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

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

#11

Post by mikeyouse » Wed, Aug 03, 2016, 3:34 PM UTC

homogeneous wrote: post #10

Does bitfinex have any legal responsibility to its customers? What are the U.S. laws (if any) surrounding the theft of bitcoins?

Most of what happens next depends on how they were organized and registered.

The obvious next step is that Bitfinex will have to file for bankruptcy protection. Whether people get their cash balances / other crypto / etc. back or some proportion of the remaining assets will be up to the bankruptcy trustee. The trustee will follow the law but I don't know if they were properly registered, aka where depositers fall on the list or whether any of the assets would be considered secured.

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

#12

Post by koolba » Wed, Aug 03, 2016, 3:43 PM UTC

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 punchlines.

Every time a company attempts any form of "hot" storage for Bitcoin this seems to happen. At this point, I'm convinced it's only a matter of "when" not "if" for anybody else doing it. People keep trying to find an intersection between security and convenience but the lines are parallel!

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

#13

Post by odrekf » Wed, Aug 03, 2016, 3:53 PM UTC

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…

So how does Coinbase do it?

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

#14

Post by celticninja » Wed, Aug 03, 2016, 3:54 PM UTC

mikeyouse wrote: post #11

homogeneous wrote: post #10

Does bitfinex have any legal responsibility to its customers? What are the U.S. laws (if any) surrounding the theft of bitcoins?

Most of what happens next depends on how they were organized and registered. The obvious next step is that Bitfinex will have to file for bankruptcy protection. Whether people get their cash balances / other crypto / etc. back or some proportion of the remaining assets will be up to the bankruptcy trustee. The trustee will follow the law but I don't know if they were properly registered, aka where depositers fall on…

they would only need to file for bankruptcy protection if they could not cover the loss from their own funds.

Right now with the price falling that could be an easier proposition tomorrow or next week.

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

#15

Post by odrekf » Wed, Aug 03, 2016, 3:59 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…

Actually it makes perfect sense, and has happened in previous thefts.

I'm an investor and I think it's worth holding onto a currency if I see it as a good store of value, it doesn't matter if not everyone on earth is using it (eg: does everyone use gold? Could everyone use gold? No. Still a good store of value). So please don't speak on my behalf.

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

#16

Post by lojack » Wed, Aug 03, 2016, 4:10 PM UTC

odrekf wrote: post #13

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…

So how does Coinbase do it?

Coinbase uses cold storage. They have some reserves in hot storage, but presumably less funds accessable makes them a smaller target. Correct me if I'm wrong, but I believe they are able to pull this off because they aren't technically an exchange. Coinbase Exchange may be all in hot storage, but they provide a seamless way to transmit your exchange reserves to a cold storage backed wallet.

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

#17

Post by aianus » Wed, Aug 03, 2016, 4:23 PM UTC

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.

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

#18

Post by rabbyte » Wed, Aug 03, 2016, 4:24 PM UTC

chollida1 wrote: post #6

onestone wrote: post #5

Earlier 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…

You're making too much sense to work in cryptocurrency.

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

#19

Post by solotronics » Wed, Aug 03, 2016, 4:38 PM UTC

The price has rebounded quite a bit. This is different from the largest exchange hack in BTC history (2014 - MtGox) because now the exchange volume is much more distributed. I think this is a reflection of the increased robustness of the bitcoin economy in whole.

Pre Hack: $600 Low Point Post Hack: $465 Currently: $560

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

#20

Post by solotronics » Wed, Aug 03, 2016, 4:40 PM UTC

doorty wrote: post #2

What 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.

That actually may not be true, many of the Chinese exchanges have 0 fee trading so their volume could be 'fake'.. there is no way to tell definitively.