"I'm still trying to digest the fantastic scale of the criminal opportunities and the money that can be made and laundered outside the control of law-enforcement agencies and governments."

—Dr Simon Moores, a former technology ambassador for the UK government and chair of the international e-Crime Congress.

It was way back in 2009 that Dr Moores expressed his disbelief at the number of ways criminals could use the anonymity of the internet to their advantage.

Today, with digital currencies becoming firmly established, we are still finding out.

The high-profile victims of the recent WannaCry ransomware attack included the NHS, Australian railways and a car plant in France. But this was just one way hackers have used Bitcoin and other digital currencies illicitly.

And innocent businesses can easily be affected.

What are digital currencies?

For some, digital currencies are a stroke of genius that will liberate businesses. For others, they are an instrument of evil that could harm those using them.

Here's Eric Schmidt, the Executive Chairman of Google.

"Bitcoin is a remarkable cryptographic achievement. The ability to create something which is not duplicable in the digital world has enormous value. The Bitcoin architecture, literally the ability to having these ledgers that can't be replicated is an amazing advancement."

And here, by contrast, is JP Morgan's boss, Jamie Dimon, who declared Bitcoin a "dangerous" fraud, fit only for use by drug dealers, murderers and people living in places such as North Korea.

"The currency isn't going to work. You can't have a business where people can invent a currency out of thin air and think that people who are buying it are really smart."

Away from the hyperbole, digital currency can be defined as a type of currency that is non-physical. This means it is not represented by banknotes or coins. It also means that it can only be transmitted or exchanged by electronic means. Typically, it allows a high degree of anonymity, instantaneous transactions and borderless transfers of ownership.

What are the top five forms of digital currency?

Bitcoin stole a march on its competitors and now leads the digital currency pack by many virtual miles, yet others are establishing themselves. Some have received recognition for their more advanced features compared to Bitcoin. Others, such as Ethereum and Ripple, offer themselves specifically as enterprise solutions.

Here's how the major players look.

1. Bitcoin

Created by:
A suitably anonymous developer, or group of developers, known as Satoshi Nakamoto.

Launched:
2009

Current value:
$3,780

They say:
"Bitcoin allows exciting uses that could not be covered by any previous payment system."
Bitcoin.org

2. Litecoin
Created by:
Charlie Lee, MIT graduate and former Google engineer

Launched:
2011

Current value:
$58.99

They say:
"That's a game changer and that's when the game really starts!"
Charlie Lee on atomic swaps, or trades between digital currencies that do not require an intermediary.

3. Ethereum

Created by:
A worldwide team of developers for the Ethereum Foundation, a Swiss non-profit organisation.

Launched:
2015

Current value:
$278

They say:
"It allows user data to remain private and apps to be decentralized like how the internet was supposed to work."
Ethereum.org

4. Zcash
Created by:
Zooko Wilcox-O'Hearn, a US computer security specialist, and a team of others.

Launched:
2016

Current value:
$207

They say:
"If Bitcoin is like http for money, Zcash is https."
z.cash

5. Dash
Created by:
Evan Duffield is the creator and lead developer of Darkcoin, which became Dash.

Launched:
2014

Current value:
$304

They say:
"Dash's peer-to-peer network is one of the largest in the world."
dash.org

How does Bitcoin work?

Wallets

  • You install a Bitcoin wallet on your computer or mobile phone to generate a Bitcoin address. You can create more addresses whenever you need them.
  • By sharing your address, people and organisations can pay into it, and you can pay into theirs.
  • A Bitcoin address should only be used once.

The block chain

  • The Bitcoin network relies on a shared public ledger called the block chain.
  • This holds a decentralised record of all transactions which is updated and held by all users of the network.
  • It records all confirmed transactions and guarantees that each wallet has the required Bitcoins for a transaction.

Private keys

  • Bitcoin transactions from one wallet to another pass through a private key.
  • This authorises and signs the transaction, using mathematical proof, to confirm its validity and to ensure it cannot be changed.

Mining

  • All transactions are confirmed by the network in the following 10 minutes, through a process called mining.
  • This prevents transactions being altered in any way.

Why do hackers love Bitcoin?

The reason hackers love Bitcoin is not primarily due to any security flaws inherent in the system. It is the anonymity that it offers that makes it so attractive.

Bitcoin's decentralised technology allows secure payments and storage of money that doesn't require banks or people's names. In the wrong hands, this can make it an ideal tool for making transactions that are deliberately hard to trace.

How to protect your business from Bitcoin fraud

At present, security in the world of digital currencies is still very much in its infancy. It may be tempting for businesses to stay well away from this area until things improve. But with the proper measures in place, Bitcoin has serious potential to revolutionise industries around the world.

Lee Murphy, owner of accountancy software Pandle, feels the benefits of Bitcoin for businesses are huge:

"Moving forward, I believe Bitcoin will be a useful tool for businesses, especially in terms of payments between companies internationally. For example, the movement toward cryptocurrency means having to deal less and less with fluctuations in exchange rates across markets."

At the lowest level, malicious types will always find a way to trick unsuspecting victims, and with digital currencies it is often a case of new tools but old tricks. Common Bitcoin scams may well look familiar to you. They include:

  • Malware downloads and phishing
  • Bitcoin pyramid schemes
  • Bitcoin investment schemes
  • Fake exchange scams

For these kinds of cons, the first line of defence will always be security systems. Regularly updated protection is the best preventative measure against hackers and viruses. In addition, thorough staff training and awareness will ensure that anything that slips through the net is caught sooner rather than later.

For Bitcoins owned by businesses, multi-signature wallets are a fantastic method of protection from hackers; requiring two separate authorisations from two separate parties before any Bitcoins are released. While the first party would be the business in question, the second party would be a service that screens the transaction for fraud, making multisig accounts significantly more difficult to steal from.

Aziz Rahman, founder of award-winning business crime solicitors Rahman Ravelli, said: "Digital currencies are the latest technological development to offer huge potential benefits to those in business. But like so many aspects of modern-day business, digital currencies do present opportunities to those looking to commit crime.

"It is essential for anyone in business who is considering using digital currencies to seek expert advice on how they can be used and what procedures can be introduced into the workplace to prevent them being abused.

"Only by taking such steps can such currencies be used safely.''

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.