Computer compromise leads to theft of bitcoins valued at $500,000 USD • Hacker News Board

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

#91

Post by scythe » Tue, Jun 14, 2011, 3:57 PM UTC

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.

And following the train of logic, what prevents you from regulating a bitcoin bank?

Crypto-currency is kind of like cash. Yes, you're a fool to try and run an entire economy with cash, but that doesn't mean it should disappear!

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

#92

Post by jlangenauer » Tue, Jun 14, 2011, 4:01 PM UTC

stef25 wrote: post #67

brk wrote: post #21

Earlier quoted context omitted.

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.

We're not all criminals. Civilians keeping 500K in their house is plain stupid.

Doubly so in the UK. Here, the police can presume without proof (and have done so) that any cash in excess of GBP1000 is the "proceeds of crime", and the onus is then upon the owner of the cash to prove that it isn't.

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

#93

Post by recoiledsnake » Tue, Jun 14, 2011, 4:02 PM UTC

stef25 wrote: post #58

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?

How would a bank stop you from getting taken to the cleaners if an outsider got access to your bank account in malicious ways?

The point is that is a little bit harder and more traceable than having to manage files(all your money) yourself. There is at least a semblance of security and the bank/govt will make good if someone breaks into the bank and steals all the cash there.

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

#94

Post by recoiledsnake » Tue, Jun 14, 2011, 4:08 PM UTC

Ixiaus wrote: post #75

DrewHintz wrote: post #69

Earlier quoted context omitted.

I doubt that encrypting the wallet on the HD would have helped much. It sounds like allinvain's computer was compromised. The attacker could have copied the decryption key when it was used legitimately by allinvain.

I put my wallet on an IronKey - I imagine that helps the situation.

Until you plug into a compromised computer and type the password? Or does it include protection against that?

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

#95

Post by krschultz » Tue, Jun 14, 2011, 4:10 PM UTC

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?

This is one of the casualities of the Bitcoin monetary policy.

(Obviously I'm simplifying, your money gets pooled with others and deposits and withdrawls happen from a pool of money, you don't get your own money back when you withdraw, but lets compare two hypothetical banks with only 1 customer each)

A dollar denominated bank takes your money and invests it. They use it for mortgages, or they put it in bond markets or equity markets. They make a profit. Some of that profit gets returned to you as interest. They also provide for safe keeping of the money. With interest rates near zero, we forget this, but thats the real reason for a bank. If it was just a safe place to keep money, we'd be paying them.

A Bitcoin bank couldn't work. You give them some Bitcoins. They transfer them to dollars, make some investments. Now you go to withdraw some money and they have to sell the investments. Since Bitcoins are deflationary, they can not make you whole without incurring a loss. There is no money to be made in operating a Bitcoin bank and giving interest so long as the exchange rate of Bitcoins to the real world keeps going the way its going. Everyone should just sit on their bitcoins and hold them.

Now if you just want to make a safe deposit box for Bitcoins, that's would work. And you would have to pay a fee. But there is a difference between a bank account and a safe deposit box, and I don't see bank accounts working with bitcoin any more so than they would have worked based on tulip bulbs in the 80s.

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

#96

Post by pnathan » Tue, Jun 14, 2011, 4:12 PM UTC

Sounds to me like a BTC bank should be set up, with corresponding accounts. Instead of 'you' holds all your BTC, your BANK holds most of your BTC in a secured location, and you can make withdrawals to your account on demand.

Of course, this would effectively require an insurance corp also set up in such a fashion that integrity of the bank could be configured.

/hmm... maybe I should do this!

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

#97

Post by pnathan » Tue, Jun 14, 2011, 4:12 PM UTC

Sounds to me like a BTC bank should be set up, with corresponding accounts. Instead of 'you' holds all your BTC, your BANK holds most of your BTC in a secured location, and you can make withdrawals to your account on demand.

Of course, this would effectively require an insurance corp also set up in such a fashion that integrity of the bank could be configured.

/hmm... maybe I should do this!

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

#98

Post by gyom » Tue, Jun 14, 2011, 4:35 PM UTC

jlangenauer wrote: post #92

stef25 wrote: post #67

Earlier quoted context omitted.

We're not all criminals. Civilians keeping 500K in their house is plain stupid.

Doubly so in the UK. Here, the police can presume without proof (and have done so) that any cash in excess of GBP1000 is the "proceeds of crime", and the onus is then upon the owner of the cash to prove that it isn't.

Sounds like a convenient rule for law enforcement to incriminate people when they have a "hunch" about their illegal actions.

When I was 12 y.o. I had that sort of money in my bedroom (years of saving money from my paper route job, and factoring inflation). Of course, I could prove that it was mine, but it seems like the bar is somewhat low if it's set at GBP1000. It's the kind of money that you use to pay to rent a cottage for your vacations, not ludicrous drug-traffic amounts ...

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

#99

Post by adrianwaj » Tue, Jun 14, 2011, 4:48 PM UTC

berberich wrote: post #55

cheez wrote: post #37

Third sentence: > If only the wallet file was encrypted on the HD. Yep. Anyone who doesn't do this is stupid.

I haven't used Bitcoin, so this is an honest question - Why doesn't the software encrypt the wallet automatically?

It's in the works: http://goo.gl/XAiBr and http://goo.gl/7HvQ4 (see quote in #3)

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

#100

Post by Groxx » Tue, Jun 14, 2011, 4:54 PM UTC

omarchowdhury wrote: post #52

Astrohacker wrote: post #50

Earlier quoted context omitted.

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

The point is that all of the IP addresses recorded in the network transactions are Bitcoin users.

No, you can make a receiving address without ever connecting to the network. Current clients won't do so (that I'm aware of), but it's entirely possible.

The main reason though is that new addresses aren't broadcast. The only time you know their location is when they send, and only if you were watching their traffic / the traffic of all nodes they sent to.