It is no longer news that traditional financial institutions hate Bitcoin and they’ll do anything to stifle its growth. Bitcoin seeks to decentralize the money supply in the economic landscape and a decentralization of money could make banks obsolete or mostly unnecessary. More so, Bitcoin offers incredibly low transaction costs and the low fees associated with Bitcoin payments makes Bitcoin a better payment alternative to many of the payment solutions that banks offer.
From the foregoing, banks have an ax to grind with Bitcoin and they are fueling the war of fear in order to slow down its adoption. More so, the banks are leveraging their economic and political affiliations to lobby against regulation that would empower Bitcoin as a global currency. Nonetheless, The Guardian reports that banks are now hoarding Bitcoin in order to protect themselves against cyber attacks in the future.
Cyber attacks take a deadly form
On October 21, the U.S. Department of Homeland Security began investigations into a DDoS (distributed denial of service) attack on some popular websites. The DDoS attack was targeted at websites in both the U.S. and Europe and it is one of the strongest DDoS attack in record. The DDoS attack took out popular sites such as Twitter, CNN, Reddit, PayPal, Fox News, Wall Street Journal, and Netflix among others.
The attacks were designed to target Dyn, a firm that provides DNS services to many of the aforementioned websites. Dyn notes that “We began monitoring and mitigating a DDoS [distributed denial-of-service] attack against our Dyn Managed DNS infrastructure shortly after 7:00am ET of Friday”.
Last Friday attacks highlight a worrisome trend in the cybersecurity industry as hackers harvest IoT (Internet of Things) devices to wreak havoc with DDoS attacks. There are about 7 billion to 19 billion IoT devices; hence, DDoS attacks will only become severe going forward.
The more worrisome trend is that the hackers often request for ransom in order to call of the attacks. Interestingly, the hackers prefer getting paid in Bitcoin because of the anonymity that it provides them.
Banks are now hoarding Bitcoin to mitigate cyber attacks
The Guardian reports that banks have started buying up hoards of Bitcoin, which they plan to use to for ransom payments if they happen to become a victim of DDoS attacks. In reality, paying off the hackers in Bitcoin (or any other currency) makes economic sense for banks because law enforcement agencies are currently incapable of preventing or stopping those kinds of attacks.
Dr Simon Moores, a former technology ambassador for the UK government and chair of the annual international e-Crime Congress observes that, “The police will concede that they don’t have the resources available to deal with this because of the significant growth in the number of attacks.”
Moores also notes that it makes sense for banks to pay off hackers than to risk a DDoS attack. In his words, “Big companies are now starting to worry that an attack is no longer an information security issue, it’s a board and shareholder and customer confidence issue.”
Strangely enough, the same Bitcoin than banks have vilified so much is now turning out to be their saving grace in the face of security challenges. Moore notes that, “From a purely pragmatic perspective, financial institutions are now exploring the need to maintain stocks of bitcoin in the unfortunate event that they themselves become the target of a high-intensity attack, when law enforcement perhaps might not be able to assist them at the speed with which they need to put themselves back in business.”