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

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

#31

Post by teod » Wed, Aug 03, 2016, 5:31 PM UTC

lojack wrote: post #16

odrekf wrote: post #13

Earlier quoted context omitted.

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.

Couldn't find too much information on this, but I see that [https://support.gdax.com/customer/portal/articles/2436336] under "Is GDAX's ether hot wallet insured?" states "The majority of ether and bitcoin deposited to GDAX is held in highly secure cold storage." (GDAX is Coinbase's exchange platform) See also [https://www.coinbase.com/security].

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

#32

Post by teod » Wed, Aug 03, 2016, 5:33 PM UTC

mrb wrote: post #23

Interesting: the thief is currently attempting to launder a fraction (1000 BTC, worth ~$550k) through a giveaway: https://www.reddit.com/r/Bitcoin/comments/4vykkr/1000_btc_gi... https://bitcointalk.org/index.php?topic=1574127.0 He is sending the coins as we speak: https://blockchain.info/address/1BfxSuxJqXuizBbTcP238JZY9DT4... As a contingency, to plan for his possible arrest/death/etc, he signed a NLOCKTIME transact…

Is it possible to verify that these coins are among the ones stolen?

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

#33

Post by [deleted] » Wed, Aug 03, 2016, 5:35 PM UTC

Aelinsaar wrote: post #21

aianus wrote: post #17

Earlier quoted context omitted.

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.

Real world banks are backed by the federal government, both in terms of the FDIC, and the FBI and broader DOJ. Robbing a bank is a federal offense, and that is frankly why "big heists" tends to be such great fiction. Mostly.

[deleted]

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

#34

Post by mrb » Wed, Aug 03, 2016, 5:46 PM UTC

paulcole wrote: post #27

mrb wrote: post #23

Interesting: the thief is currently attempting to launder a fraction (1000 BTC, worth ~$550k) through a giveaway: https://www.reddit.com/r/Bitcoin/comments/4vykkr/1000_btc_gi... https://bitcointalk.org/index.php?topic=1574127.0 He is sending the coins as we speak: https://blockchain.info/address/1BfxSuxJqXuizBbTcP238JZY9DT4... As a contingency, to plan for his possible arrest/death/etc, he signed a NLOCKTIME transact…

Just curious, how is he laundering them? Wouldn't he need to get clean bitcoin back in return?

Presumably he will send some/all of the coins to himself (plausible deniability).

Or maybe, you are right, he is not directly attempting to launder, but just "creating noise" in the block chain to make it hard for investigators to trace the stolen coins.

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

#35

Post by paulpauper » Wed, Aug 03, 2016, 5:47 PM UTC

solotronics wrote: post #19

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

probably going back to $600 soon ,these selloffs are always temporary

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

#36

Post by tempestn » Wed, Aug 03, 2016, 5:55 PM UTC

celticninja wrote: post #14

mikeyouse wrote: post #11

Earlier quoted context omitted.

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.

They likely also have insurance that may cover some or all of the loss.

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

#37

Post by paulpauper » Wed, Aug 03, 2016, 5:55 PM UTC

aianus wrote: post #17

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.

a typical bank robbery is very small (around $3-5k) and the perp usually gets caught. bitcoin robberies tend to be much much bigger and nothing can be done.

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

#38

Post by paulpauper » Wed, Aug 03, 2016, 6:02 PM UTC

This is the perfect crime. IN a about a few months the heat will wear off and the thief or thieves can gradually convert the coins into cash or just store them in 1000s of wallets for later use

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

#39

Post by devishard » Wed, Aug 03, 2016, 6:03 PM UTC

In the long run, I think this is good for Bitcoin. It's supposed to be a decentralized currency. Centralizing Bitcoin in an exchange makes the exchange a big target. This disincentivizes centralization and limits how much centralization can actually happen when people are foolish enough to try.

For individuals who lose Bitcoin because of exchanges getting hacked, it's because they leave Bitcoin in the exchange. This is antithetical to how Bitcoin is intended to be used. The answer is, don't do that. Make cold storage paper wallets and keep your Bitcoin there.

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

#40

Post by vectorpush » Wed, Aug 03, 2016, 6:49 PM UTC

devishard wrote: post #39

In the long run, I think this is good for Bitcoin. It's supposed to be a decentralized currency. Centralizing Bitcoin in an exchange makes the exchange a big target. This disincentivizes centralization and limits how much centralization can actually happen when people are foolish enough to try. For individuals who lose Bitcoin because of exchanges getting hacked, it's because they leave Bitcoin in the exchange. This…

> this is good for Bitcoin ... The answer is, don't do that ... Make cold storage paper wallets and keep your Bitcoin there.

Only in bitcoin land is theft considered good for the ecosystem.

Only in bitcoin land does it make sense to blame laypeople for storing their money with financial institutions.

Only in bitcoin land is it a best practice to secure your money using a password written on a piece of paper.

Only in bitcoin land is it reasonable to expect consumers to do a better job of keeping their money secure than corporations with on staff security experts.