Bitcoin exchange shuts after heist Bitcoin exchange Bitfloor has suspended its operations while it tries to figure out who pinched 24,000 units of the virtual currency by accessing an unencrypted backup and using information it contained to transfer 24,000 BTC to destinations unknown. In a post on the Bitcoin Forum, Bitfloor founder Roman Shtylman said he has …
if you leave your wallet on a park bench, someone might take your money.
Someone actually walking by that park bench and spotting the wallet.
With BitCoins, everone knows where the park benches are, that there are wallets lying on them, and having to physically walk by and spot the wallet is no restriction. Which _is_ a fundamental difference between BitCoins and a wallet with physical money.
Plenty of lack of comprehension here:
Bitcoin is an unhackable digital payment system, but 3rd parties may be hacked.
If you keep your bitcoin wallet secure then nobody can spend your coins. Knowing the serial number of the bank notes in my wallet doesn't let you spend the notes.
An absence of trustworthy 3rd parties is no hindrance to bitcoin because (like cash) it does not rely on 3rd parties. With bitcoin you can transfer money peer-to-peer across the internet, which is the whole point.
Bitcoin was designed to be created by people with powerful video cards. The fact they do it is not a surprise or a failure of the system.
Etc.
Bitcoin was designed to be created, and for the creation to have a cost (the video card and electricity, for example). The algorithm which is used to create the coins ensures that the rate of creation is always falling and will drop to zero when there are about 21000000 bitcoins. Creating bitcoins is not a problem, oversight or source of inflation, it is the way it's designed. Bitcoin didn't significantly inflate last year, it suffered from a bursting bubble. The natural long-term state for bitcoin is deflation. What we usually call money is created every time a bank agrees to make a loan, so if inflation is your concern then bitcoin is the solution.
Vin, bitcoin is like cash, so compare it with cash. If you want to compare it with a credit card then you need to imagine what it would be like if a credit card issuer extended credit in bitcoins. Would it necessarily be any different to a sterling-based credit card?
If this is true then please excuse my ignorance. I was under the impression (mainly because the term "mine" was used instead of "create") that people had created bitcoins without going through official channels, i.e. not respecting the controlled nature of bc generation.
...at least not for the reason you state.
The algorithm is designed so each new coin takes more and more processing power to create, so the rate of inflation should be controlled to a fairly low level. (This means the people who got in on the ground floor, when the coins were "cheap" to create, made out handsomely. Rather clever, really; the person who designed it designed it to give himself and his friends an automatic head start in wealth. Not *quite* a pyramid scheme, but it sorta looks like one if you squint just right.)
That doesn't mean it can't collapse relative to other currencies, of course, as it appears to have done.
In a way Bitcoin has failed.
There have been several (at least three to my knowledge) instances where thefts of Bitcoins have resulted in liquidity issues. All currencies have in their favour is the trust of the people who use them. If users cannot keep their Bitcoins safely or trust third parties to convert them to real money at any time and at a fair and predictable rate, they won't use them.
It is far from unlikely that the entire Bitcoins edifice will collapse with no-one trusting or wanting them.
Bitcoin worked exactly as intended. Someone with access to the wallet keys was able to anonymously and purposefully transfer huge sums of money.
The fact that it was unauthorised (due to lack of security of the wallet) is the problem, not Bitcoin. It's like blaming "credit cards" because you left your card in a restaurant and someone fraudulently charged it.
Actually, I'm impressed that BitCoin hasn't had some trick, or significant security flaw, that made the whole thing collapse anyway. In terms of what it was designed to do, it certainly does it well.
The question is not "Do I trust BitCoin?" at the moment as "Do I trust 3rd parties to hold/trade my Bitcoins?"
The question is not "Do I trust BitCoin?" at the moment as "Do I trust 3rd parties to hold/trade my Bitcoins?"
Yeah sure. So by the same reckoning I should keep all my conventional money in a safe in my own strong room, never use a bank or building society or credit union for anything, never send any money through the post using a cheque or postal order, or over the Net, pay for nothing using plastic and personally stand guard over my stash with a sub-machine gun at all times ? And I'm expected to engage in the same kind of behaviour in the digital world with Bitcoin if I'm to be able to use these precious numbers securely ?
Don't think I'll bother. Bitcoins not accepted here.
"Do I trust 3rd parties to hold/trade my Bitcoins?"
At the risk of stating the bleedin' obvious, a currency you can't trust third parties to hold/trade is about as much use a chocolate teaspoon in the Sahara on a sunny August bank holiday.
How many more 'mistakes were made' is it going to take before users of Libertarian NerdCash[tm] realise there's no such thing as an unhackable digital system?
Just a guess, perhaps Shtylman's in a country with no extradition treaty with the States.
“I still have all of the logs for accounts, trades, transfers. I know exactly how much each user currently has in their account for both USD and BTC. No records were lost in this attack.”
I'm sure he knows exactly the amounts, so did all the other bankers, virtual or not, didn't stop them running off with a bucket load of (our) money...
it's also a good way to selectively apply evolutionary pressure to make the system more resilient.
if you're a pioneer, you always have the most to lose and the biggest chance of losing.
eventually it'll work, but it'll take a while a lots of lost money....just depends on whether people want to keep pushing money into the system whether it fails or not.
I suppose private users of bitcoin are going to be ok, but well, if you leave your money in somebody elses hands, you really should know whether they are insured and have the capability to cover losses.
somebody perhaps should sue the guy, that might help :)
"Good way to shut down an "underground unregulated" currency"
Is it? Have you done this before then?
You have a hypothesis, nothing more.
There are plenty of things off with Bitcoin, having unsigned demon software and installers is one of the big things in my book, but whatever your personal feelings, keep in mind that Bitcoin is a speculative market and kind of difficult to predict.
It's been "dead" before, it keeps coming back.
Bitcoin is a zombie currency ;)
The underground nature of it is rather overstated. Very few places accept bitcoins directly, and the moment you convert it to some other currency, you're in a regulated market.
To me it seems like it's an "underground currency" in about the same way Beanie Babies were in the 90s. Something that briefly had a significant value because people thought they could buy in cheap and then profit as the market went up.
There's no excuse for being so wrong. Just look at a chart and you'll see it's been in an uptrend for almost a year. It's only been higher for about 3 months in its history, and most of that was an obvious bubble. Do you not have the internet where you live?
Given that bitcoin is secure (this is not a story about bitcoin being unsecure, it's a story about a bank robbery) and the comment didn't mention security, I think you should consider the remark about the exchange rate to be a remark about the exchange rate.
24,000 Bitcoins were stolen. As soon as they get used, the Bitcoin markets will know and the culprits caught; no? I thought one of things about Bitcoin is that the transaction were signed by both parties and part of the system was for the various "miners" to verify those transactions.
So why no just sit tight and wait for the stolen Bitcoins to be used? Odds are that the first usage is either by the thief, or someone in receipt of stolen property.
I don't use Bitcoin, but from my (limited) understanding it seems to me like there would be a way to recover this loss.
"I am a nigerian prince and my father has left me a USB pen with $250,000 of bitcoin on it, but it does not show a drive letter in windows.
I will accept bids of up to $50,000 cash to allow the fixings of this USB pen, to be doubled from the relieved funds when the USB pen is fixed"
Perhaps...
You are not entirely wrong, and I've heard at least one of the exchanges has been known to freeze accounts and investigate when they think someone is using stolen bitcoins.
But the trouble is, because Bitcoin is P2P, there is no central authority to issue some kind of blacklist of "bad coins" that everybody will recognize. And there certainly isn't any way to issue replacement clean BTC for the rightful owner.
It's somewhat like cash if you think about it. Suppose a bank is robbed and they know exactly what the serial numbers are on all the stolen bills. Other banks can be alerted to be on the look out for that money, and I suppose they probably do that in some cases. But there's no practical way to implement a completely ban on spending those bills at the local 7-Eleven or whatever.
Funny, first time I learned about Bitcoins, I felt something in my water that told me to steer clear.
It's the same feeling I had back in 1988, when I was looking to buy a house with a friend, having just graduated, and having endowment mortgages shoved down our throats. After hearing how they worked, we both (independently) decided they sounded a bit dodgy, and to - guess what - steer clear.
I have always wondered exactly *how* "missold" the people who claim they were, actually were. If 2 22 year old newbies could smell a rat, then surely anyone older, or more experienced should have too ?
But of course, my dear fellow, everone knows these Dutch tulip bulbs are worth a fortune. Just last week they were only worth a couple of hundred guineas each and now they're selling for twice that. Oh drat, my servant mistook half a dozen of them for onions. I thought that soup tasted a bit odd and now I have the most terrible indisposition.
But there is an audit trail. The guy knows who he owes, and how much. This is just like cash being stolen from a post office - they know who the cash belongs to, but not where it is*. Neither crime is an indication of a systemic fault.
* Not quite the same: with bitcoin they do know where it is, they just can't get it because of the system's built-in security.
Writing off a currency system because a bank collapses? Recently we saw Icelandic banks collapse, people lost money. But most people I know haven't abandoned our existing money system. Bernie Madoff scammed people out of money - is that the fault of the system of money?
When I first saw Bitcoin I thought it was the most ridiculous idea I'd come across for sometime. But as I read more I found that many of the issues that I thought of had already been addressed. I'd recommend anyone who isn't so familiar with it to have a good read about how it works before merely dismissing it.
In the years since Bitcoins have had some notable financial value there have been many attacks and thefts - but so far no one has found a vulnerability in the system that breaks it - so they've focussed on attacking the banks and other weak links.
I do believe that there is a future for it... like cash it can't be charged back, and is anonymous (compare with credit cards), but it still can be transferred easily via the net. This makes it possible to use for porn or gambling (both massive money spinners on the net) avoiding eg US bans on use of credit cards for gambling. It securely addresses a requirement that credit cards and cash can't fulfil - for that reason I don't expect it to disappear any time soon. As to whether we'll all be using Bitcoins in 5 to 10 years - I think that is unlikely, but I imagine its user base will be much larger than it is today - unless a major vulnerability does appear.
When that bank is the Central Bank for that currency, that is precisely what happens.
No amount of security built into the actual currency will make up for the fact that the institutions that are central to the existence of Bitcoins such as the exchanges, are not reliable. If people are concerned about liquidity, Bitcoins will have a very slow take up. At the moment I would not dare to hold more than a few pounds in Bitcoins in case I got stuck with nothing but a few worthless numbers.
"When that bank is the Central Bank for that currency, that is precisely what happens."
Actually the bank can be perfectly liquid. A currency is only as good as the confidence of users.
This is why the Bank of England is shitting itself about the sheer volume of fake 1 pound coins in circulation. It's perilously close to the level where people will simply stop accepting the things.
There are lots of kneejerk criticisms of Bitcoin here by people who obviously haven't bothered to read up on them at all. Many of the "problems" raised either aren't problems at all, or have very solid solutions. But there is one aspect that does worry me. Namely that it's extremely easy for an exchange or anyone else holding bitcoins on someone's behalf to say "We got hacked! They were all stolen!" when really they have taken the coins for themselves. Of course that kind of thing happens with traditional money too, and maybe even maple syrup, but Bitcoin does make it very very easy, and very very hard to prove.
One the plus side, Bitcoin does make relying on 3rd parties much less necessary than with using traditional methods of transferring money, but obviously there will still be times when people want to do it, so this can be a real problem.
What a fantatstic Idea!! i need to go set up an exchange right away!. Unfortunatly I'd probably have to spend all the stolen money protecting myself from hitmen.
The criticisms really are over the top. If you don't like the idea then don't use it. Paypal is still accepted. I'm pretty sure I don't understand the concept fully as I've only read the Spectrum article on it and The Register has helpfully pointed out some of the problems with the practial use of the currency but it is very very very neat technically. I have no desire to do anything illegal or untrackable but I am interested enough in the cryptography and technology that I find bitcoins facinating.
What was my point again?
They were keeping unencrypted backups, without isolating them from the public internet?
Very silly. The problem is there doesnt seem to be a body that check these things before allowing an exchange to operate.
The actual idea is quite inovative, but I really wouldnt trust it in its current form.
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