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Cyber Thoughts Newsletter
October 2024
What if we told you that Bitcoin ($BTC) is the currency of the world’s third-largest economy?
No, Japan didn’t ditch the $YEN for $BTC overnight. It turns out that the cybercrime market now ranks third after the US and China as measured by GDP, and the accepted currency of cybercrime is Bitcoin.
Conventional wisdom holds that because US taxpayers must use the dollar to fulfill their tax obligations, there will always be a certain amount of demand for the currency. This same argument can be applied to $BTC by replacing tax obligations with cyber ransoms.
Before the widespread adoption of Bitcoin, it was much harder to pay the ransoms associated with cyber attacks. Cybercriminals were reluctant to use ACH or wire transfers because banks could simply claw back the transaction. Other clumsy methods included cash and even gift cards. An old story even cyber professionals pause to appreciate recounts a ransom being paid in diamonds. Bitcoin immediately rendered each of these methods obsolete.
If you believe cybercrime will increase, which most security professionals do, then you might conclude the value of Bitcoin will also rise as demand for it increases. You have to believe several things, including that Bitcoin will remain the prominent ransom currency in the world of cybercrime, but overall, the sad reality of growing cybercrime makes for quite the bull case hypothesis.
After a quiet summer, we are seeing new activity in the M&A market. While some of it is the continued cleanup of companies that raised at unsustainable valuations in 2021, we are also witnessing companies making strategic acquisitions that investors can be happy with. While investment levels are below 2021’s spike, they are back on the growth line that ended in 2018 before the markets got frothy. The only hitch we see is that new investments are below the historical average, as more rounds are merely extensions and recaps. This will likely continue to be the case for another 12 months.
Good companies are still getting funded, but the fundraising market for founders is probably harder than in 2018 and is certainly harder than the top in 2021. With that said, it’s easier now to find good talent, which is bullish for those who do raise in this environment.
Lastly, if you appreciate our highlighted content, please follow us on Twitter and LinkedIn, where we regularly post about things worthy of attention.
What We're Reading
Here's a curated list of things we found interesting.
The World’s Third-Largest Economy Has Bad Intentions — and It’s Only Getting Bigger
Unlike a normal nation-state, the cybercrime economy is globally distributed and as such has “lobbyists” in countries across the globe. It’s hard to fight an enemy living among your own population.
Move over, Japan and Germany. The global cybercrime economy – a $9.5 trillion behemoth – represents the world’s third-largest economy by GDP, according to Cybersecurity Ventures, trailing only the US and China. Populated by bad actors, the World Economic Forum describes it as “the dark underbelly of the digital era.”
OpenAI shift to for-profit company may lead it to cut corners, says whistleblower
It is really hard to keep track of the drama at OpenAI. Will Sam Altman get a 7% stake in the company? He says “No”. Why are so many early employees leaving? Will AI destroy us all? We have a whistleblower now who fears that restructuring as a for-profit company will lead to cutting corners and bad behavior.
OpenAI’s plan to become a for-profit company could encourage the artificial intelligence startup to cut corners on safety, a whistleblower has said. William Saunders, a former research engineer at OpenAI, told the Guardian he was concerned by reports that the ChatGPT developer was preparing to change its corporate structure and would no longer be controlled by its non-profit board.
Microsoft deal would reopen Three Mile Island nuclear plant to power AI
Microsoft, famous for the Blue-Screen-of-Death will be opening a nuclear power plant, what could possibly go wrong? J/K But the amount of power required to run LLMs is making the idea of having your own nuclear power plant viable. That is crazy.
The Three Mile Island nuclear plant, home of the worst nuclear accident in U.S. history, would restart under a deal in which Microsoft purchases all its power.
Transactions
Deals that caught our eye.
Recorded Futures is Acquired for $2.65 Billion
Mastercard today expanded its cybersecurity services with an agreement to acquire global threat intelligence company Recorded Future from Insight Partners for $2.65 billion. The acquisition bolsters the insights and intelligence used to secure today’s digital economy – in the payments ecosystem and beyond.
Podcasts
What we’re listening to.
Cyber Thoughts Podcast: Episode 10 with Mike Privette
In this episode, Lucas Nelson welcomes back Mike Privette, founder of Return On Security. Together, they discuss Mike’s role as a fractional CISO and his unique blend of consulting, research, and insights into cybersecurity funding and market trends. The conversation covers highlights from major conferences like Black Hat and DEFCON, the evolution of AI in cybersecurity, and the importance of staying ahead of emerging threats. We’re excited to make discussions with Mike a regular segment.
About Lytical
Lytical Ventures is a New York City-based venture firm investing in Corporate Intelligence, comprising cybersecurity, data analytics, and artificial intelligence. Lytical’s professionals have decades of experience in direct investing generally and in Corporate Intelligence specifically.