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10 scary facts about Bitcoin

Colin Neagle | June 10, 2013
Before diving into Bitcoin, make sure you know the facts.

Essentially, users who want to create a new wallet must know that they need to send their existing sums to new accounts with new passwords. It's not as easy as many would assume.

7. DoS is possible on Bitcoin, just like any other site.
Just like banking websites, which have been the target of denial-of-service attacks in the past, Bitcoin services are susceptible to DoS attacks.

"Bitcoin has some denial-of-service prevention built-in, but is likely still vulnerable to more sophisticated denial-of-service attacks," the Bitcoin Weaknesses Wiki explains, along with more detail on the DoS protection built into the system.

6. "There are no guarantees that any eWallet service won't one day take all your bitcoins and disappear."
That quote is taken directly from the Bitcoin's Wiki on anonymity, alongside a warning to "use at your own risk." Very little information about this possibility is available online, but considering that one of Bitcoin's most highly touted attributes is its independence from a governing body, the legal side of Bitcoin is a bit murky.

5. Speaking of legal issues, it is a bit murky.
The Electronic Frontier Foundation, an early adopter of Bitcoin for its donations page, stopped accepting the currency in June 2011, citing the "complex legal issues involved with a currency system" as its top reason.

The EFF did, however, reverse that decision just a couple of weeks ago, after spending two years researching Bitcoin and how it relates to the complex regulation of currency on a global scale. Some may consider that decision a good sign for Bitcoin. But it also means that it took the EFF, a conglomerate of experts in technology and law, two years to decide whether it was comfortable accepting it. That decision was also perhaps made easier when the U.S. Treasury Department's Financial Crimes Enforcement Network informed the EFF that it, specifically, "is likely not subject to regulation." In other words, the EFF didn't decide to accept Bitcoin until it was told explicitly that it will not be regulated for it.

Then there's this excerpt, from the Bitcoin Wiki on "weaknesses":

"It is illegal in some countries to possess/distribute certain kinds of data. Since arbitrary data can be included in Bitcoin transactions, and clients must normally have a copy of all unspent transactions, this could cause legal problems."

All of this suggests that if you're concerned about the legal issues of Bitcoin, be prepared to do a lot of reading.

4. Bitcoin is not really all that anonymous.
Sure, Bitcoin transactions are conducted anonymously, without any names or a bank tracking your move. But that doesn't mean they can't be tracked.

 

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