we discussed this we realized that this is a perfect way to launder money. Since each Bitcoin address is anonymous it makes it easier to launder money. Here's how it would work if you have a large amount of money to launder.

1. Deposit your funds, in relatively small amounts, across multiple Bitcoin accounts (you can generate an unlimited number of Bitcoin accounts). Perhaps one Bitcoin account for each transaction.

2. Advertise your Bitcoin address anywhere popular (online, in the newspaper, on TV, etc).

3. Send all of the funds in your multiple Bitcoin accounts to a single Bitcoin address.

4. Withdraw your bitcoins as cash and claim they were all anonymous donations, but don't forget to pay your taxes.

Can simply advertising your Bitcoin address result in strangers sending you Bitcoin? It did for that college student I mentioned above and it worked for me when I tweeted out my Bitcoin address and a stranger sent me 0.0001 Bitcoin (worth about 8¢).

For the record, this is my Bitcoin address:
1J5p7Uvwdn7tKEjwnEPv9hSfMtycyUfiR

Also, you can send me a Bitcoin using this QR code:

Bitcoin address requesting 1 BTC.