If only Target had been accepting Bitcoins during those fateful two weeks around Thanksgiving, then maybe some of its 40 million financially-compromised customers would have been spared the potential hell of having to retrieve and rehabilitate a stolen identity.
Or maybe not.
The jury–or rather, the slew of IT security professionals I queried about this–seems to be of two minds on the question of whether Bitcoin, for all its roller coaster valuations, would at least keep users’ personal identity safe in another Target scenario.
Security Researcher Cameron Camp at ESET says that while Bitcoin is more anonymous than traditional credit cards and more secure by design, difficulties lie elsewhere. “Due to the anonymized/cryptographic nature of the currency, it is almost impossible to track whether an individual has experienced a theft or loss due to other reasons–malware, a corrupt “wallet” which is stored on your hard drive, etc–and it’s especially difficult to determine with any accuracy where the stolen currency might have gone once ‘stolen’”, he says.
Camp’s colleague at ESET Security Researcher Aryeh Goretsky also notes that given the lack of clearinghouse-like mechanisms it is possible that fraud could occur for much longer periods of time before the patterns were noticed. “Every kind of payment system has its own advantages and disadvantages: You could pay cash and be completely safe from being hacked, but you might get robbed in the parking lot,” he said.
Says Mark Williams, a former Federal Reserve Bank examiner and commodities trader who teaches finance in the Boston University School of Management and author of “Uncontrolled Risk“: “Bitcoin is supposedly bullet proof but recent robberies of over $220 million worth of coins demonstrate that controls are not fail-safe. Coin secrecy also makes it difficult to track criminals that have stollen coins. Unlike credit cards, Bitcoins are not regulated reducing accountability should a breach occur.”
On a more positive note, Ken Pickering, director of Engineering at CORE Security, is of the mind that the use of Bitcoin in a grand theft scenario like the one that occurred at Target would have kept its users safe from identity theft. “But we could say the same about its anonymous equivalent, cash.”
Tommy Chin, another security expert at CORE Security, also believes the use of Bitcoins could save consumers from identity theft, but they are still vulnerable to technical problems such as hacked wallet services.
In short, says Kevin O’Brien, director of product marketing at cloud security company CloudLock, Bitcoins are not a security panacea for consumers. “They exist either on a hosted service or in an on-premise wallet, either of which could be compromised by a dedicated criminal effort.”
The only security expert enthusiastic about Bitcoin’s potential as an anti-fraud mechanism for consumers was Kat Brown, project manager at SatoshiDICE.com.
If Target had accepted Bitcoins, she said, customers paying with the digital currency would not likely become targets of identity theft. “Because Bitcoin works on a public-key cryptography, anything passed during a Bitcoin transaction is useless to identity thieves.” If they obtain your private-key information, she acknowledged, your wallet can be compromised “but this is a tiny vulnerability compared to all the highly personal data that is shared in a credit card transaction.”
Why Retailers Like Bitcoin
Retailers seem to be interested in following Overstock.com’s lead of accepting Bitcoin as payment from customers largely due to the lower fees and speedy payment.
But as this Washington Post article points out, Bitcoin is more of a retailer’s security dream solution than a consumer’s—at least for the moment.
Conventional payment networks place most of the liability for fraudulent transactions on the merchant, allowing customers to challenge and reverse suspicious payments. Bitcoin, however, puts all of the liability on the payer. If you get tricked into sending a payment to the wrong person or hackers steal your Bitcoins, you have no recourse.
Timothy B. Lee, the reporter of that piece, thinks that a system could be worked out to the benefit of both retailer and consumer–eventually.
It won’t be in time for the first wave of retailers — and their customers — moving to the currency, however. The number of small vendors and stores accepting Bitcoin now ranges from a pub in London to a grocery store in San Francisco an online men’s accessory e-commerce site, Completely Royal, to CheapAir.com. And now, of course, joining their ranks shortly will be publicly-traded e-commerce powerhouse, Overstock.com.
Source: Forbes Business