Bitcoin Sinks After Hackers Steal $65M from Exchange
bloomberg.com
Bitcoin Sinks After Hackers Steal $65M from Exchange
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Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#2What I learned from the video: Ninety percent of Bitcoin is traded in Chinese currency. Because most of the trading is in China, the impact of the hackers is minimized and the value is stabilizing after dropping twenty percent.
Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#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 sense. The timeline doesn't fit.
The most likely reason the price has been dropping is because the Bitcoin miners have ran out of reasons and deadlines to stop the bitcoin hardfork which will cause an increase in block size, which is the main reason why Bitcoin is artificially blocked from accepting more customers and grow.
Investors likely don't think its worth holding onto a currency if it has (and reached) an artificial ceiling.
Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#4Can someone who really knows this help fix my ignorance?
How does someone actually steal from an exchange?
As I understand most of the funds(80-90+%) are kept in cold storage. Was the exchange not following this "best practice"? Is this not a best practice?
The way the cash equities markets work is you make a trade to buy or sell shares and they get delivered in 3 days time. Why does a bitcoin exchange need to have any bitcoins at all in a wallet accessible to any machine connected to the internet? Could they not work in a manner like this?
Why not net all trades and do settlement at the end of the day. If people want to withdraw bitcoins batch the requests up until the end of the day and then you can have a person or software review all requests before they are put into a hot wallet and sent out.
I've written my fair share of risk systems over the past 15 years. I think I understand how to manage risk, and delaying transaction settlement is considered part of risk management. You can trade as fast as you want but the actual settlement, by design, lags trading to allow for errors to be caught.
Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#5Can someone who really knows this help fix my ignorance? How does someone actually steal from an exchange? As I understand most of the funds(80-90+%) are kept in cold storage. Was the exchange not following this "best practice"? Is this not a best practice? The way the cash equities markets work is you make a trade to buy or sell shares and they get delivered in 3 days time. Why does a bitcoin exchange need to have a…
Bitfinex used to keep BTC in cold storage, but replaced that system with segregated multi-sig (2 of 3) wallets for each user account, backed by BitGo. In that scenario BitGo held one key, and Bitfinex held 2 keys for each account (one online and one offline). Supposedly BitGo should have enforced some limits on withdrawals to prevent such events, but for some reason that was bypassed.
Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#6Can someone who really knows this help fix my ignorance? How does someone actually steal from an exchange? As I understand most of the funds(80-90+%) are kept in cold storage. Was the exchange not following this "best practice"? Is this not a best practice? The way the cash equities markets work is you make a trade to buy or sell shares and they get delivered in 3 days time. Why does a bitcoin exchange need to have a…
Bitfinex used to keep BTC in cold storage, but replaced that system with segregated multi-sig (2 of 3) wallets for each user account, backed by BitGo. In that scenario BitGo held one key, and Bitfinex held 2 keys for each account (one online and one offline). Supposedly BitGo should have enforced some limits on withdrawals to prevent such events, but for some reason that was bypassed.
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 out of a hot wallet?
Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#7Earlier quoted context omitted.
Bitfinex used to keep BTC in cold storage, but replaced that system with segregated multi-sig (2 of 3) wallets for each user account, backed by BitGo. In that scenario BitGo held one key, and Bitfinex held 2 keys for each account (one online and one offline). Supposedly BitGo should have enforced some limits on withdrawals to prevent such events, but for some reason that was bypassed.
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.
Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#8Earlier quoted context omitted.
Bitfinex used to keep BTC in cold storage, but replaced that system with segregated multi-sig (2 of 3) wallets for each user account, backed by BitGo. In that scenario BitGo held one key, and Bitfinex held 2 keys for each account (one online and one offline). Supposedly BitGo should have enforced some limits on withdrawals to prevent such events, but for some reason that was bypassed.
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…
> My question is why do you need any bitcoins at all in hot storage?
In the Bitfinex case essentially all bitcoins were in hot storage. Why they switched to that system I don't know. Perhaps they were convinced by BitGo marketing brochures that this would be more secure. Or, they were forced to do that by regulators.
In the general (not Bitfinex) case, you need hot storage in order to process withdrawals quickly. No one is going to use a cryptocurrency exchange which makes you wait 24h to withdraw, this is unacceptable in such dynamic markets.
Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#9Bitfinex had inadequate security, that much is now proven. But more problematic, there is no such thing as provably adequate security for holding other people's private wallet keys. Any flaw in the process of generating or storing the keys is essentially the mother of all bug bounties. That is why over time, I hope that a decentralized method of exchanging digital assets will be used more widely.
Re: Bitcoin Sinks After Hackers Steal $65M from Exchange
#10Does bitfinex have any legal responsibility to its customers? What are the U.S. laws (if any) surrounding the theft of bitcoins?