Equifax Cyberattack Shows Why Bitcoin Is Becoming More Popular Reader Difficulty: Intermediate

It's only fair to share...Share on Facebook0Share on LinkedIn0Share on Google+0Tweet about this on Twitter0

What’s worse than having one of the largest U.S. retailers failing to protect your identity from identity theft? Having a consumer reporting/theft protection agency failing to protect your identity.

As you probably have heard, Equifax put out a statement on Twitter (because that where everyone release statements these days) that they have discovered breaches in security involving consumer information. As many as 143 million customers have had their information stolen.

 

So what exactly did the hackers steal? Names; birth dates; addresses; social security numbers; even some credit card numbers were stolen.

Of course, this isn’t the first time this has happened. Back in May 2016, cyber-crooks managed to steal W-2 information from many different large corporations, resulting in the theft of more than 500,000 people. The primary victims of this theft are the firms that make W-2 and payroll information accessible online.

So, is there a problem at Equifax? As an outsider looking in, it’s hard to say. However, it doesn’t give the investing community much confidence when it learns that three company insiders had sold Equifax shares just days before the public learned about the security breach and just days after it supposedly discovered the breach.

Rodolfo “Rody” Ploder, Joseph “Trey” Loughran, and John Gamble Jr. have all unloaded more than 12,000 Equifax shares, worth $1.77 million. If you know anything about the concept called “insider trading” you’re probably thinking that the timing is too perfect just to be a mere coincidence. However, we still need to keep in mind that coincidences happen.

Insiders have been dumping Equifax stock since the beginning of this year. Also, since insider transactions are required to be reported (by law), it’s not as if any of this would have gone unnoticed, especially since these breaches have been occurring for the past year. We can speculate what corporate officers actually knew, but until more information is available, that is all we can really do.

Situations like what occurred with Target Inc. and Equifax are the reason why more crypto-currenies like bitcoin are growing in popularity among individuals, retailers and banks. However, in the contexts of banks,  it’s probably worth pointing out that no bank is really interested Bitcoin itself; what they’re really interested in is its technology.

Bitcoin relies on technology referred to as a public block chain, which can be used not only for protecting yourself against identity theft but protecting the legitimacy and integrity of online data (e-signatures and key-less passwords come to mind), as well as protecting online infrastructure.

In the context of Bitcoin, it uses a shared public ledger on which the Bitcoin network relies. Bitcoin users can calculate their spendable balances, and new transactions can be verified to be spending bitcoins that are actually owned by the spender. All information is included in the block-chain, and the way transactions occur on Bitcoin Wallet is that a network of nodes confirms the transaction of previously verified transactions. This process confirms a new transaction, know as a consensus protocol. Because no one user is trusted to verify transactions, all users solve mathematical proofs that verify transactions. This makes it impossible for anybody to spend funds from another user’s wallet or to corrupt the block chain via wallet encryption.

It sounds confusing to the average layman, because it is. However, one could think about how secure our financial system could be if we made a coordinated push towards a more secure infrastructure.

That’s not to say that a system like Bitcoin is perfect by any means. It was only last year were it was reported that hackers have managed to steal more than $32 million worth of digital currency. After all, the block chain system is only as safe as the individuals who take the meticulous steps to secure their information. In the Bitcoin system, ownership of a transaction or wallet is demonstrated using a private key that is linked to payment. These keys are generated using an algorithm designed to provide a random set of outputs. Thanks to the use of these keys, they manage to keep information from being hacked; however, these keys represent data, and it can be stolen just like anything else.

This usually results from people storing their information insecurely and it is estimated that more than $800 million bitcoins have been stolen as a result. A regrettable loss; however,  significantly better compared to the $16 billion consumers have lost in 2016 (estimates could actually be much higher).

844 total views, 3 views today

Andre

Andre is a senior at Pace University, studying Finance and Economics. His topics of interests include Equity Valuation, Short Ideas, Macro, Monetary Economics, ETFs, Forex and Fixed Income. His sectors of choice involve Technology, Consumer Goods, and Financials. Andre is also a summer intern at JP Morgan Chase & Co, and works as a Financial Analyst for their Corporate & Investment Banking division.