Bitcoin and the entirety of the cryptocurrency market is, and always has been, nothing more than a confidence game. At its most basic, Bitcoin is just a sequence of letters and numbers on a screen. It is not backed by anything tangible. It cannot be held in your hand. It cannot be buried anywhere, to be dug up later like treasure. Any amount of Bitcoin anywhere is really just a sequence of letters and numbers, the value of which is based purely on belief.
To put it as simply as possible, if a statistically significant number of people believe that Bitcoin or other cryptocurrencies have value, they have value. Conversely, if belief in the value of Bitcoin or other cryptocurrencies diminishes, so do cryptocurrency market prices.
By comparison, the value of currencies like the British Pound and the United States Dollar was once representative of real physical amounts of gold stored in central bank vaults. It was, therefore, not necessary to believe that these currencies had value; they simply did. This only changed in the 1930s and 1970s when the GBP and USD were removed from the gold standard. However, even after this, we still had physical cash in the form of coins and notes, which we could physically exchange for goods and services.
Vanishing Cash – A Thought Experiment
Proponents of cryptocurrencies like Bitcoin often argue that because the currencies we use today do not have the backing of real precious metals, their value is representative only of people’s belief. This, they argue, makes currencies like the dollar intrinsically the same as Bitcoin. This is especially true when we consider that there are only 2.3 trillion dollars in physical circulation, whereas the U.S. itself is over $30 trillion in debt.
Put simply, almost all U.S. dollars, like all cryptocurrencies, exist only as numbers on a computer screen. This, too, digital currency proponents argue, makes cash no different from crypto. Let’s imagine, though, that in 1971, when President Nixon decoupled the USD from the gold standard, something strange began happening.
Let’s imagine that shortly after decoupling the dollar from gold, the physical cash in people’s purses began inexplicably vanishing. One minute it’s there; the next, it is gone. One moment it might even be in your palm as you prepare to settle a grocery store bill; the next, POOF! It’s gone. It doesn’t matter where your cash is—whether it is in a safety deposit box in a Swiss bank or under your mattress—it can, without warning, suddenly vanish without a trace.
This thought experiment might sound ludicrous. However, if countries ever transition from our current fiat cash system to a system based on the use of Central Bank Digital Currencies or even cryptocurrencies like Bitcoin, this will be the reality we begin to live in.
There Is a Hole in Your Crypto Wallet Whether You Like It or Not
Would you buy a wallet or purse with a hole in it, allowing any cash you put inside to fall out? Of course you wouldn’t; the very idea is preposterous. Nor would you ever deposit your hard-earned cash in a bank with a reputation for being easy to rob. However, this is exactly what happens whenever you attempt to store cryptocurrency you own.
As I have discussed previously on The Crypto Con, hardware-based subsystems are embedded into the CPUs of almost every modern computer or device you might use to store cryptocurrency. More importantly, these subsystems are invisible to end-device users, operate completely independently of any operating system on your device, and have privileged access to all your most securely stored data (even when data is encrypted or devices are powered off).
What Are These Subsystems?
- The Intel Management Engine (IME) is a separate microcontroller in all Intel chipsets post-2008 that runs proprietary firmware, even when the system is off (if still mains- or battery-powered). It handles tasks like remote management of all device hardware and software via Intel Active Management Technology (AMT), DRM, and it controls all basic system boot processes.
- The AMD Platform Security Processor (PSP) was introduced in AMD CPUs around 2013. Like Intel’s IME, the PSP is a co-processor running similar proprietary firmware and is instrumental in managing device security features like Secure Boot and secure storage of hardware and software encryption keys.
- ARM TrustZone is a security extension in ARM processors present in all post-2013 ARM-powered devices like smartphones, cryptocurrency hardware wallets, and IoT devices. It creates a “secure world” isolated from the main device OS, which handles security-sensitive tasks like cryptographic operations and secure boot.
These subsystems all share common traits: they all boot before device operating systems, most can be booted remotely without a user’s knowledge, and all have unrestricted access to device memory, storage, network interfaces, and peripherally connected devices like USB sticks, without this access being detectable. Their firmware is also 100% proprietary, meaning it is not fully auditable by independent cybersecurity researchers.
Why Are These Subsystems a Threat to Cryptocurrency Users?
The design of the IME, PSP, and TrustZone creates several direct security risks to cryptocurrency users, risks which I liken to having a physical hole in a real-world purse or wallet—or a physical backdoor into a local bank vault.
- Privileged Access: These subsystems can access all system memory, network interfaces, and input/output devices (e.g., keyboard, screen) without the knowledge of either you as an end-device user or your device’s operating system. A compromised subsystem could subsequently intercept sensitive data, like cryptocurrency private keys, seed phrases, and passwords, directly from your device’s memory or connected input devices.
- Proprietary Firmware: The closed-source nature of the firmware on these subsystems prevents independent security analysis or auditing. Malicious actors like hackers or state agencies can, therefore, exploit hidden vulnerabilities and intentional backdoors on devices like computers, phones, and hardware wallets without detection.
- Network Capabilities: The IME and PSP can send and receive network traffic independently of your device’s network stack while also potentially bypassing local network firewalls. TrustZone can also interact with network stacks on mobile devices to do the same. This could allow an attacker to access sensitive data like cryptocurrency private keys remotely, at any time, without you or your device’s security software being able to detect or mitigate such access.
Several Subsystem Vulnerabilities Have Already Been Proven to Exist
In previous posts, I have likened the existence of subsystems like the IME to having a second computer that you don’t know about embedded in the computer or device you use every day to live your digital life through. Sadly, because all such subsystems are proprietary, it is not possible for independent security researchers to fully audit the hardware architecture or firmware of such systems. However, the security risks posed by these subsystems are far from theoretical.
- In the case of Intel’s IME, several vulnerabilities like CVE-2017-5705 (2017) and CVE-2019-0090 have already been discovered. These vulnerabilities all allowed for remote code to be executed on devices, and one such vulnerability is still considered unpatchable. (This means that there is still no fix to stop remote code from being injected and executed on affected Intel devices in the future.)
- In the case of AMD’s PSP, flaws like CVE-2018-3639 (2018) exposed risks in device secure boot processes.
- When looking at ARM’s TrustZone technology, exploits in some Qualcomm devices (e.g., CVE-2016-2431) have been proven to allow attackers to bypass secure boot and access protected data like cryptocurrency private keys on devices.
These vulnerabilities demonstrate that each of these subsystems represent more than just theoretical security risks. Rather, several security exploits have been proven to exist in the real world. Thanks to the discovery of NSA High Assurance Platform (HAP) code in Intel’s IME, we also know that agencies like the NSA are able to disable the IME to safeguard their own IT security. It is literally only the consumer market (everyday people like you and me) who have to worry about the security threats imposed by the likes of the IME and other such subsystems.
Vanishing Cash vs. Vanishing Cryptocurrency
In my earlier thought experiment, I asked you to imagine a post-1970s world where physical cash could inexplicably disappear without warning. The very idea of this happening is preposterous. However, if we ever transition into a post-cash, completely cryptocurrency-centered economy, inexplicably vanishing digital currency balances will become part of our new reality. This is because backdoors enabled by subsystems embedded into the technology we use to store and transact cryptocurrency already exist and are already exploitable.
This is also why physical cash, regardless of what cryptocurrency proponents argue, will always have more intrinsic value.
Unlike crypto stored on your phone, physical cash under your mattress will never inexplicably vanish overnight. Nor will cash in your hand ever vanish as you settle a bill at your local grocery store. Your crypto, on the other hand, very well might vanish, especially if you ever become a person of interest to the state or somebody not tight-lipped enough about how crypto-wealthy you are.