Bitcoin Sinks After Hackers Steal $65M from Exchange • Hacker News Board

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#21

Post by Aelinsaar » Wed, Aug 03, 2016, 4:45 PM UTC

aianus wrote: post #17

koolba wrote: post #12

From the article (emphasis mine): > While trading was halted in all digital currencies, including ethereum, the exchange said losses were limited only to bitcoin. It also said U.S. dollar deposits were not impacted . As someone standing on the crypto currency sidelines with a bag of popcorn, I feel like this movie has gone from cyber punk drama to a played out comedy where you already know all the jokes and punchline…

Real world banks get robbed every day. As long as the hot wallet is a small enough portion of the total funds (unfortunately not what happened here) it'll just be an occasional cost of doing business.

Real world banks are backed by the federal government, both in terms of the FDIC, and the FBI and broader DOJ. Robbing a bank is a federal offense, and that is frankly why "big heists" tends to be such great fiction. Mostly.

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#22

Post by solotronics » Wed, Aug 03, 2016, 4:48 PM UTC

thomaszander wrote: post #3

> Bitcoin slumped 5.5 percent against the dollar as of 2:30 p.m. on Wednesday in Tokyo, bringing its two-day drop to 13 percent. Prices also sank 6.2 percent on Monday, although it was not clear if that initial move was related to the hack. The price has actually been dropping consistently since the 31st of July. Granted, this hack has caused a the drop to be bigger, but attributing the entire drop to it makes no sen…

There are some nuances that are often not fully understood when discussing the transaction limit in bitcoin. Firstly, since the transactions are processed by the miners in exchange for a fee we have evolved into a dynamically calculated fee system. Since the blockchain is immutable this makes sense so that it is costly for an attacker or abuser to flood the system with meaningless transactions. There is some contention in this, but from my perspective what has emerged is a free market where if you need a quick transaction guaranteed you will pay the few cents to get it. Also, the Lightning network payment layer is in testing currently and when it is added as another layer on top of bitcoin this enables a huge rate of transactions per second for negligible price.

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#23

Post by mrb » Wed, Aug 03, 2016, 4:52 PM UTC

Interesting: the thief is currently attempting to launder a fraction (1000 BTC, worth ~$550k) through a giveaway:

https://www.reddit.com/r/Bitcoin/comments/4vykkr/1000_btc_gi...

https://bitcointalk.org/index.php?topic=1574127.0

He is sending the coins as we speak: https://blockchain.info/address/1BfxSuxJqXuizBbTcP238JZY9DT4...

As a contingency, to plan for his possible arrest/death/etc, he signed a NLOCKTIME transaction that would automatically destroy these 1000 BTC in a week if no action is taken.

His handle "rekcahxfb" spells "bfxhacker" in reverse. No plans yet on what he will do with the remaining 118 500 BTC.

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#24

Post by jessaustin » Wed, Aug 03, 2016, 4:54 PM UTC

zekevermillion wrote: post #7

chollida1 wrote: post #6

Earlier quoted context omitted.

Sure, I think I understand that, and I appreciate your answer. My question is why do you need any bitcoins at all in hot storage? What's wrong with netting until the end of the day and then put the required amount of coins in a hot wallet to do settlement say 24 hours after a trade? Wouldn't this cooling off period give software and risk managers a chance to find invalid transactions and keep funds from being stolen…

Bitfinex was required by US regulators to switch from cold storage to segregated per-user wallets. Something to do with margin requirements for commodities exchanges.

Can you link to more detail about this? This doesn't seem like a requirement that would be enforced for other "commodities" exchanges? Also, it doesn't seem impossible to set up "per-user" cold storage?

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#25

Post by mrb » Wed, Aug 03, 2016, 4:56 PM UTC

zekevermillion wrote: post #7

chollida1 wrote: post #6

Earlier quoted context omitted.

Sure, I think I understand that, and I appreciate your answer. My question is why do you need any bitcoins at all in hot storage? What's wrong with netting until the end of the day and then put the required amount of coins in a hot wallet to do settlement say 24 hours after a trade? Wouldn't this cooling off period give software and risk managers a chance to find invalid transactions and keep funds from being stolen…

Bitfinex was required by US regulators to switch from cold storage to segregated per-user wallets. Something to do with margin requirements for commodities exchanges.

Correct. Here is the source: "CFTC Regulation Prevented Bitfinex From Using Cold Storage" http://imgur.com/O46UNix

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#26

Post by Karunamon » Wed, Aug 03, 2016, 5:00 PM UTC

Aelinsaar wrote: post #21

aianus wrote: post #17

Earlier quoted context omitted.

Real world banks get robbed every day. As long as the hot wallet is a small enough portion of the total funds (unfortunately not what happened here) it'll just be an occasional cost of doing business.

Real world banks are backed by the federal government, both in terms of the FDIC, and the FBI and broader DOJ. Robbing a bank is a federal offense, and that is frankly why "big heists" tends to be such great fiction. Mostly.

I'm pretty sure that stealing hundreds of thousands of dollars worth of a "thing", regardless of what that "thing" is, is a federal offense thanks to CFAA, if nothing else.

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#27

Post by paulcole » Wed, Aug 03, 2016, 5:12 PM UTC

mrb wrote: post #23

Interesting: the thief is currently attempting to launder a fraction (1000 BTC, worth ~$550k) through a giveaway: https://www.reddit.com/r/Bitcoin/comments/4vykkr/1000_btc_gi... https://bitcointalk.org/index.php?topic=1574127.0 He is sending the coins as we speak: https://blockchain.info/address/1BfxSuxJqXuizBbTcP238JZY9DT4... As a contingency, to plan for his possible arrest/death/etc, he signed a NLOCKTIME transact…

Just curious, how is he laundering them? Wouldn't he need to get clean bitcoin back in return?

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#28

Post by Digit-Al » Wed, Aug 03, 2016, 5:14 PM UTC

mrb wrote: post #23

Interesting: the thief is currently attempting to launder a fraction (1000 BTC, worth ~$550k) through a giveaway: https://www.reddit.com/r/Bitcoin/comments/4vykkr/1000_btc_gi... https://bitcointalk.org/index.php?topic=1574127.0 He is sending the coins as we speak: https://blockchain.info/address/1BfxSuxJqXuizBbTcP238JZY9DT4... As a contingency, to plan for his possible arrest/death/etc, he signed a NLOCKTIME transact…

How is this 'laundering'? Laundering is putting dirty money into some system and getting clean money back. This appears to be just giving some bitcoins away and getting nothing back. Forgive me if I'm misunderstanding something.

[edit: okay, paulcole just beat me to the punch.]

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#29

Post by teod » Wed, Aug 03, 2016, 5:23 PM UTC

paulcole wrote: post #27

mrb wrote: post #23

Interesting: the thief is currently attempting to launder a fraction (1000 BTC, worth ~$550k) through a giveaway: https://www.reddit.com/r/Bitcoin/comments/4vykkr/1000_btc_gi... https://bitcointalk.org/index.php?topic=1574127.0 He is sending the coins as we speak: https://blockchain.info/address/1BfxSuxJqXuizBbTcP238JZY9DT4... As a contingency, to plan for his possible arrest/death/etc, he signed a NLOCKTIME transact…

Just curious, how is he laundering them? Wouldn't he need to get clean bitcoin back in return?

I suppose he could pose as the "winner" and claim ignorance, although I'm sure there's much better ways of laundering via a Mixing service [https://en.bitcoin.it/wiki/Mixing_service] or something similar.

Re: Bitcoin Sinks After Hackers Steal $65M from Exchange

#30

Post by andrewla » Wed, Aug 03, 2016, 5:27 PM UTC

paulcole wrote: post #27

mrb wrote: post #23

Interesting: the thief is currently attempting to launder a fraction (1000 BTC, worth ~$550k) through a giveaway: https://www.reddit.com/r/Bitcoin/comments/4vykkr/1000_btc_gi... https://bitcointalk.org/index.php?topic=1574127.0 He is sending the coins as we speak: https://blockchain.info/address/1BfxSuxJqXuizBbTcP238JZY9DT4... As a contingency, to plan for his possible arrest/death/etc, he signed a NLOCKTIME transact…

Just curious, how is he laundering them? Wouldn't he need to get clean bitcoin back in return?

The idea, I think, would be the analog of throwing thousands of dollars from a bank robbery into the street. The stolen bills can be identified by their serial numbers, but if law enforcement tries to crack down every time they see one of those bills pop up, the actual thief will be buried in the noise.

In Bitcoin land this is both more feasible and more complex at the same time -- it's very easy for a poorly planned version of this to make the thief no harder to identify, and even a well-executed version requires vigilance in the future to avoid betraying the identity of the thief vs. the identity of one of the giveaway recipients.