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FTX stored private keys to crypto assets in plaintext, without access controls

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Re: FTX stored private keys to crypto assets in plaintext, without access controls

#81

Post by themagician »

willio58 wrote: post #14

While this is flatout insane, it does not speak toward crypto's security directly. If you personally decide that you want a company to hold your crypto that's your decision and a poor one at that. You have the ability to create your own wallet and hold your funds in it securely. Some exchanges like Coinbase even have wallet apps so the transition is super easy to make.

Wallet "apps" are not secure. It's an illusion of security. Unless the source is open AND verifiable there is no reason to trust it more than trusting FTX.

I 100% guarantee that there will be a major hack, from a major app, at some point in the future where it turns out that all seed generation was not in fact random. Honestly, it's probably already happened multiple times and they just haven't gotten caught. Those stories where people claim that all their crypto got stolen even though they never shared their seed—you know the stories that everyone always dismisses as, "You must have let someone else see it." Well, some of those are probably true.

When you generate a private key through an app you are 100% trusting that the person who published that version of that app did not do something trivially easy like decide to generate all seeds from a known incremented input. You'd never know. And if that person caught caught internally the company is far more likely to cover it up, because otherwise they will collapse overnight.

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#82

Post by datadata »

HL33tibCe7 wrote: post #69
datadata wrote: post #53

It is fantastic that a company operating with such horrific practices is dead. While we are at it, when can we fix similar issues below with mainstream financial systems that millions of people are still using? - Social security numbers are used as a secret for identification, despite being in plaintext and having so low entropy as to be guessable, and originally issued on a card literally saying "Not for Identificat…

I mean you’re right in that, thinking about this on an abstract level, your suggestions seem like no-brainers. But the current system works well enough in the vast majority of cases. And the fixes to the problems you list would add considerable complexity. I don’t think it’s actually that clear that fixing these problems would have a net positive effect on the world.

The size of the market just for identify theft protection is 10 billion USD [0]. There is 30 billion USD in credit card fraud a year [1]. I don't think that is working well enough, that is a multiple-FTX sized loss of money every single year going into a problem that is fueled mostly by really bad underlying security systems.

0: https://www.globenewswire.com/en/news-release/2022/03/23/240.... 1: https://www.bankrate.com/finance/credit-cards/credit-card-fr...

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#83

Post by thephyber »

datadata wrote: post #53

It is fantastic that a company operating with such horrific practices is dead. While we are at it, when can we fix similar issues below with mainstream financial systems that millions of people are still using? - Social security numbers are used as a secret for identification, despite being in plaintext and having so low entropy as to be guessable, and originally issued on a card literally saying "Not for Identificat…

Each one of these systems has a better replacement, but not all of the industry has moved to it.

The largest related issue I believe is that the use of “knowledge databases” by credit bureaus (and all of the companies and governments that trust credit bureaus).

Each of these has been solved, but until the last system using the inferior authentication is upgraded, they all remain weak points. I have argued that the US (or each state) should create a digital certificate system similar to Estonia’s “digital residency card” or S Korea’s online transaction signing (although hopefully not implemented as an ActiveX control for Internet Explorer 5).

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#84

Post by renewiltord »

RSZC wrote: post #49
renewiltord wrote: post #37

It wasn't/isn't just them. It wasn't a massive secret either. https://news.ycombinator.com/item?id=32077583 The test of all these security exploits are in the exploiting. In practice, you can run wild and nothing will happen. My HN password was 000000 for years.

I mean I have a yahoo chess account with a password of like abc123, that's not the point. Your HN password doesn't provide access to your money, never mind other people's money.

Sure, but look at the timestamp on the linked comment. No one took the money for the next 4 months after that.

And they had a lot of crypto to take.

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#85

Post by reisse »

LapsangGuzzler wrote: post #68
reisse wrote: post #22

Earlier quoted context omitted.

One thinks about crypto as a clownworld only until one had to work with or inside the real financial system. Techincally, it is in no way better than crypto. The only difference is that in real financial system there is a strong legal cover for all the technical and security fuckups. Like, stealing from bank by exploiting their 10-years old Windows XP ATM connected to the internet is 10-years-in-jail offence, while s…

> while stealing crypto may be hard or impossible to prosecute in many jurisdictions. This is one of the inherent contradictions of crypto. If the ultimate goal of crypto is to create a financial system that is free of government control, then that system must also be free of the justice system because that's the government too. Asking people whose salaries are paid for with tax dollars to help you recover stolen cry…

It's not really a contradiction. People who want financial system free of government control and people who want government to prosecute for crypto crimes are mostly different people.

The latter usually care about 100% APR on dollar and other scammy promises, and not about any real crypto benefits. When they get burned, they want government to step in and regulate.

The former don't care much that system allows to scam people (the "it's your fault if you were scammed" attitude), they care more that it's free from regulations.

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#86

Post by paulcole »

cs702 wrote: post #2

Wait, what ? Private keys were stored in unprotected plaintext files regularly opened by multiple people at the company? WTF? That crosses the line and goes deep into "willful negligence" territory, in my view. The physical equivalent would be stacking customer assets like dollar bills and gold bars in big piles inside a heavily trafficked room that has no lock. The term "irresponsible" doesn't quite do justice to it…

> That crosses the line and goes deep into "willful negligence" territory

This is FTX we're talking about. That line is far far far in the rear-view mirror.

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#87

Post by amanj41 »

jrockway wrote: post #80

This sounds like your standard startup-y security stack. Bonus points for trying to use your cloud provider's hardware key storage and keeping secrets in 1password. It ain't great but you could do worse. (I've worked at startups and we did better. No access to the cloud provider without a time-based escalation. Secrets in secrets managers. Passwords rotated regularly. Mandatory 2FA. Signed commits. But it would proba…

What's particularly astounding about the case of FTX is that it was rolling in cash (unlike many startups), and yet never cared enough to throw money at hiring tons of security-minded staff and engineers

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#88

Post by themagician »

datadata wrote: post #78
themagician wrote: post #65

Earlier quoted context omitted.

Traditional banking is sufficiently slow enough that things can be reversed before permanently settled. The "slow" speed of moving money is a feature. It's designed for humans who make mistakes all the time.

I agree that it is a feature, but that feature didn't come with any downsides initially when the speed of everything else was also slow. The downsides are now substantial as the customer expects higher speeds. The downsides of not having the option to have final settlement quickly also seems to be a source of many other problems. We also don't even need to change this aspect of traditional banking in order to add str…

Honestly, I don't really see this. Small personal transactions happen via Cash, Venmo, PayPal, Zelle, etc. without much issue or friction. As far as the general consumer is concerned it is instant.

Large business transactions generally (not always, obviously) do not have the sense of urgency that would require fast settlement. There's some market maker stuff that benefits from fast settlement, but that's not exactly a reason to push whole new system out to everyone.

The biggest "benefits" of crypto are not benefits to the average consumer going about their daily life. Instead of dealing with fraud you'd have to deal with customer service issues for actual customers who forgot/lost their keys. And, honestly, you'd probably have to deal with more fraud. Your phone gets hacked, your keys get stolen, and then what… all your money is irreversibly gone?

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#89

Post by sublinear »

datadata wrote: post #78
themagician wrote: post #65

Earlier quoted context omitted.

Traditional banking is sufficiently slow enough that things can be reversed before permanently settled. The "slow" speed of moving money is a feature. It's designed for humans who make mistakes all the time.

I agree that it is a feature, but that feature didn't come with any downsides initially when the speed of everything else was also slow. The downsides are now substantial as the customer expects higher speeds. The downsides of not having the option to have final settlement quickly also seems to be a source of many other problems. We also don't even need to change this aspect of traditional banking in order to add str…

> The downsides are now substantial as the customer expects higher speeds.

Why would they expect this? It seems like the slowness is the only thing keeping the game from growing legs and walking away from the humans playing it.

Re: FTX stored private keys to crypto assets in plaintext, without access controls

#90

Post by whalesalad »

RegularOpossum wrote: post #21

Also, they advertised on fortune cookies at my local Chinese takeout place, which I think told me all I needed to know.

I asked a girl to prom in HS with a fortune cookie. It didn't work, but it was a fun experiment.
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