Bitcoin Under Attack, a Lesson in Discretion, and Getting Rich Quick

What links dark deeds, dwarves and dinosaurs? John Law takes a firm grip on this week’s bitcoin news.

AccessTimeIconFeb 14, 2014 at 2:15 p.m. UTC
Updated Sep 11, 2021 at 10:21 a.m. UTC
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Welcome to the CoinDesk Weekly Review 14th February 2014 – a regular look at the hottest, most controversial and thought-provoking events in the world of digital currency through the eyes of skepticism and wonder.

Your host … John Law.

Knockers cause bitcoin blues

piggy bank
piggy bank

It’s been a rum old week for bitcoin. Legislators are gunning their engines to bring it within regulatory control, the mighty voice of JPMorgan has said that it’s “not very good”, and there seems to be a concerted and multi-pronged attack on exchanges by anonymous hackers.

This last one is the most interesting. It combines a curious and complex flaw in some bitcoin software implementations with a classic denial of service (DoS) attack – having found a weak spot in how bitcoin is transferred, the hackers are pounding away.

You can read all about the flaw; called transaction malleability, it can lead to a unique transaction ID to be changed before it is confirmed on the bitcoin network. The change makes it possible for someone to pretend that a transaction didn’t happen, if all the right conditions are in place.

It’s not a problem with the basic bitcoin mechanism, more a subtle side-effect of poor software – an affected transaction can look like a duplicate from some angles, but not from others. Create a lot of these transactions and flood an exchange with them and the overhead of sorting them out slows things down enormously for everyone. Wham. Denial of service.

DoS attacks have been around since before the Internet, although the early ones were usually unintentional and caused either by faulty software yelling its head off or some fault condition triggering a flood of network traffic that triggered further instances of the fault elsewhere.

More recently, DoS has been the weapon of choice of disaffected activist groups, vandals and organised cybercriminals putting the frighteners on potential victims. There are lots of remedies and larger online organisations are good at fighting DoS, which is why nobody’s succeeded in bringing down the world banking system (not that it needs much help).

Bitcoin exchanges are not larger online organisations, so the response is slower and more uneven. But software will be patched, firewalls reprogrammed, sources of attack packets identified and isolated – and anyway, with the general misery driving the price down, leaving your exchange transactions until later isn't such a bad idea.

As for the other woes? JPMorgan is an apex predator in international finance, and as such one of the organisations that really should be deeply distrustful of bitcoin. Like the movie industry with home video recorders and telephone companies with the Internet, it’s progressing nicely along the path of ridicule, hence alarm and dire warnings, towards adoption and exploitation.

It’ll be far more dangerous for bitcoin’s more revolutionary possibilities when outfits like JPM decide they like it.

Compared to some of the hi-jinks of big finance, whoever’s behind the DoS attacks are rank amateurs.

Market penetration: small but growing


Talking of ranking, bitcoin’s importance is rising with the porn trade.

Online porn is an odd business: John Law has been at many computer industry shows where entire halls were devoted to it, carefully arranged so that everyone could politely pretend not to notice. Even if the leather-clad butler dwarves with silver trays of refreshments were hard to overlook, as it were.

But rest assured, gentle reader. John Law would never stoop so low. Even if it was a hot day in Vegas and he had a thirst that could distort the orbit of Jupiter.

Of course, nobody ever looks at porn either. And when not looking at it, one may well prefer not to leave evidence of such inaction in one’s bank or credit card statements. What could be better for not paying for things you don’t do than something which leaves no trace of what just didn’t happen?

Such entirely imaginary non-activities have led to bitcoin accounting for a very real 10% of revenues at, which will most certainly pay for a few people of diminished stature to dish out a stiff drink or two.

Which leads John Law to wonder. What other legal yet embarrassing activities may benefit from the plausible deniability of bitcoin?

The Americans have already OK’d it for donations to political parties, which in these sordid times does indeed feel less savoury than logging in to It could be just the thing to rescue the NME, whose violent unfashionability has just seen its circulation dip below that of The Lady. Or, indeed, the career of Justin Beiber: do you really want that on your iTunes invoice?

Enjoying one’s harmless hobbies free of ridicule is surely the mark of membership in a civilised society. Even if, the lord knows, it is sometimes hard to keep a straight face.

Evolving a path to success


And speaking of alternatives, here is this week’s free gift – an interactive diagram of cryptocurrencies, together with their evolutionary relationship. It looks something like a flower, which is apt given that – ho, ho – it is now possible to buy tulips with bitcoin, something that has given the grown-ups in the posh media a jolly good laugh.

It’s great fun to wander along the petals and explore the hundreds of options. It’s even more fun to use the timeline control, which lets you pick any month between now and 2008 and see what the altcoin universe looked like then.

Paleontologists like to talk about the Cambrian Explosion, the period of time some half a billion years ago when the seas of the world were suddenly populated by a huge number of new species. 2013 was cryptocurrency’s Cambrian age.

For those with a scientific bent, digital money has one huge advantage over prehistoric creatures: you can watch it evolve.

Everything of interest is publicly available, in real time or close to it, just by watching the block chain. Which proof of work works best? What difficulty scalars best fit actual usage patterns? Of the hundreds of coin types out there, most will die. Some will go on for a while. Some will prosper. And some will go on to produce huge evolutionary families of their own.

All of this will take place in the huge ongoing experiment that is modern finance, and can’t help but produce fascinating evidence for what’s actually going on. If John Law had the time, smarts, money and connections, he’d be off building these tools in the sure expectation that at some point, someone will become the Darwin of digital money – and it might as well be him.

After that, someone will become the world’s best genetic engineer for producing the DNA of new altcoin: Satoshi may have been a far-sighted genius, but you can’t beat actual data.

Move over, JPMorgan. A new apex predator is evolving in the turbulent seas of bitcoin’s prehistory and it will eat your lunch.

Just as soon as he’s polished off this gin and tonic. Thank you, Tyrion. A tad more ice, perhaps?

John Law is an 18th century Scottish entrepreneur, financial engineer and gambler. Having reformed the French economy, invented paper currency, state banks, the Mississippi Bubble and other ideas essential to modern economics, he took three hundred years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.

Retro Robot via Shutterstock 


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