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, …
The whole basis of Bitcoin is that it is virtual, untraceable and unattributable. There is deliberately no trace. Its not a flaw, its a design axiom.
It not like cash, or credit cards or PayPal. Its more like barer bonds - the person with the bond has tottal title to it. If you had a bond that you bought for 10,000 and it became worth 500,000, would you keep it in full view on the table next to your open front door? Probably not. You might pt it in a safe deposit box, because that way you can keep it but still not declare it for tax. Thieves can still break in, but its harder to do.
The point here is that no-one can prove he did have the money in the first place, and no-one can show who has it now (assuming it has been stolen). That is what untraceable means.
For anyone else who does not understand this, as has been said previously, go read Cryptonomicon.
Mines the one with the barer bonds in the pocket.
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"Allinvain speculated the thieves made off with the windfall after using malware to compromise his Windows-based computer."
Technically savvy enough to get involved with BitCoin, but not savvy enough to run a secure OS, or apply all the sticky-plasters that are required to make Windows less sieve-like.
Speculator or enthusiastic miner, I don't really care. Blaming BitCoin (or anyone) for one's own negligence and ineptitude is a bit rich.
Miners need to run mining software to mine coins (since the CPU bitcoin client is very slow at mining) and they also need to throw their bitcoin client open as an RPC server so the miner can get work to do.
The security issue here is obvious. Miners are motivated to seek out the fastest mining software to maximize their take. It wouldn't be hard to convince some users to download and run a trojan based upon its claims of speed.
The trojan could even legitimately mine for a while to ensure good word of mouth but then go into robbery mode and transfer the lot somewhere else. This isn't hard for it to do since It has full access to the bitcoin app via RPC (and as can be seen here the commands it can call is extensive. https://en.bitcoin.it/wiki/Original_Bitcoin_client/API_Calls_list). It doesn't even need to bother with RPC if the wallet is local and could just lift it, but the RPC probably guarantees it the best chance of escaping firewalls and so on.
I am not sure that I agree with your suggestion that there is some kind of contradiction between his involvement in BitCoin and his falling for some kind of social engineering scam that led to his computer being infected. Very many soc-eng scams try to persuade that you are going to get "rich, rich, rich!" and schemes like BitCoin try to persuade you that you are going to get......."rich etc". In other words, falling for a social engineering scam directed against your pc and falling for a (ponzi, or do I mean poncy? )scheme like BitCoin has certain similarities. IE. "A fool and his pc and/or money are soon parted".
He's got himself to blame for his actual loss, but Bitcoin is undermining the trust into their system with comments like "He really just lost the amount he spent in Bitcoins, he just lost 1000$"
If you change Euros into Dollars, the Dollar rises like mad (Well, this IS hypothetical), and you end up with 10 times the original amount of money - but it gets stolen before you convert it back, you'd be a bit pissed off if the police said "You only lost the money you originally exchanged into Dollars, no worries", wouldn't you?
If Bitcoin is money, it ALWAYS has its current worth (hence the name "Currency"), not the worth it had when you got it in exchange for something else.
I am not against paying taxes, I'm proud to pay tax because I realise that tax isn't me giving my money away, but everyone pooling our money to spend on things we all need.
I use Bitcoin because I'm a saver and I don't appreciate every central bank devaluing my savings by printing money. I don't want the value of my hard earned cash to be at the mercy of the broken system where stability depends on continuous exponential economic growth.
The purpose being to keep money flowing. If money never devalues then people hoard it.
And so you get what we had here (before the theft), people hoarding masses and masses of bitcoins, but the actual volume of the bitcoin economy being so low and so unstable that this one guy could have caused the value to plummet by selling up. And he didn't even have that huge a treasure trove.
I hope you haven't sunk too much 'IRL' cash into the scheme, but if you have then... well good luck I guess. You're going to need it.
Don't you get it? Bitcoin is inherently unsafe and unregulated. It could collapse tomorrow and you could be left with nothing.
It's only an investment in the way that pyramid schemes are investments - early adopters hype the scheme to the heavens, promising untold wealth and then cash out before the scheme collapses. It's the majority who are stuck in the scheme at the end who discover the reality that it was a scam all along.
If you're so paranoid about deflation go buy some land, gold or something tangible.
Congrats... Bitcoin just devalued your money.
With his Statement Mr. Schneider made clear that whatever money you put into Bitcoin should be considered lost - if you can convert it back to real currency, lucky for you, but you're not supposed to expect anything from Bitcoin.
Your hard-earned cash is at the mercy of Bitcoin and whatever exchanges will be left by the time you want to get your money back. If Bitcoin just comes out and says "Hey, it was a nice test, but we'll just shut down everything now" you'll end up having lost all your money with nobody to appeal to.
It's money being extracted from you by force. I'm glad you're happy about paying. I'm sure if you didn't have to pay it, you'd be just as happy to pay it, too. They have places to do that. They're called charities. And they don't ask you to pay at the point of a gun.
> Only the state is big enough to guarantee a currency,
There are so many currencies that have failed over the years it would take to long to list them.
Perhaps you mean the dollar, pound and euro? Well there are no guarantees with any of them. National borrowing in all 3 currencies is way out of control and at some point the price (inflation, lots of it) will have to be paid. Or in the euro's case it might devolve back into national currencies for some of the countries involved.
Those who use a virtual currency are perhaps hoping that because it is independent of the dollar/pound/euro it will not be affected by any one currencies inflation.
Now, if I had the money to do it, I would spread it out over multiple currencies and perhaps even keep some (but not a lot) in virtual currencies.
"Only the state is big enough to guarantee a currency".
That depends upon your value of guarantee. My IOUs currently circulate within my local LETSystem , acceptable currently within a group of about 60 active participants. They are worth my help giving people lifts, the odd few hours carrying out various tasks or providing advice, second hand goods, home made jam etc. I've purchased and earned a few thousand pounds worth of similar goods and services over the last 10 years or so. It was never setup with the intention of anyone considering it a means of savings, (as opposed to exchange) but the fact remains that LETS credits earned when we started 18 years ago are still spendable with those actively participating today.
The state does have an advantage which we don't in the sense the state guarantees to accept it's own issued money as payment of taxes.
Bitcoin will be a pseudocurrency (like Air Miles, Tesco Clubcard Points and Green Shield Stamps) when it's redeemable against something useful, and people who use it have a reasonable guarantee against devaluation and theft.
You don't need the state to do that. Unfortunately, the numpties who think Bitcoin can bring down the fractional reserve banking system (cont'd p94) can't see how to get from Here to There.
I thought that, due to the requirement that all transactions must be logged to prevent someone spending the same bitcoins twice, that bitcoins were inherently traceable? And if the thief hasn't spent them yet he could transfer them first thus saving some or all of his hoard...
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My lad (was) into "Runescape" in a big way. He eventually decided to use a (to me) dodgy 3rd party (runescape-gold.com) where you *pay* then in £s, and they transfer so much "gold" to your characters inventory.
Because he has to learn for himself, I let him buy £30 worth. Went through with Paypal. All seemed well. He got the "gold" was happy as Larry ... next day - all his inventory had gone. I have no idea exactly how, but did note that Jagex T&Cs forbid buying gold this way, so you could hardly complain to them.
Wasn't there a court case recently where somebody sued for something in 2nd Life ?
"Don't you get it? Bitcoin is inherently unsafe and unregulated. It could collapse tomorrow and you could be left with nothing. "
No regulation is better than bad regulation. The fiat monetary system is possibly the greatest failing of the human race, and the bungled attempts at regulation would be laughable if they weren't so harrowing.
There is nothing inherently unsafe about Bitcoin, like any type of cash, its important to store it securely.
As for collapse, my analysis is that in the long run, Bitcoin is probably less likely to collapse than any other currency. For now though I have not spent what I cannot afford to lose.
"No regulation is better than bad regulation. The fiat monetary system is possibly the greatest failing of the human race, and the bungled attempts at regulation would be laughable if they weren't so harrowing."
No it isn't. Regulation stops you from being fleeced, it gives you protections from dodgy banks and lenders who would exploit you, it is borne from painful financial collapses in the past.
And you still haven't addressed why bitcoin (which is also fiat btw) a safe investment as opposed to buying land or something else which is tangible.
"There is nothing inherently unsafe about Bitcoin, like any type of cash, its important to store it securely."
Yes there is. Maybe you haven't been paying attention but some guy just got hosed by a theft. If the thieves decided to cash-in that money then everyone else's investment will slump because sellers will outstrip buyers and the price will collapse. If there are no buyers and only sellers then bitcoins are virtually worthless. And that will be just a taster of what happens when the entire sysem collapses and EVERYONE wants out.
"As for collapse, my analysis is that in the long run, Bitcoin is probably less likely to collapse than any other currency. For now though I have not spent what I cannot afford to lose."
Well your analysis appears to be clouded by some peculiar libertarian notions. Even buying gold / silver in the current speculative bubble is probably a sounder bet. Or perhaps you should even invest in some tulip bulbs. I hear they are a surefire investment too.
I am quoting your post in full - it deserves it big time!
""No regulation is better than bad regulation. The fiat monetary system is possibly the greatest failing of the human race, and the bungled attempts at regulation would be laughable if they weren't so harrowing."
No it isn't. Regulation stops you from being fleeced, it gives you protections from dodgy banks and lenders who would exploit you, it is borne from painful financial collapses in the past.
And you still haven't addressed why bitcoin (which is also fiat btw) a safe investment as opposed to buying land or something else which is tangible.
"There is nothing inherently unsafe about Bitcoin, like any type of cash, its important to store it securely."
Yes there is. Maybe you haven't been paying attention but some guy just got hosed by a theft. If the thieves decided to cash-in that money then everyone else's investment will slump because sellers will outstrip buyers and the price will collapse. If there are no buyers and only sellers then bitcoins are virtually worthless. And that will be just a taster of what happens when the entire sysem collapses and EVERYONE wants out.
"As for collapse, my analysis is that in the long run, Bitcoin is probably less likely to collapse than any other currency. For now though I have not spent what I cannot afford to lose."
Well your analysis appears to be clouded by some peculiar libertarian notions. Even buying gold / silver in the current speculative bubble is probably a sounder bet. Or perhaps you should even invest in some tulip bulbs. I hear they are a surefire investment too."
I could not have expressed it better!
:)
AF
They are in Fear mode. People are buying both because they fear the coming collapse of the existing fiat currencies. Whether or not they eventually decline is dependent entirely on removing that fear. Even then it is arguable that they will be worth more than they are today. Only reason I'm not investing in them is that I'm maxed out on the debt front and working to pay that down.
I've read many a claim on this subject, some stating Bitcoin is a currency, others bonds, ponzi scheme, scam etc.
As my posting name suggests, I know a thing or two about how money works. Let me confirm that every true currency, traded electronically, will be manage by a centralised system, usually accessed through their RTGS, Real Time Gross Settlement system, usually run by the countries/currencies central bank (Bank of England for Sterling, ECB for Euro, Fed for US Dollars etc). This way, we know how much there is, and crucially, where it is.
Cash is different matter.
Bitcoin is not currency, banks are not going to buy it are they? Mugs game with a few lucky winners at the end, a punt at best.
And besides all this boring rubbish, the name "Allinvain" just seems a bit comically suspect eh?
For me, the value of a currency breaks down when there is no meaning to the phrase 'I promise to bear the bearer on demand...", and you contemplate the system of fractional reserve banking.
At that point, suddenly it doesn't matter whether there is a state behind a given currency or not... all currency seems to be a monstrous fraud by a bank of one kind or another.
I'm not a banker, but I know a thing or two about bankers. Like Icesave. Northern Rock. RBS. Lehman. Goldman Sachs. Barings...
How much of my money do you want me to give you to compensate for the failure of your entire industry to self regulate?
Bankers, pfft.
>>"The problem with 'real' money is that the banks wants 6% of each transaction (visa, cash withdraw, bank charges X 2 for both transaction sides)."
My bank doesn't charge me anything for withdrawing cash, paying in cash or cheques, or sending or receiving electronic transfers.
They might charge me for some of those things if I was a regular business, with business-style turnover, but since a regular business seems fairly unlikely to piss about with things like bitcoins, that's a pretty moot point.
A guy gets ripped off and all a bunch of you have to say is that he's an idiot for having Bitcoins. That's pretty pathetic. It is not the victim's fault. Nor is it Bitcoin's. The system does exactly what it is meant to. The merits and flaws of an untrackable currency are beside the point. Too many of you are playing the 'blame the victim' game. Do you blame the victims of identity theft when a trojan lifts enough personal details from their computer for someone to get a credit card? I would hope not. This is the same thing.
"Do you blame the victims of identity theft when a trojan lifts enough personal details from their computer for someone to get a credit card? I would hope not. This is the same thing."
The same thing, with a notable exception.
As has been mentioned, the attractiveness of the system is that there are no fees to pay, greedy bankers to finance and so on. However, that is also the flaw.
Recently I was unlucky enough to have my details stolen, £200 near enough went from my account without my say so. If this had been bitcoin, it looks like that would have been the last I saw of it. As it was, I phoned my bank who immediately cancelled my card and issued a new one, began an investigation in to the fraudulent transaction, and credited my account with £200 right there, pending the outcome. They found in my favour, so I kept the money.
As with everything, there is opportunity and there is risk. If you take the opportunity bitcon, sorry, bitcoin represents, you must accept the risk of dealing in untraceable money. I choose to not take that opportunity, however I have much lower risk. He chose to take the opportunity, unfortunately, he is now the victim of the inherent increased risk.
'Regulation stops you from being fleeced, it gives you protections from dodgy banks and lenders who would exploit you, it is borne from painful financial collapses in the past'
Sorry, but what faraway planet are you from? Surely you meant: 'Regulation that should stop you from being fleeced, to give you protection from dodgy banks and lenders who exploit you, this being learnt from the current painful financial collapses"
I don't recall losing my savings once during any financial crisis in my lifetime. Perhaps that is because I don't invest in ostrich eggs or some other harebrained get rich quick scheme. Perhaps it also has to do with the fact that banks are regulated which curbs their worst excesses and provides a measure of financial safety if they do come crashing down. When Northern Rock came crashing down, the government stepped in with a savings guarantee and nationalised the bank to stabilize it. Without regulation no such measures would have happened it might have had a domino effect on other banks. The fact of the matter is Bitcoin is a blackhole.
If and when it collapses or is legislated out of meaningful existence you know who will save your ass? Nobody. Your money will be toast. Or rather it will be in the pockets of speculators who got out before the pyramid collapsed.
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