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Displacing the Dollar: Is Crypto Robust Enough to be the New Reserve Currency?

Kenneth Geers
Senior Research Scientist at Comodo Group
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RSAC 2021
May 20, 2021, Online, USA
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About speaker

Kenneth Geers
Senior Research Scientist at Comodo Group

Kenneth Geers (Ph.D., CISSP) is a Senior Research Scientist at Comodo. Hs is also a NATO Cyber Centre Ambassador, a Atlantic Council Senior Fellow, a Digital Society Institute-Berlin Affiliate and a TSN University of Kyiv Professor. During his 20 years with the US government, Geers worked with the US Army, NSA, NCIS and NATO. He is the Author of Strategic Cyber Security, the Editor for Cyber War in Perspective and The Virtual Battlefield, and the Technical Expert for Tallinn Manual. He has authored many art

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About the talk

Dr. Kenneth Geers, External Communications Analyst, Very Good Security - Top Rated Speaker Kathy Wang, CISO, Very Good Security Cryptocurrency has universal ambition but first must conquer the US dollar as planet Earth’s reserve currency. It must become a reliable medium of exchange, unit of account, and store of value, which is not likely to happen in the foreseeable future. This presentation will cover a wide range of challenges including cryptomining, cryptojacking, detection, and response.

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I'm sure you've heard this story. That in 2010. Someone paid 10000 Bitcoins for two pizzas. And today they are worth over 500 million dollars those same Bitcoin. So those are very expensive pizzas and what you're probably asking yourself is where is this than going is cryptocurrency going in to change my life or change the world? Maybe than end of the nation-state as it is. In Wartime, it's very clear what how fragile human civilization is? And in fact, what, what is a value right to people because Banks, they can either have

their money stolen by their own country, because they need it for war or by an invading country. The World War II, the most fascinating stories took place when England and France shipped their gold to the United States for safekeeping. So, over time, there's a lot to think about in terms of how we got here and where we're going, especially in this case related to cryptocurrency, a long time ago. There were shells and salt and various things that people Bartered with in exchange for goods

and services, but these things they they they usually required some proof of work. That someone had found and extracted and standardized some something like a gold coin, something like a bar of gold these things. They tend to survive. We have examples of gold coins and and paper currency already from a thousand three thousand years ago. In the case of china. One thing about gold to be aware of, is it? It's rare. It's beautiful. It's not poisonous or radioactive or corrosive. So there are certain

that makes things more valuable than others. Now after World War II, the Allied Powers trying to create some level of stability in the world and they created a system based on this little town in New Hampshire in the place called Bretton Woods, and basically what happened is the dollar was pegged to the price of gold and foreign currencies were pegged to the US dollar. The US dollar was crowned, the world's Reserve currency and what this means is that it is held and

in a kind of risk management by other countries, they hold on to it because again, it's it's stabled and it provides a source of stored value in a medium of exchange that maybe their currency wouldn't have. If you were a small country who might get run over by a bigger country, for example, or you didn't have access to the enormous supply of gold at the end. State status. So money is really important meeting about cryptocurrency at 2, to think about what makes for money and it really is

a human construct. It's based on economic consensus. It's a social convention. There's some kind of standardized shape size weight. So there's a something called legal tender which, under a certain rule of law at Merchants are required to accept it. So I have coffee shop when the Barista before they make your coffee. They don't have to take your money. But after they make your coffee, they do it. Required by law to take your money for it. So it's something that can be exchanged for goods and services and then governments are required to accept it as

taxes. Good money is scarce. Authentic durable portable stable in digital currency if it is to survive until 3. I've been to reach its potential, should have the exact same traits. Now, money leads to power. So the US, you know, it has the trust of other countries who give the United States, their money, they buy US Treasury Securities because they're considered safe. And this is what we mean by a reserve currency, right? Other currency. In other countries, they they, they put their trust in their money into the United States. But it does lead to a benefits of

different sorts for each party. So, so for those who are investing again, there, is there stability. They're seeking to avoid devaluation. They're seeking to counter inflation and what they get in the United States. Dollar is a managed Supply. They get access to liquidity, access to markets and they're buying into a system of trust. Monetary policy. When you hear that word on the Evening News. What is referring to is a government that is trying to further these Concepts. Write the United States wants people to trust in the dollar. So go use

it. Now, on the US side. There are certain advantages to having everybody give you their money. You can only imagine if this were the case, you know, in your house in the neighborhood, right? You, if you had that same privilege and what's some of the countries called this, an exorbitant privilege. It allows the United States to monetize its debt or to run balance-of-payments deficits what this means is we can be a little more carefree and are spending and we have the bandwidth to pursue policy objectives, but other countries can't So

money again, in this case can equal power because the United States you might know has the most military assets by far-right show. Some nations are not going to be happy with this and to see changes but nothing lasts forever, right? So in the United States, we had the New Deal, Social programs are the Vietnam War. All of these kind of put a strain on our ability to manage this Bretton Woods system. And by 1971, the United States was forced to an end to the convertibility of the dollar to gold float. Its currency

against worldwide currencies and declare that the US dollar is a fiat currency and what that means. Is it back by nothing else other than try, right? There's no gold behind the US dollar. It's only your belief in the current system. So let's look at the things that digital currency will have to achieve in order to 63 essential elements of money. The first called medium of exchange. Basically, that means that it needs to be an intermediary token. Have a certain value that can be traded for goods or services in the benefit of a medium of

exchange. Like a dollar, is that it avoids? What's Economist called the inconvenience of Coincidence of wants and other words, you may not want my apple and I may not want your banana, right? But if that's all, we've got, then we're stuck. But if we find an intermediary token to exchange, then many more options become available is a very famous story in Kenya near where I'm currently living in Mozambique. And what happened to there, was that people begin to have access to cell phones and air time. So they started to

trade are time as currency. And what this dude was lead to a major international corporation called him that we use. For example, we just gave our gardener some money and they were able to transfer transfer it via in peso to the north of Mozambique and it all started with the transfer of air minutes as a medium of exchange. And next thing is called unit of account. And this is sort of a stable measure that can be used in multiples of the same unit. I have to calculate cost price

prices profits and performance. Right? In the same thing, people want to be able to measure the trade-in purchase and sale of goods and services. One very important elements is called double entry bookkeeping. So it's keeping on the credit side and the debit side the same number. Right in this lies at the very heart of capitalism. And when people began to figure out Double Entry bookkeeping, it really helped Europe, for example, to emerge from the Dark Ages specifically in Italy, in the eighteen hundreds. So, another important concept you to

mention is that of a ledger, right? So it's a record of economic activity and financial relationships, and ledgers are so important. In fact, they may be even older than writing for communication. We have found bones in Africa, that have a kind of Correspondence Ledger that is over 20,000 years old. Android Ledger is kind of like good money, but it has a slightly different characteristics and it should be immutable unchangeable. This is a very important aspect of Bitcoin. It will see you soon timestamp. Same thing,

show ownership and be accurate, right? And so it's it's all about having a payment system, a way to amend the ledgers. That basically is if you think about it, when you go to buy your morning coffee, right? Your Ledger gets deducted. And the coffee shops, Ledger gets added to. So store of value. This is the most difficult aspect for cryptocurrency to achieve because of its volatility in the lack of basically a central management, but those are benefits, of course, in other ways for crypto.

Sprint store value, you're talkin about a durable asset that has stable demand and saved purchasing power. So for example, Russia Today is buying a lot of gold because if it's inherent properties, that make it a valuable, right? So these things, they tend to that. You can use them for risk management. Are they they they can counter inflation or the fear of inflation US dollar has been Siri very successful as a store of value and that's one reason why it's been around for a while, as as a reserve currency. In fact, it's been so valuable

that numerous countries, some, for example, Cambodia Ecuador Lebanon, Somalia Zimbabwe. They have officially adopted the US dollar because their own currencies were too volatile, right? You can't pay a hundred billion dollars for dinner. In fact, that happened in many. So what I did was I just switched to the US dollar. Let's talk for a second just a little bit about the options that would be available because we want to know whether cryptocurrency could replace the US dollar. So curly and Russia. Vladimir Putin has thinking

how can I have a strategy to do my economy for our vulnerability to us sanctions and make Russia more independent. So they are currently the biggest state by riff gold. On January 2021 amount of gold. I just recently passed dollars 23% to 22% in terms of the the the the reserve in quantity in in Russia right about cryptocurrency some Authority and governments are hesitant, right because part of the beauty for the owner of crook. Currency is Independence, right transnational. Personal power, and of course

dictators. I don't really like that. And so in Russia have been a lot of legislation to stifle Miners Inn in Van cryptocurrency. But anyway, I just wanted you to think about an alternative to the dollar that may not be cryptocurrency. That's out. There. Here's a picture of a Shanghai. So you can see the the in China they have gone a little bit in a different direction to invest in more already than than Russia. Modern it if you think about it is so powerful, right? Ethernet, 1974 TCP IP. 1974 HTTP 1990 SSL, TLS

96. In a Bitcoin, 2009 programmable, right Network, protocols that can do amazing things in the mind, not only programmer, but potentially a revolutionary in terms of political and digital thought. So, I went with crypto currency is how to move value across, a decentralized network. Fear with no trusted intermediary again, no double counting and the chips away at What's called the cost of trust in something that would change the economics of verification. Who are you and have. I received my

payment end in 2008 Satoshi Nakamoto in a paper called Bitcoin, a peer-to-peer electronic cash system reveal, not only Watch it, right? That combines asymmetric cryptography, digital signatures for consent, attend only time-stamped, blogs, and much else. Right? These are the kinds of things that literally can be used to secure the entire internet. Right? What you want or verifiable immutable transactions. In one of the things that Bitcoin and and blockchain of claim to have solved is something

called the Byzantine generals problem, which is how do you get all of your military elements working together? It does require a lot of trust, right? Because just before the attack units want to go quiet. So they don't give away their positions etcetera. But then how do you know that everybody is is is doing what they're supposed to do. So if you look that up the Byzantine generals problem, this is one historic. That situation Nakamoto has claimed to have solved today. There's an over 1,000 which shows its promise and also

numerous initial coin offering and in China again, most payments about 80% today are already digital payments. Even fact in the United States, you know, you're using your card a lot more than dollars, but one test will be in 2020 to the Beijing. Winter Olympics, where they will test cryptocurrency. Okay, just a word on blockchain because it's sort of the foundation that makes all of this happen, right? And if you go back to The Ledger discussion, which is Sookie to a modern economy, basically, you know,

a cryptocurrency. Is it as a digital asset, kind of like the app that is due centralized and used among humans. Chain is The Ledger technology. Wright is an auditable database, that is public and the records can be looked up. It's a list of records that are if he is blocks are tied together with cryptography. The time stamped their append only, which means that is kind of like a house of cards. If you were to go back and change one of the blocks, then the whole thing would fall apart, right? So that the math

is designed, is kind of a one-way mask that when something happens on the blockchain, it stays there forever, right? So from a human perspective, it is a communication protocol, that is based on consensus, right? So it's public, its secure. It creates additional coins through Mining, and it verifies coin ownership, their lot of technical aspects to the Input and output of the blocks. The basically for the purposes of this talk is just important to know

that they are tied together in important ways. Now, I'm going to turn it over to Cassie, Cecil at bgs cryptocurrency, mining really awesome intro to currency. And you know, the topic of this talk is whether cryptocurrency can displace the dollar rice. So what are some of the operational aspects of cryptocurrency that is going on. So let's talk about mining a bit more. So, if you're someone who wants to get access to a Bitcoins, for example, there's two ways to do that. You can either mine it

or you can purchase Bitcoin, y or acquire. Well, acquiring it is not cheap at the current market rate of Bitcoin is 1 / 50,000 right now per per Bitcoin. So, you know, that's not specifically use Bitcoin mining as an example here because Bitcoin is the most popular of all of the different options for cryptocurrency. So right now, at over 50k per Bitcoin, perhaps mining is a more desired approach for some people. So let's talk about how mining works and what actions are Bitcoin miners taking. So what essentially miners are doing is they're

trying to be the first to come up with a solution to a puzzle like a hashing puzzle. Why? So the probability of being the first to discover the solution is proportional to the amount of mining or computing power. The miter has on the network. That's what that's what it is. Right. This process used to be easier back when Bitcoin mining started but has increased daily exponentially in difficulty, as more entities, have caught on to Bitcoin mining and there's more and more

units out there with minors out there. So, if you think about it from a hardware setup standpoint, I have a background and Hardware engineering. So love to think about this kind of problem. Miners need to have access to Graphics processing units or gpus for example to set up mining operations. There are now in Tire mining Farms that exist to conduct Bitcoin mining. So in fact, the picture that you see on this slide is a mining Farm in Iceland of all places

by very remote places where property and all of this setup can be done fairly easily. So, going back to what I said earlier about being the first to solve this solution to a hashing puzzle. Why are they doing that? Right? So miners are doing this because they're effectively conducting auditing to verify the legitimacy of the Bitcoin transactions. This is Ashley pretty clever that. This is the reason why they're doing solving these puzzles. And and then there's a whole reason for

that, this auditing, minimizes the risk that the coin holders to make a copy of the digital token, and spend the same Bitcoin twice. For example, you wouldn't want that. If you have an actual physical dollar, you spend it goes into the hands of someone else. You can't, then we spend it. Right? But like with digital tokens, it's not quite that straightforward as physical money. So, this is a mechanism by which that wrist is minimized. So, in this way, minors work to verify, for

example, one, 1 mag work or a block of Bitcoin transaction. So at that point, when they verified this block of minor is eligible, but not necessarily going to be rewarded with a certain quantity of Bitcoin. But to actually get rewarded or get paid the minor needs to be the first one to come up with the exact or closed 64 digit. Hexadecimal number or the hash that is less than or equal to the Target hash. So this means that only minors that are able to generate high hashrates and when I say hi we're talkin like Sarah hashes per second,

have a good chance to secede to ask you yet paid for this. So it is not easy to get paid for mining. So, what does that mean for resourceful minors? The ones that I actually getting paid, they're probably joining mining pools to pull resources, buy. And some of them are also looking to take advantage of potentially free resources out there. For example, both get lab and get a job offer for UCI minutes to a certain extent. So what miners my do is they my create a whole bunch of free accounts on these infrastructures owned by get lab table

and the minor would get access to a good deal of computing power, right? All at the expense of either get my Apple. So, of course this is considered to be against the terms of service or terms of use for the, you know, if we get lab table and is considered to be abused activity and then it becomes imperative with a company, like, get lava with your help, to figure out how to detect this type of crypto mining activity and block the activity so that they don't have to pay for that usage. The testing of blocking

crypto mining activities. Just like any detection work is very much an arms race. Detecting indicators of crypto. Mining activity can include conducting analysis of DNS traffic or monitoring for specific strange patterns. You not work package or potentially monitoring II RC Communications in the network, but keep in mind that as you're developing algorithms to Monitor and the tap and then subsequently blocked this type of activity on the infrastructure. The

miners are also reacting to locking activity and maybe popping the Annie by on how to avoid being detected next time. So what you see is a lot of what we call low and slow type of activity, where it probably will not easily Spike utilization of your resources because I was just be way too easy. To discover rice. So this is what I mean by this is very much an arms race because it is not easy to deal with. So what we had before was maybe use machine-learning face uristix to process a lot of data and look for outlier Behavior which helps with the

low and slow types as well. But this is not easy to implement, of course. So we've all heard the term cryptojacking before. Exactly. What does this mean why? So my nerves are very resourceful. They're very financially motivated and some of them are targeting attacking and compromising internet-facing computers to gain control of large numbers of resources to conduct mining activities. So, for example, one of the most publicized crypto mining malware includes

one of mine and I so my toes are very resourceful. They're doing a number of things to try to either get free resources or pull together to ask, you get paid for their transactions. And now we moved to one of the benefits here, cryptocurrency and can afford it. Thank you so much. So I just want to mention that at the end of visual level as well as at the national level. There are Truly revolutionary aspects about cryptocurrency, right? If it's really decentralized and transnational about the personal

potential and even for at the nation-state level developing nations to, to have an an alternate way to you to invest into sav-rite. Other than that, I've been dependent on on the US dollar but it's at the end of the level. There are ownership issues that are so important. Not only in terms of potential ery, but access to credit the ability to exchange assets in Estes recently in the news over the past few days. So it applies to 4% as well as the rich person. Spreads that they speak in terms of

investment. And even shifting risk to a certain parties where they haven't been able to, in the past all of this leads to political potential. That could, in fact, slow down acceptance and use an adoption of cryptocurrency. Because example, I have a lot of experience in Estonia where I used to live and they they have put more of their government services and Digital Society online than any other country. And they claim that it's specifically, in many cases meant to diminish corruption,

right by publishing more of taxes, more of budgets, more of salaries. In one of the question is, is just do governments actually want to be less corrupt. And that's a political question for, for voters, in Fort for governments, but more and more transparency could lead us in. Directions. But I am excited about all of these things. Really that? What I want to emphasize is that these political impact May, in fact, slow down adoption, because governments in their desire to get their mind

around. This issue will will create policy obstacles to, to adoption on the risk side. There's, there's just a lot to think about as well. I'm in, I'll mention, for example, lost hardware, and lost passwords in the news, and it's not, it's not an isolated case, but there is one person who's been in the New York Times recently who has over $500 in Bitcoin, but has forgotten his password, right? And so, if you could some all of the, the risks up into into that, for example, How many times have you lost the phone or upgraded a phone? And then you you

can't remember the password when you pull it out of a drawer of the next year show. So there's a lot on the criminal side. One of the things is weak, know your client, right? So so Bitcoin exchanges, for example, that are high-risk, they might be dealing in criminal activity or even terrorist activity, that governments are wary of Rights of central banks. One of the things they want to do is protect investors and protect citizens right from scams and from because governments

alike stability, right? Depending on which government of course, but most most sitting government want to stay in power and so they do tend to err toward stability. So anyway, there's a lot to think about, Here, including, you know, if you're a small player or potentially a government right, even losing some of your other authority, right? So I think you will find government hesitant to let go of the dollar in this case or let go of their Authority in a bigger sense. So he pass it back to ask

you to talk about Security in this space. Yeah. Thank you. I'm so how many of you have had people ask you about. What's the security of Bitcoin currency like you? No answer. If it's it's a brand new problem, right? But if you think about the security pillars of confidentiality integrity and availability, all of that does apply to cryptocurrency as well. So what are the security implications for cryptocurrency? I think the place that we should look at it as being sort of the Holy Grail

or the Vault of where access is probably a successful access is best, is what the crypto wallet, but that's where all of the private Keys stored and if you get access to a quick, the wallet and effectively own the currency so can attackers deal that wallet. We have to think about it from that perspective. Absolutely. They can write. Did you ever hear of Electro rat malware? For example, so the rap part stands for remote access tool in electrorack was thought to have been released maybe over a year ago and has been targeting users via cryptocurrency

and blockchain related online forms. This was actually a almost like a marketing campaign where How do I add sand? And there was a post that entice users to Ashley, click on downloading a particular app to help them, you know, it's going. But then once they installed the app, then is Hachi, A malicious app that is quite intrusive. Right? And I conduct activities such as keylogging UPS, billing files, executing commands on the target system and this malware

work for multiple Oasis including Windows Mac OS, but what was remarkable about this particular? Now, where was that? It was written from scratch. The attacker actually wrote this whole thing from scratch, created this whole campaign around the distribution of it and it was able to evade signature-based malware detection capabilities. Play some time because it was written from scratch, right. There wasn't like, some sort of freak and type of malware module that use, that was

that made it easier to detect, I signature bass system. So, this is actually pretty remarkable, and I anticipate that more of these will will be rolling out as the value of Bitcoin increases. But you know cryptocurrency wallets, they hold private Jesus. I said and the pillars of security still apply just like any other sensitive data that needs to be protected from unauthorized access, unauthorized modifications and in accessibility by, so, Thinking about it like a little bit ahead

of where things are right. Now. A lot of you may be familiar with the zero trust principal and in what is ultra steel, trusses the principal or the model of hiding in the user, a device and the type of data that is being abscess. So can this type of model or principle be applied to further secure the staff base crypto wallets, for example, of course, I can write because a lot of the same principles. Still apply with sensitive data, for example, access to the wallet, could be

restricted to only a specific user utilizing a specific device in order to access the wallet and maybe just also enable a multi-factor authentication scheme so that the access process is Further secured or tightened as well. So these are ideas that are kind of floating around the community. In terms of how to secure crypto, wallet spot, that has to be the number one, Target by attackers just because of what it is. So we're going to wrap up now just in the next two slides and and

say there is no doubt that cryptocurrency is a game-changer blockchain. I'm sure you've heard could be as big as the internet itself, right? The price of Bitcoin speaks for itself. The vast potential of weights, right? In this paste. That said a question in the near-term. Cryptocurrency cannot be a replacement for the US dollar. I do in particular to its security Volatility, but you know, if you put it in conceptual terms, you know, it's trust, right? Its speed. These are right now can do about 70,000

transactions, II by comparison, Bitcoin is doing a handful. So it will take time over the long-term. There will be plenty of interest in cryptocurrency, but public adoption. Remember the airtime. Anecdote from Kenya, this it will become a societal Norm but it will take time. The security risks have to be better understood and addressed the the speed in the payment system needs to be faster. But in the same thing happens with every technology. So credit cards in the 1950s. I took about 15 to 20 years for Congress to enact laws that understood. Ed

and managed all of the issues surrounding credit cards. So just keep your eyes peeled in this space, but it will be one Bellwether got to watch. What are they doing? How were they absorbing this in into their traditional systems? I want to fly, you know, if you choose to buy, right? If you choose to opt for cryptocurrency over dollars, in this case. We want to have a disclaimer and says what, you know, we're not we're not investment advisors where information security

researchers. However, we have sounds found some pretty interesting advice such as the three key elements of investment. I came across which is consistency tax planning and emotional control, right? So you don't want to be a minimalist or maximalist in this case, but just think about it, rash. I have a plan is your goal wealth preservation, or wealth creation. You know, how much bandwidth do you have? Right? Because let's face it, Bitcoin might be the most valuable asset in human history or via

some kind of policy or trust. Failure might drop to 0, right. So Elon Musk can afford, afford to lose his Bitcoins, but you and I are not in the same position, right? That's sad. There's plenty of space for gross in Syntec. There's a lot of economic range in the system that syntac is finding. It can improve in terms of efficiency and speed space access scale. Remember that? Most of the world is still unbanked, right? So part of the goal of many fintech companies has to figure out how to To offer credit and services are too much of

the world, which is not had access to traditional banking. So we'll leave it there and just say that it's best to have a logical plan for you and to revisit it regularly, many many. Thanks for your time.

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