Barney: We Need to be Smarter When Handling Blockchain
(Graphic by Madelyn Foulger | The Daily Utah Chronicle)
February 22, 2023
The internet is constantly evolving, giving way to new industries and technologies. We’ve had the relatively recent creation of blockchain, which sparked the development of cryptocurrencies such as Bitcoin.
Cryptocurrency is its own can of worms as far as societal and economic implications go, but one thing is clear: we shouldn’t allow people to be exploited because of fictitious capital.
H.B. 289 creates measures to counteract some of the systematic failures within blockchain. Considering the rise in crypto-related scams, this necessary piece of Utah legislation should be considered federally.
Blockchain is a technology that decentralizes information and spreads it between multiple computers. It does this by creating hashed tokens that act as keys, where an identifier attaches to information and spreads it across multiple hosts or computers in a network. This system as a whole is referred to as a blockchain.
This technology is revolutionary for security and other forms of technology, since it is decentralized. The idea of a decentralized network is extremely appealing, especially in the finance industry, where we want detailed records of transactions while maintaining individual anonymity. Blockchain spurred the creation of cryptocurrencies and has changed how we view capital. While I dislike the idea of cryptocurrencies, they have cemented their place in society and if they’re going to continue to exist, they should exist in a way that is thoughtful.
Cryptocurrency technology creates a system which is easy to exploit. The decentralized nature of a blockchain means that transactions made within it are anonymous. One example is a Bitcoin transaction: it’s reliant on having a blockchain and is only traceable to an individual or group when the coin is exchanged for traditional capital.
H.B. 289 would require providers of blockchain technology, such as Coinbase, to be registered through the state of Utah. According to the sponsor of the bill, Rep. Trevor Lee, “If these companies are now registered through the state, it’s going to help with that problem. It’s not going to be completely eliminated and you can still have bad actors just like you can in any business, but by having them registered with the state, you’re going to start seeing more accountability and hopefully trust now in these companies who want to grow and be good actors.”
Cryptocurrency has been plagued with scams and illicit activity since its inception. Decentralized currencies are an easy way for criminals to spend the money they receive from their criminal enterprises in an untraceable way. Things such as ransomware also typically ask for payment in cryptocurrency.
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NFTs, or non-fungible tokens, are another type of blockchain-driven currency that gained popularity in the past few years. In 2022, popular YouTuber Logan Paul came under fire for his NFT trading site, CryptoZoo. Crypto journalist Coffeezilla did an investigation, which alleged the site had nefarious intent.
This, however, isn’t the full scale of cryptocurrency crimes. Individuals have managed to make scams based solely on the trade and distribution of crypto — the FBI found that millions of dollars were stolen in crypto scams in places such as Colorado. These were people trying to make investments in cryptocurrencies, which is a completely legitimate way to use them. The millions of dollars stolen from people aren’t always returned. In some cases, there aren’t people to prosecute or money to be retrieved. These scams have real world consequences for real people.
FTX is another recent example of blockchain technologies being used in potentially malicious ways: they managed to defraud investors millions of dollars almost overnight and have likely changed the direction of the industry as a whole.
The best way to stop cryptocurrency scams is to ensure they never happen in the first place. Obviously, when investing in something, do research, but the government should have your back against shady individuals who want to take your money using blockchain. H.B. 289 is a good handrail on the waxed staircase that is blockchain.
“This is a step in the right direction, to start giving more, more accountability to the companies who want it versus those who are trying to be bad,” Rep. Lee said.
If cryptocurrencies are to be a regular part of our society, we need to make sure they aren’t being used in harmful ways. Registries and other safeguards are needed to prevent scams and create safer spaces for cryptocurrency growth in a way that doesn’t detriment our society or economy.
