Step 1: Throw together a Bitcoin "exchange" Step 2: Announce you were "compromised" Step 3: Profit!
Step 2.5: Pay tons of restitution or get sued into next millenium
Bitcoinica MtGox account compromised
101–108 of 108 posts
Re: Bitcoinica MtGox account compromised
#102Earlier quoted context omitted.
Banking, as regards regulation, is a special case. If a taxi company or a pizza company goes belly up, people shake their heads sadly and move to a competitor. The free market is the best arbitrator. If a chain of banks goes belly up and people's life savings are gone, you get rioting in the streets. That's the kind of situation that let Hitler into power. For the sake of preserving civilization, governments act as t…
I disagree strongly. The reason that bank runs and failures are so destructive is because of the state build cartel, driven by central banking. That was built in order to prevent competition and to let fractional reserve(which is in essence fraud) to run wild. The only reliable way to ensure stability in banking is to separate it from the state and let the free market do what it does in every industry known to man, w…
Except, of course, that there's no way to tell as an ordinary customer whether your bank is genuinely secure or just following cargo-cult security until they get hacked and lose all their money. There's also no way to make sure that your bank isn't using fractional reserve banking until there's a bank run and it fails.
And that's assuming people are rational and wise. They're not. For example since the Bitcoinia failure, the free market has lead to a whole bunch of Bitcoin users investing in something that has all the hallmarks of a ponzi scheme and accusing anyone who points this out of trolling and slandering the guy running it.
Re: Bitcoinica MtGox account compromised
#103Earlier quoted context omitted.
I wonder why. There seems to be a huge gap in the market for a professionally run enterprise here. Or at least, anything more focused beyond students half-assing it part-time.
Bitcoin market activity may not be large enough to ever pay back the significant cost of building a secure exchange. Also, as TradeHill and CampBX discovered, people just won't move off of MtGox no matter how bad it is.
People won't move off of MtGox for a simple reason: it has by far the best liquidity.
The only way for another exchange to get a foothold would be to offer similar liquidity, which would mean taking the other side of most trades themselves. This would be very risky and they would need deep pockets.
Re: Bitcoinica MtGox account compromised
#104I can't believe people entrust virtual money to sites like these which in general - but consistently - seem to be run by amateurs.
Right now, as we speak, Bitcoin users are entrusting their money to an investment scheme that has all the hallmarks of a Ponzi[1]. We're talking 9% monthly interest if you invest enough bitcoins, utterly implausible explanations as to what the money's being invested in, a seemingly limitless capacity to swallow up new funds, and probably a whole bunch of other things I've forgotten. As far as anyone can tell, there's at least 32 thousand Bitcoins (about $240k at current exchange rates) invested in this scheme[2], possibly much more.
[1] https://bitcointalk.org/index.php?topic=91655.0 [2] https://bitcointalk.org/index.php?topic=91653.0
Re: Bitcoinica MtGox account compromised
#105Earlier quoted context omitted.
You mean 3372% interest— The 7% number is _per-week_.
I'm not sure why anyone would believe him enough to send him money. Perhaps they don't understand how absurd that claimed interest rate is? :x
I'm not sure either, but apparently the person running the scheme has a 32,000 BTC ($250k USD) wallet so I'm guessing a lot of people must've bought in enough to send him a lot of money:
Re: Bitcoinica MtGox account compromised
#106Earlier quoted context omitted.
Well I do agree with you that Bitcoinica was not 100% secure. This hack really has nothing to do with the app or its infrastructure. - I didn't set the password. - I didn't have the power to change the password. - I shouldn't have access to the account. The root cause is LastPass account being stolen.
Agreed that you are not personally responsible for this particular attack, though I see it as the latest in a series of cascading failures, beginning with the initial attack. It's the lack of consideration of security - that can only be baked in from the outset - that's the real root cause. If the application had been self-hosted in a physically secured location, the attack that exposed the LastPass credentials would…
Agreed. But one of the team members explicitly released the source code and that caused the hacker to correctly guess LastPass account. (At least this is the most "right" version of the story I've heard.)
Re: Bitcoinica MtGox account compromised
#107I know nothing about bitcoin, can someone provide a tldr about why it is (seemingly) so difficult to build a secure site around exchanging these things? I don't get how you can simply "Loose" a few hundred grand without a horse head winding up at the food of your bed.
Lots of the bitcoin hacks have been security amateur stuff. E.g. MtGox was just storing MD5 hashed passwords. Unix added salts to passwords decades ago. The people making this sites don't know about security.
Re: Bitcoinica MtGox account compromised
#108Earlier quoted context omitted.
I disagree strongly. The reason that bank runs and failures are so destructive is because of the state build cartel, driven by central banking. That was built in order to prevent competition and to let fractional reserve(which is in essence fraud) to run wild. The only reliable way to ensure stability in banking is to separate it from the state and let the free market do what it does in every industry known to man, w…
Except, of course, that there's no way to tell as an ordinary customer whether your bank is genuinely secure or just following cargo-cult security until they get hacked and lose all their money. There's also no way to make sure that your bank isn't using fractional reserve banking until there's a bank run and it fails. And that's assuming people are rational and wise. They're not. For example since the Bitcoinia fail…
The competitors of a bank practicing fractional reserve and cargo-cult security would have a major incentive in pointing that out, in order to gain market share.
The free market does not lead people to nothing. What 'it' does is to reward lucrative (i.e. economical and profitable) behavior and to punish stupid ones. It is a form of social organization with an embedded stabilizing mechanism.
The same could be said of centralized banking, or centralized anything, as could be more easily seen on the more socialist economies of the soviet block.
Given that, let the people invest their money as they see fit, and punish fraud (including fractional reserve banking) as the crime it is. Simple solution.