BitMEX CEO: Jury Out on Whether Bitcoin Is Secure Long Term

Siamak Masnavi

In episode 97 (title: "How Crypto and Blockchain Technology Could Change Financial Services") of crypto journalist Laura Shin's "Unchained" podcast, recorded at CME's recent Global Financial Leadership Conference, Arthur Hayes, Co-Founder and CEO at crypto derivatives exchange BitMEX, said that "the jury is out on whether or not Bitcoin is actually secure over the long run."

This was a special episode that also featured Dan O'Prey, the chief marketing officer of Digital Asset, and Alexis Ohanian, Co-Founder and Executive Chairman of Reddit (as well as Co-Founder and Managing Partner of Initialized Capital). However, for the sake of brevity, we will only be focusing on Arthur's comments/answers.

Before we cover some of the main highlights from this episode, it should be noted that all three guests were expressing their own personal opinions and not the views of any past, present, or future employer, and that all the content in this episode (as is the usually case with all episodes of all podcasts) was purely for informational purposes and not constituting any form of financial advice.

How Will Blockchain Technlogy Change the World?

"I got involved in Bitcoin when I lost my job in 2013, and I started trading full-time for a job, and then I got into trading derivatives over that period of time, and what really struck me about Bitcoin, in the whole crypto industry, is for the first time you basically have direct market access for people who otherwise would not interact with financial markets, especially in North Asia, where I've spent the past ten years of my life. It's really compelling to see you can open a smartphone, open up an account, and start trading pretty quickly in this new asset class, and I think 24/7 trading of all types of different assets is something that is going to be the future, and that will bleed into the other markets that we are all familiar with, you know, FX, fixed income, and equities."

Do you See Private and Public Blockchains Working Together One Day?

"If you don't need censorship resistance, why would you ever use a public blockchain. It's extremely expensive; it's extremely slow; and you have to have a totally different toolkit of engineering skills... But if you are just an enterprise and you want a better way of transferring data or a better database, then private, DLT-type blockchains are for you; you don't need to interface with Bitcoin or some other public chain."

Does Crypto Represent a New Asset Class?

"I think it's sort of a blend. It's still extremely small: market cap is what, $200 million. Apple has more cash in its balance sheet than the whole value of the industry that we're talking about. So, it's insignificant in terms of where it is today. Could it become a bona fide asset class in the next 10 years? Maybe. Still, the jury is out on whether or not Bitcoin is actually secure over the long run. It's had a decade, which is pretty good, but it's still an experiment. So, I say the jury is out, but looking like it could be a new way of raising capital and sending value around the world."

What Will It Take for Institutions and People to Get Into Crypto?

"We've got to make money at the end of the day... Bitcoin or Bitcoin trading is probably the easiest thing for a financial services institution to look at. OK, can I make $5-10 for a seat, for a dude seating there or a woman trading? Most likely, probably, you will not make that amount of money, which is why you are seeing some of the banks backtrack their crypto desks or they have sort of put them on the backburner. So, it's really about how much money you can make, what's the volatility, what's the volumes... We've sort of come off about 70% in terms of the price this year, volatility is down massively, exchanges are firing people. So, it's a very volume-driven business, and there's no volume, there's no excitement, and [so] the institutions won't get involved. But at the end of the day, it's 'can you make money trading it?' and if the answer is 'yes', they'll find a way to do it."

Why Are We Seeing Traditional Financial Institutions Get Into Crypto Despite Bear Market and Lack of Real World Adoption?

"They probably started planning it last year, in the fall, when it went batshit crazy... and it takes a while to get it ramped up... and you launch into a massive bear market... I am sure if you had to poll these same executives today and say 'please go to your board and approve a Bitcoin something or other right now', they'd probably get shown the door... Luckily, they've gotten it through the committee they need to get it through, and we have new products addressing new markets that are coming online, but I don't think that's any verdict on Bitcoin being any better or worse right now."

Decentralized Applications (DApps)

"I don't think most of these things are actually decentralized. A lot of talk about decentralized whatever service is bullshit... I think a lot of this decentralized [talk] is just a way to get money from people who don't know what they are talking about or what's really going on behind the scenes. So, really, the only pseudo-decentralized asset out there is probably Bitcoin, and that's not even that decentralized in and of itself. So, I think we have a long way to go before we get to this utopia of decentralized applications. We really have a lot of centralized moats in different parts of the ecosystem."

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Bitcoin ‘Sextortion’ Scheme Netted Cybercriminals Over $330,000

Blackmailers have reportedly managed to rake in over $330,000 worth of bitcoin, the flagship cryptocurrency, through an email-based ‘sextortion’ campaign that has been ongoing since at least 2017, and saw its activity surge last year.

According to a report published by UK firm Digital Shadows, the cybercriminals received said amount from over 3,100 unique BTC addresses. The funds ended up in 92 different bitcoin addresses believe to belong to the same organization, that could reportedly be making an average of $540 per victim.

The firm’s report, first spotted by The Next Web, tracked a sample of 792,000 emails sent to victims. The ‘sextortionists’ reportedly sent them an email that would include a known password as “proof” they hacked them, and claimed to have video evidence of them seeing adult content online.

The threat was that the video would be published online, if a ransom in BTC wasn’t paid. Last year, Cornell University computer science professor Emin Gün Sirer warned potential victims to “never pay, never negotiate” with cybercriminals trying to extort them.

Per Sirer, the emails were being sent to every email account on the popular website haveibeenpwned, which shows whether emails addresses had their data leaked on well-known online security incidents.

A Sophisticated Operation

The UK firm’s report seems to show the ‘sextortion’ operation was a sophisticated one, as scammers were seemingly trying to hire more people to help them target high-net-work individuals.

These hires could be getting high salaries, up to $768,000 a year, if they had experience in network management, penetration testing, and programming. The cybercriminals have notably also been using social media to target their victims.

The scammers’ capabilities are said to have varied in skill, as while some struggled to distribute a large amount of emails that could get past email server or spam filters, others managed to show high levels of sophistication, with emails sent from accounts specifically created for the campaigns.

Moreover, these campaigns were launched on a global scale, as the servers the emails came from were in five different continents. The highest amount of emails came from Vietnam, Brazil, and India. These servers could, however, have been compromised by the scammers as well.