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Bitcoin exchange hacked via Rails exploit, funds stolen

bitcointalk.org

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Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#21

Post by raganwald »

pavel_lishin wrote: post #10
pdog wrote: post #6

Earlier quoted context omitted.

The banking system was already very sophisticated pre-1930s.

My question was, specifically: It's 1903, you deposit your life savings into your local bank, and a week alter it gets robbed. Do you get any of that money back? Or are you now broke?

A deposit is an IOU from the bank to you; If the bank fails as a result of the robbery, you are SOL. However, if the bank remains solvent, it absorbs the loss.

In most cases, even a large robbery wouldn't ruin a bank: They could borrow against or sell their mortgages to another bank for cash to pay depositors.

This is different than a safety deposit box: The fine print is that you are responsible for its contents and if the bank is robbed, they will not replace the contents or reimburse you.

So, if you put your life savings into gold and put the gold in a safety deposit box, you lose. If you put your life savings in a deposit account, you will be reimbursed unless the bank fails outright.

(Prior to the creation of the FDIC in the US or deposit insurance in Canada).

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#22

Post by nickpinkston »

sp332 wrote: post #16
hexis wrote: post #7

Earlier quoted context omitted.

In the US, at least, people still got famous for being bank robbers back then. The FDIC, which provides limited insurance for bank deposits, started their insurance on January 1, 1934. So, sophistication aside, it's an interesting question what happened to depositors after a bank robbery.

The FDIC doesn't cover bank robberies. https://www.fdic.gov/consumers/consumer/information/fdiciorn...

Though I believe they've got another form of insurance for this.

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#23

Post by TazeTSchnitzel »

If it's that easy to steal, you're probably doing it wrong. The front-end server should never have direct access to the bitcoin RPC server, since the front-end is likely to be vulnerable. Instead, it should contact a robust back end server, which then talks to the RPC.

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#24

Post by numbsafari »

pavel_lishin wrote: post #4

I guess this is still the Wild Wild West era of Bitcoin; I'd wager plenty of banks got knocked off by bandits back in the day, too. What happened to a bank's customer's funds if it got robbed prior to 1933?

It probably depends.

Banks are typically capitalized by a variety of assets, of which cash is typically a small amount.

In addition, the bank typically has its cash holdings distributed at a number of different branches.

Your account at the bank is technically it's liability. Essentially, you've loaned your money to the bank with an option to redeem it at any point in time (demand-deposit account, or checking account) or up to some period of time after asking for it (time-deposit account, or savings account).

So, let's say a bank's branch is robbed of $10,000. What happens? The banks shareholder lose $10,000.

Let's say all the cash and physical assets at a branch is robbed. The bank will typically cover those assets with assets from other branches. The bank's shareholders swallow the losses. Sometimes the bank will sell additional shares, or some of its remaining real assets to help provide it with more liquidity so it can continue to cover funds requests by account holders.

Let's say a bank has all its assets in cash in a single branch location and that location is robbed, meaning the bank now has no assets left. That bank is now bankrupt. It goes to bankruptcy court and you are a creditor. Once the banks remaining assets are sold, you may get a few pennies.

This is a major failing of the existing bitcoin repositories. They aren't banks and so aren't regulated as such. They're just storage lockers where you hide your cash under a mattress. In the event of a theft or fraud... oh well! It'd be interesting to see someone get a bank charter and backup those bitcoin deposits with real capital.

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#25

Post by roel_v »

hexis wrote: post #7
pdog wrote: post #6

Earlier quoted context omitted.

The banking system was already very sophisticated pre-1930s.

In the US, at least, people still got famous for being bank robbers back then. The FDIC, which provides limited insurance for bank deposits, started their insurance on January 1, 1934. So, sophistication aside, it's an interesting question what happened to depositors after a bank robbery.

"In the US, at least, people still got famous for being bank robbers back then."

What are you talking about? People are still famous for being bank robbers, e.g. http://en.wikipedia.org/wiki/List_of_bank_robbers_and_robber... . FDIC insurance has nothing to do with robberies, it insures against banks going bankrupt.

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#26

Post by Graham24 »

pavel_lishin wrote: post #10
pdog wrote: post #6

Earlier quoted context omitted.

The banking system was already very sophisticated pre-1930s.

My question was, specifically: It's 1903, you deposit your life savings into your local bank, and a week alter it gets robbed. Do you get any of that money back? Or are you now broke?

short answer: you get your money back.

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#27

Post by lucisferre »

pavel_lishin wrote: post #4

I guess this is still the Wild Wild West era of Bitcoin; I'd wager plenty of banks got knocked off by bandits back in the day, too. What happened to a bank's customer's funds if it got robbed prior to 1933?

A lot of banks get knocked off today

http://www.fbi.gov/stats-services/publications/bank-crime-st...

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#28

Post by revelation »

bstar77 wrote: post #8

I can't get to the article at the moment, but I'd love to know why they failed to update their app especially since it handles financial transactions. I had several apps to update and the process took very little time and effort.

Or, you know, why their wallet is compromised just because the web interface is.

It's like a CA that creates the certificates in PHP right there.

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#29

Post by rplnt »

If anyone has problem accessing the site, it's Vircurex and Cryptostocks.

"Before the wild speculations beginn, the service will be recovered and we pay the losses out of our own pockets."

from this summary: https://bitcointalk.org/index.php?topic=135926.msg1447905

Re: Bitcoin exchange hacked via Rails exploit, funds stolen

#30

Post by numbsafari »

numbsafari wrote: post #24
pavel_lishin wrote: post #4

I guess this is still the Wild Wild West era of Bitcoin; I'd wager plenty of banks got knocked off by bandits back in the day, too. What happened to a bank's customer's funds if it got robbed prior to 1933?

It probably depends. Banks are typically capitalized by a variety of assets, of which cash is typically a small amount. In addition, the bank typically has its cash holdings distributed at a number of different branches. Your account at the bank is technically it's liability. Essentially, you've loaned your money to the bank with an option to redeem it at any point in time (demand-deposit account, or checking account…

It should be obvious that the above is a gross simplification on my part and the FDIC and modern banking arrangements make things much more complicated when it comes to bank failures. That said, the simplification gets to the original question of what happens without modern banking arrangements.
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