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back to article Man says he lost $500,000 in virtual currency heist

Leaders of the open-source virtual currency project known as Bitcoin say they have no way to verify one user's claim that hundreds of thousands of dollars worth of digital coins were plucked from his computer earlier this week. Rumors of the heist have been swirling since Monday, when a Bitcoin user named Allinvain claimed 25, …

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Flame

So this bastard was a speculator!

He bought a whole pile at 4c each and now they are supposedly worth $20.

Shuffle along bankers, hedge fund dealers etc. Make way for one of your brethren,

<--- Burn them all!

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Facepalm

Bzzzt. Fail.

So in your P2P utopia, speculators don't exist? Speculation doesn't exist?

This magic nerd currency has abolished all acquisitive desires?

That's brilliant, absolutely brilliant.

Please leave your number in the reply Charles, I'll see if there's a open mic spot at my pub's next Comedy Night.

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Sorry

No sympathy.

Where's the Evil Bill icon gone?

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Riiiiight

And it's totally not a scheme for early adopters to hoard coins and cash out at the expense of later users... totally, yet this guy somehow has a hoard of 25,000 of them.... And if the market couldn't handle about 0.25% of the coin supply being put up for sale then the bitcoin 'economy' is clearly mostly made up of these hoarders.

Also if there's no way to show or pursue theft then somebody also f*cked up the system design.

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Headmaster

like cash

"Also if there's no way to show or pursue theft then somebody also f*cked up the system design"

Well no , thats the point. If you cant trace theft then you cant trace transactions.

Like cash

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Headmaster

not like cash

If someone does a bank robbery or burgles your house, the police can get finger prints, look at cctv pictures and so on to catch the thief. The clear-up rate for these sorts of crimes may not be anywhere near 100%, but people do go to prison for it.

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Holmes

like cash

And here, the guy can have his computer forensically examined to see if a theft took place.

If I walked into my local police station and said I'd just had £300,000 in pound coins stolen from my backpack, what do you think their response would be. I suspect the *best* I could hope for is having my statement taken.

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Almost but not completely unlike cash

Cash is untraceable, but is harder to steal, especially in large amounts. You have to physically be where the cash is, and if it's a large amount you'll have to carry quite a lot of weight.

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So what you're saying is

That you might store extra cash in a separate location, such as another room, or a bank, or maybe another computer that isn't externally connected when it doesn't need to be? It's his fault he had it on a PC that became compromised, it's probably his fault he was compromised, and it's his fault for storing capital in a currency he knew couldn't be traced if stolen. If he's got any brains he should be putting his efforts into working out how the cash left his PC.

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Depends on the size of the bills.

I could easily walk out with $300,000 in my backpack if I'm carrying bundles of $100 bills. On the other hand, carrying away $300,000 in gold, even at today's prices, will require a fair bit of work.

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Less traceable than cash

(paper) Cash has serial numbers. When it's stored in banks, those serial numbers are noted. If one notes the serial numbers on their own (paper) cash, then that becomes an element that could be used to trace the stolen product. Bitcoins are not like cash. They're more like your own private little language ... fascinating to build, fun to use with your friends, and absolutely ridiculous to anyone not included in the exercise.

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Stop

Let's work this out shall we...

Current gold price, just over 1500 USD per Troy ounce.

300,000 / 1500 = 200 Troy Oz = roughly 6.2Kg

Shit, put it in a back-pack, and even me, with my dodgy ticker, could at least shuffle to my car with a million bucks worth...

Now where have you put it exactly?

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Cash is not harder to steal

How is over 8 billion missing that US flew into Iraq? That is about 2.5 C130's full of money.

So it isn't as impossible or as hard as you think it is.

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Weight of gold and other things.

"On the other hand, carrying away $300,000 in gold, even at today's prices, will require a fair bit of work."

Not so fast...

Today's quote of gold is: $1526 (and some change)

So, $300,000 is 196.5 troy ounces.

Troy ounces are 31.1 grams (plus a bit)

A little math and this comes to 6,111g (or 6.111 kg). A bit more math and one gets 13.5 lb.

In my book, this is a bit heaver than a laptop (probably an old one) in a backpack. In my book, not much "work"!!

Of course if this were back in the 60's, when gold was $35/oz it would be a bit heaver! (40 stone heaver!!)

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Anonymous Coward

There's a lot of it about

This is a bit like gold-farming in MMORPGs, and Second Life has a virtual currency which you can convert back into US Dollars. Though Linden Lab do say that all transactions can be traced and individual Linden Dollars have serial numbers--possible, but who knows? Linden Labs are also recruiting fraud specialists.

Other virtual world operations seem to just price everything in US dollars

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at the time he acquired the coins they probably were worth only $1000 or less

So what? All kinds of things, tangible or intangible, increase or decrease in value over time. Loss is typically reckoned on the value at the time, not the value at some time in the past.

Otherwise insurers would be able to get away with "Well, your coin collection might have been worth thousands at the time it was stolen, but when minted it was only worth one pound, 16 shillings and a groat."

I hold no brief for the bankers who created the current mess, but this smacks of the folks behind bitcoin wanting to have things both ways.

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Hardly bitcoins' fault

If I had money disapear from my account I wouldn't expect the Bank of England to be able to trace it - but the online wallet company he used should have been able to.

Probably not very smart to have kept it all in one bank - but tell that to a few local councils who thought Iceland was safe.

So what if he speculated? The money was worth what it could be exchanged for. Arguing it's worth only what he paid for it is like the BSA claims that software piracy costs billions - because every kid that pirated Photoshop would have otherwise paid retail for it.

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Not the system's fault, perhaps the client's

I don't think much of Bitcoin the system but in this case it's more likely Bitcoin the client's issue.

If the Bitcoin client's wallet is just sitting there on disk with no password protection then its a serious fault of the software. If the path of the wallet is predictable e.g. %APPDATA%/Bitcoin/wallet.dat then its a serious fault of the software. APPDATA could change depending on user id but if you know the guy you're targetting you could throw in some guesses based on first / lastname combinations.

And both these things are true. Someone could use a web exploit to lift the file and initiate a transfer from from their own PC. It doesn't even need a trojan although that is possible too.

This sort of thing was fairly predictable. The Bitcoin source code has some very pretty shoddy code in it and this is one serious example. The software could be hardened in a number of transparent ways, the most obvious being to randomize the path to the wallet, e.g. %APPDATA%/bitcoin/iuoiruw128z/wallet.dat. That immediately prevents browser upload attacks.

Secondly Bitcoin should implement something akin to receivables and savings wallets. Incoming transactions go into a plaintext receivables until the user enters their savings password. At which point they move from the plaintext file into the encrypted file. The wallet closes after a timeout period, e.g. 5 minutes. So if someone lifts a wallet it'll be encrypted and therefore worthless.

I'm sure it could be improved further than that, e.g. multiple savings wallets. But the basics are simply broken at the moment. Given all the brouhaha about how secure the system is you have to wonder what other problems are lurking within it.

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My long held belief

Digital money without the confirmation of a bank authorized payment trail will be forever vulnerable. All possible protections can be beaten by patient trojans. The gains for a thief, who has the comfort and security of working from home, are immense.

At the turn of the century there was a hype over the coming digital wallet. It crashed. The encryption cannot be kept secret. The coded transfer can be synthesized. And with a hot soldering iron a kid in his bedroom can become a multimillionaire.

The problem is its digital. Just as we can indefinitely make exact copies of our images so we, or others, can with money. Cash in a safe is analogue, it can never be exactly copied. Certainly cash can be adequately forged, so its total design and production is a race to stay ahead.

I don't understand why the banks who have their billions as magnetic orientations cannot create money. The proof of this is the failure of BCCI, an international bank that was totally crooked.

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Re: bank deposits

"Money" is a liability on a bank's balance sheet, so for that reason it is not in their interest to create it. The asset is the loans they hand out to people, and they are only assets to the extent they can have it paid back to them.

The likes of Maddof and Stanford created money in the way you describe, and look what happened to them.

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Boffin

who creates money, bank or borrower ?

"I don't understand why the banks who have their billions as magnetic orientations cannot create money. "

More than 97% or so of money comes into existence based upon a believable contract by a borrower to pay it back to a lender, e.g. when you go out and buy something using a cheque overdraft or credit card, or buy a house with a mortgage. 3% or so is notes and coins, and even notes have a promise to pay in coins written on them.

Given that it is the borrowers promise which is the transferrable IOU I think it's clearer to think of the borrower as the issuer. A proportion of bank charges and interest exist to cover bank losses when the promise to repay isn't kept. Various monetary reformers insist it is the banks which create the money out of nothing in this deal, but where they are wrong is that what they call "nothing" is in fact a commitment to repay by other parties (which makes the indebted parties the monetary issuers not the banks). The concept of commitment backed money drives the conventional economy for the most part, and also works in LETS.

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@copsewood

nice explanation. It is also worth noting that bitcoin is not money but asset (e.g. comparable to plain piece of silver, but not to actual coin) since there is no issuer. Which means no authority to defer to when things go wrong, as happened here.

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take accounting 101 please

""Money" is a liability on a bank's balance sheet, so for that reason it is not in their interest to create it."

sorry, but a basic tenant, though sometimes not easily understood .. is:

Assets + Liabilities = Capital

In the case of loans, typically today, the bank borrows from a larger bank and this is a liability that is capital, and it is then loaned as a security note that is indeed an asset .. whether it gets paid or not, or whether that security's value raises or lowers determines profit-capital gain or loss, but it is still an asset

any not "money" the bank holds is a (capital ) asset, not a liability

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Re: My long held belief.

Aaahh, magnetic orientations...

Reminded me of a school trip to Medway college on a coach, with the rest of my classmates, to oohh and aahh at their 64Kb ferrite core memory box, the size of a small fridge. Circa 1975/6.

How times have changed...

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Trollface

Conversion rate

the conversion rate of power consumed to bitcoin worth is still pretty terrible.

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value/power

"the conversion rate of power consumed to bitcoin worth is still pretty terrible"

True, the Bitcoin "mining" value/power ratio is pretty lousy, in relation to many other activities.

However, from a purely economic perspective, that ratio is even worse for a lot of other computer-based activities, such as playing games, watching video, ranting in online forums [1], Everyone's Favorite Example [2], and so on.

We justify those activities, economically, by recognizing intangible (or at least difficult to calculate) benefits, typically psychological and social ones. That is, we assume that people need to be entertained, to participate in their culture, and so forth; and so expending some resources to those ends are justified.

What can someone do with Bitcoins they've mined? They can hoard them for speculative purposes - that's basically gambling, a form of entertainment. They may be able to spend them, typically on other entertainment products [3].

So ultimately the resources spent on Bitcoin mining are mostly an entertainment expense, and probably on the whole similar to other such expenses. Yes, generating hashes keeps that CPU pegged, but many of those machines would probably be running other non-productive software if they weren't trying to find Bitcoin blocks.

[1] OK, that one sometimes produces some value, in terms of education, etc.

[2] Porn.

[3] Notably illegal drugs, if media reports are to be believed.

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Flame

Why is my sympathy limited?

Possibly because this kind of system is beloved of those who consider all taxation as iniquitous, something that infringes on their "liberty". These freedom-lovers frequently do not understand the difference between "liberty" and "taking liberties". I have zero sympathy for tax-evaders.

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FAIL

Wow.

I've read the article and I cant see anywhere where it says he is anything other than a law abiding, tax paying, citizen who has been robbed (allegedly).

But wait a minute, he has some money in "bitcoins" that must make him an evil tax-evader because everybody who has money in "bitcoins" or any other virtual currency is an evil tax-evader.

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I thought that

"everybody who has money in bitcoins" were all in the drug trade?

Whatever, Bitcoin looks like a pyramid scheme, and more fool anyone who gets involved with it.

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It's all taxable.

The problem is how and when. These transactions, where they involve real goods, could be dealt with in the same way as a barter deal. Otherwise, the tax liability usually comes at the time of conversion to real money

Watching for the real money is easiest for the taxman.

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Facepalm

guy's a dipshit

you pay your bank fees, your visa card rates etc not just because they want to turn a buck (and employ people, too)* but also for insurance. you pay your 8-25% interest so that when some nobjocket honks off with your card and buys a bunch of rolexs in harrods and flogs em on ebay you can hop on the phone and not have to pay for it. likewise your bank covers you for bank robberies and things like the FDIC cover you for bank failure.

so sure, stick all your money in bitcoins**, just take out insurance on that investment, otherwise, like this dude, its just digital money under the mattress as opposed to the papery stuff, and you've nobody to blame but yourself when it goes for a walk.

*yeah, yeah. big evil credit giants, holding the little man down. I get it. money under your mattress employs zero people and doesnt work in the marketplace.

**if its decentralized, how does that even work? one big hard drive failure could have wiped out his "stash" too, right? If there's a system for transfers, then there's a transfer log. this makes my head ache.

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FAIL

Dimwit.

Basically it's like keeping a load of cash in your house - if burglars steal it or your house goes up in flames it's probably gone.

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Not really

It would be quite a pile of cash they'd have to carry, and they would have to physically come to your house.

No, this is more like having your wallet stolen by a pickpocket (Hell, it's even called a Wallet!) - it's just that no sane person would carry half a million around in their trousers.

Bitcoin is a micropayment system, it's not safe to have huge amounts of money in your virtual wallet.

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If you are keeping $300,000 at your house

you are keeping it in small bills which will be easy to carry.

And yes, I know EXACTLY how big a pile of $300,000 in cash (mostly $20 bills) is, because I'm the poor sod who once had to walk into a bank carrying a box with half that amount in it to make a deposit. Not something I planned to do, and not something I plan on ever doing again, but it isn't as large as you think it is. Although I will grant the looks on their faces was almost worth it. And I was told it would take them the whole day to count it, even though we'd done so in less than 3 hours.

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Odd

This story sounds exactly like something created to undermine the idea of bitcoins and happens just days after they're publised for the first time.

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Boffin

bitcoins around for longer than a few days

I posted my views about Bitcoin in November: http://lwn.net/Comments/415118/ . However, the fact that this bubble has taken a few months to get as big as it now is doesn't mean it won't burst, and as far as I'm concerned, the sooner it bursts the better, because that means less attention will be taken from ethically based and sustainable monetary alternatives.

People who earned credits on my local LETS 18 years ago can still spend these with the 60 active participants today if they want what is on offer.

Ripple http://ripple-project.org/ is another very interesting concept, equally suited to transacting LETS credits and supermarket points as it is for paying in Pounds, Dollars and Euros, if the routing, concurrency and privacy problems are solvable. At the moment these technical problems appear difficult and intriguing, but I'm not aware of any fundamental reason why they should not be sufficiently solvable. Ripple also has the natural advantage of the IOU basis and all of the credit clearing being based upon existing trust and business relationships, and all transactions being traceable (at a pinch e.g. in the event of alleged fraud) through referral handovers within existing relationship chains, so the whole concept seems inherently reliable.

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Holmes

Tin foil hat time

The only thing undermining Bitcoin is the crappiness of the concept itself.

Monetician, heal thy self.

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Joke

Virtual money?

Virtual loss

Virtual sorrow

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WTF?

Down voted lol

seems some people have a virtual sense of humour.

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so apart from money laundering,

and Ponzi schemes, can anyone name a practical use for bitcoins? Are they any more than just the ostrich farm or tulip of a new generation?

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Neal Stephenson would say so.

Cryptonomicon readers might have a clue.

But clearly the most practical application is contraband trade and tax evasion.

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Black Helicopters

I'm not one for conspiracy theories but....

A highly publicised, non-verifiable jab at the embryonic bitcoin system on the back of a climate of recent hacking? You can't help but feel it would be in the interest of a lot of banks/governments. Even a hedge against the value of bitcoins would profit off the back of this.

Also. 4 cents now worth $20 a pop for something that has no intrinsic value? Why don't they just use virtual tulip bulbs and drop the pretense?

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Anonymous Coward

Title

Bitcoins can shit off and not come back until they're called Galactic Credits.

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dyr

It's an increasing trend with El Reg comment mongers to type with wild and inaccurate abandon before doing even the most cursory of investigation in to the subject matter.

There are one or two, well, OK, just one, El Reg hack of which that criticism can be leveled too.

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"I feel like killing myself now."

what a drama queen.

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You wouldn't?! What are you: can't think ahead, liar, or toff?

So you have $500k lying around that you wouldn't blink an eye over when suddenly disappeared?

Me, $5k would already hurt for months, taking a safety net away.

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Yeah but

He didn't have $500K laying around, he had a chunk of data claiming to be worth $500K when it apparently wasn't.

It's kind of like whining because your Elite commander lost cr500K.

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Fiat

You could just as easily say he had a wad of paper claiming to be worth $500K

One good thing about bitcoin is that it may cause people to consider the worth of fiat currency.

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Anonymous Coward

I can't see why they can't confirm or deny the theft

There has to be SOME trace ability other wise it's too dodgy to get upset about.

Honestly if it has none then this is a system used purely to break the law...otherwise why would you use it considering the risks to your money? The only thing I could think of is that you want to hide what you are buying online....Like drugs or REALLY dodgy porn...

I bet 50p this guy turns out to have illicit pictures of young children on his machine.

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Mushroom

What is truth ?

In Bitcoin world, as in the world of the Roman Governer of Palestine who asked that question of an alleged usurper, truth is what the powers that be claim it to be. In Bitcoin world the powers that be are those who can vote what truth is considered by the network to be, because they have more processing power than all the other players combined. Validating the next transaction block in Bitcoin is a matter of consensus, where a given number of CPU cycles == 1 vote. So it follows that in Bitcoin consensus is what BOFHs who can run programs through corporate clouds at the cost of their employers electricity bills, and Botnet herders who have more computers under their control than anyone else all at other people's expense, get to decide what the valid next block is going to be.

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