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back to article MtGox allows users to see a picture of their money, but not have it

Bitcoin exchange MtGox has finally allowed thousands of concerned customers to view their balances, but not to withdraw the digital funny money. On its website, MtGox said it would let users look at their accounts as long as they were happy not to touch. "This balance confirmation service is provided on this site only for the …

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Trollface

Shell game

Now you see it, now you don't.

And they called it a scam.

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Interesting times ahead

What a fascinatingly unique situation! MtGox can easily return your Bitcoins by transferring them to to your wallet address.

However the Bitcoins represent stock that can be liquidated back into cash, which MtGox will need to pay its creditors - which includes people whose Bitcoins it still holds.

So if they refund all the coins they hold, they will get sued by less people...but won't have enough money to pay the people who do sue them. On the other hand if they don't refund anyone, they'll get more lawsuits...but they'll be able to sell their stock of Bitcoins to pay.

It all kind of hinges on whether the courts determine if MtGox's Bitcoins should be treated as a Commodity, a Currency, an Asset, or any combination of the three.

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Anonymous Coward

Re: Interesting times ahead

...or they could hold off as long as possible under bankruptcy protection, paying themselves a healthy salary and paying 'consultants' (who may or may not be relatives) right up until the lawsuits start resulting in judgements (probably many years after all appeals have been heard) and then finally going bankrupt.

It's not as if there is a reputable company that needs saving.

For the full strategy of this game plan, please see SCO and TSCOG.

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Re: Interesting times ahead

Not sure how they could continue paying themselves a healthy salary, since they have no income, and can't liquidate their assets. Plus of course if they start trying to convert their own personal Bitcoins to cash, they may well cause a slump in the value of Bitcoin, thereby reducing the value of their personal and Mt Gox's assets.

That's an interesting thought. If Bitcoin is considered an asset then the value of the company is dependent on an incrediblly volatile conversion rate. If Bitcoin plummets, Mt Gox will be worth nothing.

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Anonymous Coward

Re: Interesting times ahead

They can liquidate their assets, that's what SCO did even with judgements and creditors outstanding, all within bankruptcy protection.

They could also convert their own Bitcoins, if they are an asset of the company then they will probably be trying to get them converted in the safest way possible as quickly as possible - or they will start paying salaries in Bitcoins.

Either way I would be surprised to see much in the way of real or virtual assets left to pay creditors at the end of it.

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Anonymous Coward

Re: Interesting times ahead

"What a fascinatingly unique situation! MtGox can easily return your Bitcoins by transferring them to to your wallet address."

Brain dead alert!

A balance printed on a screen is not the same as the crypto hash stored in a wallet that, in turn, represents a certain bitcoin value.

If this is the case then why did Govts in the west give a load of tax payers money to the banks? Hint, all the accounts, like MtGox, displayed a balance on screen, though they didn't have enough money to pay out.

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Re: Interesting times ahead

"Brain dead alert!"

Umm...thanks for quoting me out of context there. I wasn't implying that all MtGox had to do was refund everyone and all would be hunky dory. Yes I know that a balance sheet does not necessarily equate to reality ("Computer says we have one in stock but the shelf's empty").

Try to understand the point I'm making please before you jump in with your insults. Other people seem to have managed it.

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Anonymous Coward

Re: Interesting times ahead

What point were you trying to make? They can't easily return your bitcoins to your wallet because they don't have enough bitcoins to do that.

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Re: Interesting times ahead

Just a technical question.

What is to stop them saying - we were hacked at time X, we will restore all wallets to the point at X-1 from backups - and any transactions since then of those coins are assumed stolen goods?

Just like the NY stock market reversing all trades when a high frequency trading sent went crazy.

Obviously it affects future transactions later in time when these coins were legitmately traded on - but I thought you can track the id of each wallet they had been in from the chain carried with each "coin" ?

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Re: Interesting times ahead

If that were possible, what would stop me from spending a bitcoin, restoring from backup, spending that bitcoin again, ad infinitum?

That's like asking "couldn't you make a xerox of your $100 bill, so in case it was stolen you could spend that instead?"

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Re: Interesting times ahead

@Yet Another Anonymous coward

"What is to stop them saying - we were hacked at time X, we will restore all wallets to the point at X-1 from backups - and any transactions since then of those coins are assumed stolen goods?"

Who would they tell?

The raison d'etre of Bitcoin is, in this instance, the 'problem'. There is no central authority or trust source to assess this and then assert that the transactions should be rolled-back.

In the eyes of supporters, this is a virtue but it is not without risks and this is one of them.

Very loosely, one can compare it to SSL certificates. The process you are asking about is like a Certificate Authority (e.g. Verisign) revoking a certificate. This works (in theory) because everyone trusts Versign. This is the hierachical nature of PKI and it concentrates trust to a few entities.

Bitcoin, however, is more like the 'web-of-trust' concept.

This means that a single entity can't easily disrupt the whole system the way a CA could - for example if the US Government ordered Verisign/Symantec to revoke a bunch of otherwise valid certificates, or issue false ones.

This is a good thing but on the flip side results in the inability to revoke/reverse bad transactions*.

* - Of course, like any other transaction, you still have to deal with those funds being passed onto an innocent third party, which makes it rather unfair to reverse the transaction as it could leave honest, innocent people out of pocket. In Bitcoin, there is a further complication here as the anonymity means it is next to impossible to tell if the 'stolen' coins have been used in payment to a third-party. This is because you can transfer them back to yourself and all the network sees is a transfer between two different addresses.

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Re: Interesting times ahead

The average Bitcoin user doesn't understand runs on banks and not being able to cover lender's balances... Otherwise no regulation wouldn't be such a "feature".

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Re: Interesting times ahead

Lender's balance?

Another thing not absolutely clear to me in this whole sorry saga.

People keep talking about Bitcoin exchanges as if they were banks.

I thought an exchange was a public wallet where you could trade Bitcoins inluding converting them to cash.

Do the exchanges lend out Bitcoins in return for interest, invest them and otherwise use them to increase their capital holding?

Do they pay interest to depositors?

Is, in fact, lending involved?

Or is the exchange just supposed to be a "swap shop" to facilitate the use of Bitcoins to directly purchase goods or currency?

In which case you would expect the displayed balance to directly equate to stored Bitcoins.

In fact, if you depoit (store?) a Bitcoin in an exchange do you not store a unique chain electronically?

I am sinking deeper into the mire here!

I thought the scam was using a bug where a single unique chain was used several times to generate modified chains where it should have been only able to generate one.

Which can't be true otherwise there would be a number of counterfeit bit chains in circulation, the total number of Bitcoins in circulation would be higher than expected, but the depositors would still have the original unique chains which they deposited.

So in hopefully simple terms Is it like a box full of dollar bills - you throw in you bill with a unique serial number but get back whichever bill first comes to hand?

And the scam involves someone getting a bill, saying "didn't get that" and being given another? A bit like a faulty ATM dishing out more notes than requested?

Again I don't see traditional banking analogies holding true because there are never as many dollar bills as there are dollars but I thought each Bitcoin was unique so there was a one to one mapping between Bitcoins and the total Bitcoin world wide holding.

Perhaps a non-banking terminology is needed to clarify?

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Re: Interesting times ahead

@david Roberts

You are correct - Mt Gox is not a bank, in the traditional sense. I'd argue that an actual bitcoin bank is largely impossible - financially - due to the fluctuating value of BTC. The steady inflation built in to modern fiat currencies encourages investments. If you just hold the money it will decrease in value. So, you take your money and invest it - either directly or by putting it in a bank.

In doing so, you hope what you invest in earns money and thus your pile of money grows. Doing similar with Bitcoin is pointless because it would only be an unnecessary intermediate step. You would be changing your (e.g.) USD to BTC and then depositing in in a bank. To invest it, the bank would effectively have to convert it back to USD to buy shares. So what was the point using BTC?

People buy BTC as an investment - in the hope that it will increase in value. Therefore, the investments a bank might make are not helpful. If you think BTC will increase 20% then why would you want to invest it in shares that might, at a pinch, earn 7%?

I digress.

The thing to understand with Bitcoin is that you can't actually store the bitcoins. If you 'own' a bitcoin is not decided by anything specific you can produce as proof but the Bitcoin network's agreement that a certain amount of BTC has been transferred to you. In other words, to prove you have 1 BTC, you show that the transaction log records 1 BTC being sent to you.

As an analogy, instead of showing someone your bank statement, you show them you payslip.

Regarding duplicating bitcoins, you are right - there can't create bitcoins this way. What happens is that a bitcoin might be transferred to two different locations. Those transfers are then confirmed by the network. (The miners.)

If there are two conflicting transactions, only one will be kept. The simple (to understand, not accomplish) trick is to transfer BTC to a 3rd party and at the same time, to yourself. If your transaction to yourself is the one accepted by the network then the transfer to the 3rd party is now viewed not to have happened.

As you can't store or transfer a bitcoin, what you are effectively transferring is the right to transfer it to someone else. If the Bitcoin community agrees that that right has been transferred to you then you can use the BTC. If they don't, then you can't use it.

In the above exploit the person cheating the system relies on the Bitcon network accepting his transaction to himself rather than the one to the legitimate retailer

So theft, really, is just convincing the Bitcoin community that someone gave you the moneny, honest.

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Reminds me of Jim Bowen on Bullseye

......and here's what you could have had... now f**k off!!!

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Are they letting you see your wallet?

Or some sort of fakery? Sort of like salting the gold mine maybe?

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By all means, beat this dead horse of a company to a finer pulp. Maybe you'll get a few more gallops out of it.

Not-sarcastic translation: The bitcoins are gone. Get over it already.

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Some sort of Bitcoin quantitative easing needed to add to the block chain?

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WTF?

Hmmm...

So they will let you "see" the Bitcoins that are in your "Wallet"...which may, or may not, actually be IN your "wallet"...and may, or may not actually exist...because 750,000 of them are "missing".

Once again...anther classic P.T. Barnum moment.

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Facepalm

Re: Hmmm...

So they will let you "see" the Bitcoins that are in your "Wallet"...which may, or may not, actually be IN your "wallet"...and may, or may not actually exist...because 750,000 of them are "missing".

Yeah, I was thinking much the same thing. So they let customers see a "balance" but they ostensibly refuse to stand by it in any way... What's the point?

Really, at least one of the sides involved has to be abysmally dumb for this to have looked like it would solve anything.

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Yes, pointless humiliation was just what this situation needed!

You gotta love a currency run by /b/tards.

Next, make them dance for their money! Tits or no coins!

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Alert

Goon Show moment

This makes me think of the Goon Show, with the characters' habit of paying each other in pictures of money.

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Re: Goon Show moment

To complete that, it would be funny if any attorneys involved were required to take their payment solely in Bitcoin.

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Find missing bitcoins

I think the investigators must find a way to find where the coins did go to. They can't actually been missing. Someone has them and must return them. They have to find them. And then they can be returned to us.

So find those real criminals and get them to court!

Although bitcoins are anonymous, they are very well traceable.

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Re: Find missing bitcoins

@Onno

The first problem to overcome is what happens if these bitcoins have now been used to may legitimate payments? If I managed to covertly transfer a bitcoin from you to me (i.e. 'steal' it) and then donate that coin to a charity, from whom do you get the coin back?

Or, if I 'steal' 10 bitcoins, add them together with 90 other bitcoins I have and then spend those hundred bitcoins in 100 x 1 BTC transactions, which 10 bitcoins do you recover?

But, let's assume that you aren't talking about actually getting those coins back but the thief having to pay back the value stolen - presumably in the equivalent USD.

The question then becomes identifying the thief. This is the problem and it's built into Bitcoin by design - the ability to achieve near-perfect anonymity.

Bitcoin is a difficult concept to explain to people who don't already understand public key cryptography. Apologies if this either is unintelligible or I am teaching some proverbial egg-sucking.

Imagine the Bitcoin world like a giant room filled with locked boxes. Each box has two components of note - the box number (e.g. A1, C6, etc...) and the key to unlock it. Boxes and keys are 1:1 - each boxes has one and only one key that will open it and each key is only good for unlocking one specific box.

Bitcoins are stored in these boxes and any given person might have any number of them.

These boxes have a small slot in them (like a letterbox or vending machine coin slot) to allow bitcoins to be put into them without requiring the key. If you want to give someone money, you only need the box number. If you want to retrieve that money, you need the key to open it.

These boxes can be created at will by people and there is no record of who created what box. There is no security guard watching over them nor a ledger listing who owns the key to each box. They are secure because only the person with the key can open the box - they are (effectively) unpickable.

If I want to transfer a bitcoin to you, the process goes like this:

1. - You tell me the number of your box (E12)

2. - I use my key to open my box (A3) and put the money in E12.

3. - The transaction is recorded as 1BTC going from A3 to E12.

There is an important addition, however - boxes can be arbitrarily created and destroyed. Both sender and reciever can just use the same box for all their transactions but this is far from necessary. What would 'normally' happen is:

  • You would create a new box each time you wished to receive a transaction and give me that number.
  • After I had opened my box and transferred the bitcoin to you, I would destroy my box (it's empty now after all)

As creation of these boxes is anonymous and not controlled, maintained, authorised or recorded by any central authority, there is no intrinsic method to link a box to it's 'owner'. You might know from previous transactions that I owned box X71 but that says nothing about what other boxes I might own.

The only way to prove who owns a box in practice is to match it to a transaction that requires or records personal details.

For example, if I buy from an online store for delivery, I would have to provide a shipping address. The store would record the transaction and that box number (X71) would be tied to my name.

If the theft went R106(Mt. Gox) > X71(?) > V122(retailer) then you can get information from the retailer to find out who, logically, must own box X71.

Unfortunately, anyone capable of pulling off the theft in the first place can be presumed to be smarter than that.

Of note, as you can arbitrarily create boxes, there is nothing to stop you taking 10 bitcoins from one box and then transferring one each to 10 new boxes, then destroying the original one. If I have 1 BTC in box X71, I can create a new box, Y93 and transfer the 1 BTC into that. I can do that as many times as I want and the transaction will show as:

R106(Mt. Gox) > X71(?) > Y93(?) > Y8373(?) > . . . > Z522(?) > V122(retailer)

Now, you can match Z522 to a name and address via the retailer but that doesn't mean you can match all the previous points in the transaction. It may well be the same person but how can you tell?

Also, to be clear, the thing was stolen is the keys to those boxes. Once the thief has those keys, they can be used to transfer the bitcoins to any specified box.

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Re: Find missing bitcoins

Part of the nature of the coins is that are easily traceable.

All of the computers involved in the accounting are aware of the path the coins have taken.

Without this, it would be trivial to duplicate coins.

They could presumably trace the coins and, if they acted in concert, "retrieve" them.

The problem is that would acknowledge the group as a de facto governing body.

The thing is, there is no way to determine which transactions are legit and which are not.

You know that a transaction has occurred, but not why. So if you "recover" the coins, the

current holder of them is screwed unless he convince someone lower along the chain to eat

the loss instead.

Now if there has been no "delivery", a company like Virgin Galactic could just "void" the ticket

and the winkle boys get nada. Lawsuit commence, lawyers win, ick.

It's almost certain that what has occurred is that the company allowed coins that were

not truly in their possession to be cashed out. Sort of the old joke about the coin on a string

and the vending machine. Of perhaps coins were "counterfeited" in that they fooled the local

software that possession of real coins were available. Of the fakes were switched for real ones.

*shrug*

Basically, I've heard they were "robbed" but not told the nature of the robbery.

I've always thought of bitcoins as an alternative to travelers checks more than anything else.

Somehow they inflated in value for no real reason. Kind of like having a check for $1 signed

by one of the Beatles. You could cash it in for the $1, or you could sell it for hundreds.

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Re: Find missing bitcoins

So educate me, without reference to a non-bitcoin currency or transaction how do you prove beyond reasonable doubt in a court of law you ever owned a bitcoin never mind has it stolen.

Sure you may have paid real money for someone to store it but you have to refer to the real money invoice, am i missing something for a bitcoin only economy?

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@MrJonno

You can't truly prove you ever owned a given bitcoin. Apologies if you already understand public key cryptography but, simplifying it, proving you own a bitcoin is like proving you own the contents of a locked briefcase by opening it with the code.

That's generally sufficient but doesn't really prove you own it, just that you know the combination. You might have watched while the real owner entered it or coerced them.

With something like Mt Gox, there is an extra level of credibility because Mt Gox sold you the briefcase and can, presumably, testify that you did indeed buy it. That assurance, however, is only as valuable as the witness's believability. In this case, that's not great . . .

Whether that satisfies the 'beyond reasonable doubt' criteria.

That'd the best non-currency analogy I can come up with at the moment. It's late; I'm tired.

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So on security, you security for bitcoin is basically the security of key (on your laptop), versus the security of a government underwriting a bank (up the amount that covers everything I own or ever likely to)

Well some people obviously have a lot of faith in encryption or not a lot of faith in government (to avoid being flagged up or down I won't side which side I'm on)

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@MrJonno

Essentially, yes, the security of your bitcoins is based on the security of the encryption.

The encryption is solid - at least within the current and predicted future computing environment. Public key cryptography is based on mathematical problems that are inherently difficult to solve. The security level of any given cryptographic implementation is therefore dependent on exactly how hard the maths is to solve.

Every such setup is 'vulnerable' to a brute-force attack, which is simply trying ever possible combination until one works. Good implementations should be designed so that such brute-force attacks are the only ones possible. In such a system, the security then becomes down to the number of possible combinations.

A huge leap in compute power would render such systems more vulnerable but the only forseen advance of significant magnitude is the much debated 'quantum computing'. We are a ways away from that yet.

Anyways, that just means that someone can't break the cipher without the (private) key. As is often joked, the cheapest way to break encryption is a length of rubber hose - i.e. just obtain the actual key.

A bitcoin 'wallet' is really just a digital keyring. It holds your collection of these private encryption keys and the corresponding parcels ('addresses') of bitcoins they access. This is why you might have heard stories of people losing bitcoins when their PCs have died - the list of private keys existed only on that PC and are thus in retrievable. That is why online wallets are popular - you are protected from losing access to your money due to PC failure. Of course, there is a risk there as well . . .

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Sorry - in the last paragraph, I meant to say that the wallet contains your private keys and a list of the BTC addresses they are for.

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Meh

I sold a set of pre-nerf Greater Shadow Amuli in Asheron's Call for $400 once. Bitcoin seems to be the same but without the fun.

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