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Computer compromise leads to theft of bitcoins valued at $500,000 USD

forum.bitcoin.org

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Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#41

Post by brandall10 »

mrvc wrote: post #15

It's not really $500,000 though is it? As soon as you exchange a small amount of that into dollars you crash the exchange and the value drops significantly. I'd estimate it at about $30,000 worth.

Granted the market is easy to manipulate with small transactions that can start large swings; as well it would be difficult to find a buyer if you wanted to liquidate a lump sum of this size without a solid discount.

That said, I think you're overstating the impact this would have. The recent downswing from ~$30 to ~$10 in a period of a couple days was speculated to be due to MtGox consolidating 20 times this amount.

Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#42

Post by [deleted] »

brk wrote: post #21
BigZaphod wrote: post #8

Earlier quoted context omitted.

Nobody would keep $500,000 in cash sitting around their house, but that's essentially what this guy did.

Completely untrue. I've witnessed stacks of cash far in excess of that. However, when it is done, there is usually a fair bit of armament around the cash, and the kinds of people that keep that sort of cash on hand are also not the sort you want to commit an amateur robbery against.

[deleted]

Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#43

Post by staktrace »

byrneseyeview wrote: post #30
ansy wrote: post #11

I'm a BitCoin skeptic with the best of them. But this is breathtaking. That's one thing about bitcoins. There's no FDIC or SIPC watching your back. It's the wild west with train robberies and stage coach heists in all.

It's interesting to consider why that is. I could start a BitCoin deposit insurance company, for example: you'd pay me X% of your balance each month, and I'd make you whole in the event of fraud. Of course, I'd want all sorts of regulations on how you set this up; I might sell you some kind of extra-secure system for managing your balance, for example. At that point, the market would basically be putting a price on B…

Wouldn't this also defeat the purpose of BitCoin in the first place? And by "purpose" I'm referring to the whole "anonymous, untraceable" aspect of it. It's very much like cash - it's anonymous, yes, but also if it gets stolen there's not much you can do about it.

Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#44

Post by mrcharles »

Correct me if I'm wrong, but given the P2P nature of bitcoin, wouldn't it effectively give someone interested in malicious activity a list of target IP addresses? In theory he could set up his own P2P, watch for large transactions, and then he has an ip running a bitcoin client who (potentially) has a large wallet.

Then it's just a matter of running common exploits (or new ones, if you have them) in order to access the machine and the bitcoin wallet.

Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#45

Post by recoiledsnake »

byrneseyeview wrote: post #35
tybris wrote: post #20

I now understand that BitCoin is actually an experiment to teach people basic economics and why many of today's rules and institutions (e.g., banks) exist. Sorry for criticizing it. BitCoin is an awesome educational tool.

What prevents you from setting up a BitCoin bank? More interestingly: are the features that let you set up a dollar-denominated bank features or bugs?

Banks are regulated by law and have the funds insured by FDIC. i.e even if the bank goes belly up, the FDIC will make sure the depositors get the money. With BitCoin, how do you trust a bank? Even if it's just by word-of-mouth trust, eventually the bank will be taken over or run by non-trustworthy people. The threat of federal prison keeps most real banks honest. Nothing like that exists in the BTC world.

Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#46

Post by cheez »

ansy wrote: post #11

I'm a BitCoin skeptic with the best of them. But this is breathtaking. That's one thing about bitcoins. There's no FDIC or SIPC watching your back. It's the wild west with train robberies and stage coach heists in all.

FDIC or SIPC don't cover you if you have stacks of cash that get stolen.

This guy wasn't using a bank, he wasn't encrypting his wallet, so that is inevitable.

Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#48

Post by Astrohacker »

recoiledsnake wrote: post #45
byrneseyeview wrote: post #35

Earlier quoted context omitted.

What prevents you from setting up a BitCoin bank? More interestingly: are the features that let you set up a dollar-denominated bank features or bugs?

Banks are regulated by law and have the funds insured by FDIC. i.e even if the bank goes belly up, the FDIC will make sure the depositors get the money. With BitCoin, how do you trust a bank? Even if it's just by word-of-mouth trust, eventually the bank will be taken over or run by non-trustworthy people. The threat of federal prison keeps most real banks honest. Nothing like that exists in the BTC world.

> Banks are regulated by law and have the funds insured by FDIC. i.e even if the bank goes belly up, the FDIC will make sure the depositors get the money. With BitCoin, how do you trust a bank?

There were banks before the FDIC and people trusted them. The threat of insolvency can (but doesn't always) keep them honest.

Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#49

Post by hcho »

recoiledsnake wrote: post #45
byrneseyeview wrote: post #35

Earlier quoted context omitted.

What prevents you from setting up a BitCoin bank? More interestingly: are the features that let you set up a dollar-denominated bank features or bugs?

Banks are regulated by law and have the funds insured by FDIC. i.e even if the bank goes belly up, the FDIC will make sure the depositors get the money. With BitCoin, how do you trust a bank? Even if it's just by word-of-mouth trust, eventually the bank will be taken over or run by non-trustworthy people. The threat of federal prison keeps most real banks honest. Nothing like that exists in the BTC world.

How did people trust banks before FDIC?

Re: Computer compromise leads to theft of bitcoins valued at $500,000 USD

#50

Post by Astrohacker »

mrcharles wrote: post #44

Correct me if I'm wrong, but given the P2P nature of bitcoin, wouldn't it effectively give someone interested in malicious activity a list of target IP addresses? In theory he could set up his own P2P, watch for large transactions, and then he has an ip running a bitcoin client who (potentially) has a large wallet. Then it's just a matter of running common exploits (or new ones, if you have them) in order to access t…

There's no way to know which IP address corresponds to which bitcoin address.
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