Currency Exchange Suspended !

[TheCountOfNowhere]

http://www.bbc.com/news/technology-19486695

"Bitcoin theft causes Bitfloor exchange to go offline

One of the biggest Bitcoin currency exchanges has been taken offline after 24,000 units ($250,000; £157,800) of the virtual currency were stolen from its computer servers."

The funny bit is:

"Unlike most other types of money, Bitcoins do not have a physical real-world equivalent"

A bit like the UK £

[bmf]

http://www.bbc.com/news/technology-19486695

"Bitcoin theft causes Bitfloor exchange to go offline

One of the biggest Bitcoin currency exchanges has been taken offline after 24,000 units ($250,000; £157,800) of the virtual currency were stolen from its computer servers."

The funny bit is:

"Unlike most other types of money, Bitcoins do not have a physical real-world equivalent"

A bit like the UK £

Just when it was gaining Traktion.

[TheCountOfNowhere]

Can't see this magic money that can be magic'd up from nowhere catching on

[thecrashingisles]

The BoE should use the same excuse. "All that government debt we've been buying has been stolen by a hacker so unfortunately we won't be able to sell it back into the market as planned."

Edited September 5, 2012 by thecrashingisles

[200p]

Real stores of value hurt when you drop it on your foot.

10lb bar of lead anyone?

[interestrateripoff]

As a currency becomes more popular people with either steal it or forge it.

[Sour Mash]

Proof that it actually has some value as a currency.

[Bruce Banner]

The thread title had me worried for a bit.

[ThePiltdownMan]

Its great that bitcoin is finally becoming mainstream enough for BBC to report on it, even if its for the negatives.

[adamLancs]

BBC: "Bitcoin's future in doubt" ... not really, but I bet a bunch of new people are googling Bitcoin right now. Bad publicity etc. Pretty nice.

[Traktion]

Just when it was gaining Traktion.

[Traktion]

It's all a bit wild west in the Bitcoin economy at the moment.

Personally, I don't leave any more Bitcoins with exchanges than I absolutely need to. Who knows what they've left unencrypted or exposed?

The exchanges are becoming more open though and MtGox (the biggest exchange) is going to allow 3rd party auditing soon. I'm sure insurance will come after that too.

https://localbitcoins.com/ is another alternative, which is more like a distributed exchange system. I've not used it, but I think the idea is to build up user ratings, like for ebay sellers. You could also only trade with local people in person, at a shop etc.

IMO, it's not where Bitcoin is right now which is important. It is where it will be in a few years. Personally, I think there is a lot of potential.

[dangermaus]

I wonder what percentage of bitcoins are used to buy drugs?

Must be 90% +

google silk road if you don't understand

[Traktion]

I wonder what percentage of bitcoins are used to buy drugs?

Must be 90% +

google silk road if you don't understand

It was recently 20% of the total transactional value, IIRC.

[scepticus]

Just when it was gaining Traktion.

LOL, very good.

[Crashman Begins]

Shitcoin ?

[dangermaus]

It was recently 20% of the total transactional value, IIRC.

Oh thats surprising.

I don't know anyone who's used it for anythign else but silkroad is becoming quite mainstream

[Traktion]

Oh thats surprising.

I don't know anyone who's used it for anythign else but silkroad is becoming quite mainstream

I think online gambling with Bitcoins is getting quite big too, as it doesn't need to be regulated (and could be pseudo-anonymous anyway).

I should imagine that international transfers will be another growth area, as it's much cheaper and faster than using traditional bank wires.

Bitcoin seems to be carving itself a few niches and it will probably grow out from them to other areas, IMO.

[Roman Roady]

Isnt this virtual currency quite similar to the currencies in use around the world now?

Existing only in computer memories and perceived to be of value.

This has the advantage of being international.

Could debts in Bitcoins be legally enforced anywhere?

This type of thing could be a threat in the long term to the current cartel of central bankers who currently rule the world.

What they cant control, they will want to destroy.

[Traktion]

Isnt this virtual currency quite similar to the currencies in use around the world now?

Existing only in computer memories and perceived to be of value.

This has the advantage of being international.

Could debts in Bitcoins be legally enforced anywhere?

This type of thing could be a threat in the long term to the current cartel of central bankers who currently rule the world.

What they cant control, they will want to destroy.

Bitcoin is two things - it's both a settlement system and a unit of account.

The settlement system has two parts. Firstly there is a distributed ledger, called the block chain, which holds a record of all transactions. Secondly, there are clients which update the block chain, which are then validated by all other clients (to ensure no double spends, that it's a valid payment etc).

The settlement system provides the mechanism to circumvent the banking system. It essentially combines the settlement process of both private and central banks. This is all done in software, based on the rules* embedded in it. This is certainly a threat to the money gatekeepers, as it cuts them out completely - you don't need VISA, banks, central banks etc to move your money about, even if it is to the other side of the world.

The unit of account is what the settlement system uses to define who has what. This is similar to pounds, dollars etc. As central banks can create digital money, without the need to create the paper notes to back it up, it is indeed similar. However, the Bitcoin rules* define that only so many coins can be created, by following a defined 'mining' algorithm. Therefore, no individual or organisation can add more coins to the system.

You could have a contract which requested settlement in Bitcoins, which the courts would then insist is either paid in Bitcoins or in the state's legal tender. This is no different from asking for carrots to be delivered in exchange for spuds.

I think the main worry/criticism is that the system will either catastrophically fail (due to some unexposed software flaw) or that the long term deflationary nature of the currency - when the user base is growing faster than the number of new coins being mined, the value should increase (simplified, but you get the gist, I hope!). This will become more of a problem when mining levels off in a few decades too, assuming it is successful enough to survive that long.

IMO, once people become comfortable with multiple currencies, there is nothing to stop new ones being created, to combat the deflationary nature of another. If you accept that deflation is due to too many people chasing a too small pool of coins (whether hoarded or otherwise), then creating another pool of coins, which can be exchanged into relieves the pressure. IMO, I think this process would be market driven, however I understand that this is pretty untested waters.

TBH, I find the whole Bitcoin thing fascinating. It is like a giant monetary and economic experiment. We will get to see what is needed and what isn't. We get to see how much regulation, how much legal intervention, how much control in general is needed, in order for an economy to prosper. We also get to see whether each of these manages to develop, organically, without an authoritarian organisation managing it (EDIT: largely - ofc, most people live in states which impact them). It's exciting stuff, IMO!

* NOTE: These rules can only change substantially, if a majority of people download the new client, thereby agreeing to the new rules. In short, if a rogue client was released, transactions from it would be rejected. Therefore, it is likely that the software would have to be forked into a new standard, which would be incompatible with the Bitcoin network.

Edited September 6, 2012 by Traktion

[ChumpusRex]

As a currency becomes more popular people with either steal it or forge it.

Bitcoin is, for all intents and purposes, unforgeable. It's also unprintable, apart from during an introductory phase, where anyone with sufficient computer resources can print bitcoins at a controlled rate. Once 20 million bitcoins have been printed, further printing is essentially impossible.

Stealing, however, is rampant. It's mainly through the currency exchanges, who are basically run by people so incompetent that I wouldn't trust them to operate a toaster.

But there have been some instances of big bitcoin holders having their personal computers (where their bitcoins are held) targeted by sophisticated "spear-phishing" or malicious software attacks.

[Sour Mash]

TBH, I find the whole Bitcoin thing fascinating. It is like a giant monetary and economic experiment. We will get to see what is needed and what isn't. We get to see how much regulation, how much legal intervention, how much control in general is needed, in order for an economy to prosper. We also get to see whether each of these manages to develop, organically, without an authoritarian organisation managing it (EDIT: largely - ofc, most people live in states which impact them). It's exciting stuff, IMO!

History shows that no currency outside the control of the existing financial system will be allowed to develop to the point where it gains widespread public acceptance. Bitcoin has the potential to be a global currency, no way it is ever going to be permitted to reach that potential.

Right now we're in the phase where there's a propaganda war being pursued against it. If it continues to gain acceptance then we'll see various existing legislation, there's been plenty purporting to be against money laundering or terrorism that has been introduced in the last decade, being deployed to thwart it.

Failing that, new laws and direct action to stamp it out.

However, the technology is now out there. They can stop honest people using it for legitimate reasons using legislation but I'd guess that there's a real opportunity for organised crime to form its own currency based around a variation on the tech. ie. They set up their own private p2p currency network which they agree to exchange with each other in return for their goods or 'services'.

Edited September 6, 2012 by Sour Mash

[Saberu]

The site owner probably stole it himself. It's easy for an amateur Linux user to make their box secure. If someone thinks they have the skill to run a box which will be attacked 24 hours a day, they probably have better than amateur skill. My guess is he 'stole' it from his own box, then pocketed the cash

It's worth noting that there is no need to keep Bitcoins on other peoples servers, you can keep it on a USB key or your own computer. Hell your best bet would be keeping it on a TrueCrypt volume on a top quality USB key which you then lock in a safe.

So then no one can steal it even if they found the USB key.

The main Bitcoin exchange in existence is still perfectly secure afaik.

Edited September 6, 2012 by Saberu

[Traktion]

The site owner probably stole it himself. It's easy for an amateur Linux user to make their box secure. If someone thinks they have the skill to run a box which will be attacked 24 hours a day, they probably have better than amateur skill. My guess is he 'stole' it from his own box, then pocketed the cash

It's worth noting that there is no need to keep Bitcoins on other peoples servers, you can keep it on a USB key or your own computer. Hell your best bet would be keeping it on a TrueCrypt volume on a top quality USB key which you then lock in a safe.

So then no one can steal it even if they found the USB key.

The main Bitcoin exchange in existence is still perfectly secure afaik.

Very true and that's good advice. You can also encrypt the Bitcoin key, requiring a key phrase to use it. On top of that, you could PGP encrypt it again if you were paranoid. IIRC, there are some cold storage devices which act as black boxes being talked about too, to make this process super simple.

TBH, people should always be careful who they trust with their coins. You don't need a bank to hold them safely, if done well. This, in itself, stops FRB occurring, unless you want to take the investment/risk intentionally.

I think there are a lot of ways which the technology could be improved upon and there are many devs doing just that. It's still a relatively new technology, after all.

Re the owner stealing them, who knows? It has been suggested that the Bitcoinica hack was an inside job too, although I don't think it has been proved either way yet. Having something which is easily concealed has both benefits (to keep them safe) and drawbacks (for a thief to keep them safe).

[Traktion]

History shows that no currency outside the control of the existing financial system will be allowed to develop to the point where it gains widespread public acceptance. Bitcoin has the potential to be a global currency, no way it is ever going to be permitted to reach that potential.

Right now we're in the phase where there's a propaganda war being pursued against it. If it continues to gain acceptance then we'll see various existing legislation, there's been plenty purporting to be against money laundering or terrorism that has been introduced in the last decade, being deployed to thwart it.

Failing that, new laws and direct action to stamp it out.

However, the technology is now out there. They can stop honest people using it for legitimate reasons using legislation but I'd guess that there's a real opportunity for organised crime to form its own currency based around a variation on the tech. ie. They set up their own private p2p currency network which they agree to exchange with each other in return for their goods or 'services'.

Granted, the state could prohibit its use. They could have 'a war on bitcoins' or some such silliness.

Ofc, prohibition won't stop people using it. There would have to be a global agreement to cause problems too.

As the USA stole everyone's gold in the great depression, I suppose you take a risk holding anything. However, it can be very hard to prove that someone even has any Bitcoins (a small encrypted file can be anything), let alone take them off them (you can copy/email the wallet too + get a trusted party to move the funds etc).