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Bitcoin Price Crashes
Beardydog writes "Bitcoin trading site MtGox.com has suspended operations for the rest of the day after illicit access to at least one account resulted in a steep drop in the price of Bitcoins on the site. Commenters to the support page for the event are reporting that a list of usernames and associated email addresses and password hashes have been posted online. MtGox are currently planning to roll back all of the day's trading, email notices to all affected users, and require replacement passwords for affected accounts."
Bitcoin is a decentralised computer currency designed by self-righteous Ayn Rand-reading nerds who despise looters and parasites like, er, you. It is used to purchase Internet services, illegal drugs and pictures of naked women holding video cards.
Bitcoin works by an emergent synergy of cryptography, peer-to-peer, anonymity, anarchism, libertarianism, wasting stupendous quantities of electricity, the marketing department at NVidia, the enduring exchange value of tulip bulbs and doing all of this instead of Folding@Home.
Bitcoin successfully harnesses a hitherto-unexploited Internet resource: the vast reserves of unexamined privilege amongst computer programmers. Coins are "mined" by stealing them from people who are able to comprehend this level of computer science but still keep their Bitcoin wallet in plain text on a Windows machine.
The Bitcoin system is robustly designed to continue past the collapse of the US dollar and the world economy, as the Internet, fast computers and reliable electricity are all expected to be readily available when barbarian hordes are wandering the burnt-out post-apocalyptic remnants of civilisation.
It is completely incorrect to describe Bitcoin as a "pyramid scheme." Technically, it's a "pump-and-dump."
Many common products are still inexplicably not purchasable with Bitcoins. "It's as if they don't understand the revolutionary wonder of Bitcoin," says Debian developer Hiram Nerdboy, 17. "I can't get chicks with Bitcoins either. Even with my slickest Pick-Up Artist techniques! It's as if my knowledge of economics and game theory didn't apply to real life. But that's impossible, of course. They're probably just theists. Hold on, I just gotta post to Slashdot about this."
Bitcoin was invented by Internet libertarians, in the spirit of freely-chosen individual interpersonal interactions that will bring about the utter collapse of the oppressive taint of the dead hand of government, in order to make money at your expense.
http://rocknerd.co.uk
Enough with this Bitcoin spam already.
Bitcoin is stupid, unneccessary and irrelevant, we don't care for your fucking scam.
These are trades are done on a firm's website, with US$ and BTC balances stored on it. It's totally out of the hands of the bitcoin system except for deposits to (and withdrawls from) accounts on the site.
The only thing I can think of is that they are rolling back transactions which haven't settled yet (settlement=delivery). Because once they bitcoins held in a MtGox account have been transferred out to your bitcoin wallet, they can't get it back. But while they are still held in MtGox account, the actual owner of the coins is MtGox (much like your brokerage is the actual owner of your monkey while you have money deposited with the brokerage).
Any guest worker system is indistinguishable from indentured servitude.
Is it just me, or does these comments, and everything surrounding this, AND THE FACT THAT THIS OCCURRED ON FATHER'S DAY, sound suspicious to anyone? I hate to sound like a conspiracy theories, but this sounds an aweful lot like a psy-op to me.
After all, Bitcoin" was not hacked, nor did "Bitcoin" crash (http://bitcoincharts.com/markets/ - they are STILL WORTH MORE than the U.S. dollar). It was a SINGLE WEB SITE that was hacked. If the pirate bay was hacked, would you say that "bittorrent" was hacked? Only if you're an idiot and don't understand how bittorrent works.
"Mt. Gox", the main Bitcoin exchange, was originally "Magic the Gathering Online Exchange". Nobody really knows who runs "Mt. Gox"; it appears to be one person in Tokyo who's only reachable via email and IRC. (He must be having a terrible night; this all happened around 3AM in Japan.) It's not like there's some real financial institution, or even a funded start-up, behind this. Most, if not all, of the Bitcoin "exchanges" and "exchangers" are somewhat flaky entities. Bitcoin's ecosystem is financially very weak.
Understand that Mt. Gox is not just an exchange. It's a depository institution, like a bank. Customers have balances, in Bitcoins and other currencies, with Mt. Gox. But Mt. Gox is not regulated or audited as a bank or a brokerage, even though it holds other people's money. Accounts are uninsured.
This matters when something goes wrong and somebody gets stuck with losses. Mt. Gox claims they're going to "roll back" transactions to before the theft. But some of the money is already gone, transferred out before Mt. Gox shut down. Mt. Gox is going to have to eat some of those losses if they do a rollback. Do they have the cash? Nobody knows. They're not audited by anybody.
As for the security breach, not only is the entire file of usernames, email addresses, and encrypted passwords now widely available, so are the unencrypted passwords cracked so far. (One wonders why whomever stole the password file published it, but it may have to do with their needing help from others to crack the passwords.) As a result, TradeHill, another Bitcoin exchange based in Chile, has shut down, to avoid attacks using passwords obtained from Mt. Gox. Right now, there's no way to turn Bitcoins into dollars. (Euros, yes; right now the going rate is EUR11.51/BTC. But that market is very thin.)
Whether or not BItcoins are a good idea, the market ecosystem behind them is far too flaky.
they can have my monkey - he was throwing shit everywhere.
A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort.
Rolling the transactions back is a huger blow to that interesting experiment, and basically undermines the attempt to get bitcoins accepted as a form of currency.
Trades on the exchange do not impact the Bitcoin blockchain (transaction history) directly, in the exact same way as money is not directly transferred to/from your bank when you trade. Any market event is buffered into the virtual accounts that traders hold with Mt.gox, while the actual bitcoins are in Mt.gox's wallet and the actual dollars are in Mt.gox's bank account. You need to specifically request a transfer to get either money or bitcoins out of the system.
So the event is in no way relevant for Bitcoin. It's just a bad case of unsanitized inputs.
Usefulness as a currency is inversely proportional to potential as an investment. BitCoin fans, when you boast that your "currency holdings" have shot up in value by several hundred percent in a year, this is NOT A GOOD THING for BitCoins as a currency. You, Joe Merchant, would have to be a complete blithering idiot to set yourself up to accept BitCoins as a form of payment if deflation of several orders of magnitude is REQUIRED in order for your "currency" to be anything but a niche toy. In addition, credit, the lifeblood of any economy is completely impossible under such conditions; it would be the height of insanity to take out a loan if you had the potential of owing the equivalent of several hundred percent interest after a year. (As in, if you took out a loan for a thousand BitCoins a year ago, you'd be praying for an event like this to happen right now...)
An ideal currency remains relatively stable in value in relation to something you actually want to buy. An illiquid currency that gyrates wildly in value is useless, as it makes proper pricing of goods, services, and credit impossible.
In the end, BitCoins are no more a "currency" than Beanie Babies were. And at least Beanie Babies are cute. (And tulips were/are pretty flowers.) BitCoins are an interesting experiment in cryptography, nothing more.
Anyone with an iota of common sense could see that.
I wasn't trying to extol myself as a genius--I was making an observation for those who haven't had much of a look at the history of the market.
What we need is a digital cash system that is run by banks -- yes, I know, we all like to hate on banks, but the truth is that banking is an important part of the economy and the majority of digital cash protocols call for a bank to issue the digital currency.
I think bank-issued digital currency would be worse than government-issued currency, because the government has at least some semblance of advancing the good of its people, whereas a single bank issuing a currency could do whatever it pleases to the market, having only profit motive.
A system like bitcoin where a very large number of users of the currency all have a stake it in with no single user selling all their bitcoins would cause more than a .1% fluctuation in value would be a system that would be very good at holding value for its users (assuming there are no design exploits and no organization with enough computing power to start playing games with the block chain).
The problem with the current bitcoin system is that I imagine there are hundreds of people who could crash the value of the currency because it's likely too concentrated with a few individuals and the market is not deep enough for them to sell their stakes to those who are willing to invest in it more. At the value of $17 US / bitcoin, there are $112,141,350 US in the bitcoin market. There are probably dozens of bitcoin "millionaires" (in USD) who would end up with probably only somewhere in the thousands of dollars if they sold, with the result being putting the bitcoin value back at something like $.10 - $.20 / bitcoin. The system is extremely intriguing, but the current ownership distribution and market seems like a disaster, either waiting to happen or already starting.
Maybe if the system were started again, with the current level of interest, the results would be different. I'd get involved in that. The market with the current ownership distribution? No way.
I'm supposed to hate electronic voting, but support a wholly electronic currency?
"There is more worth loving than we have strength to love." - Brian Jay Stanley
It's worth nothing that this 'price crash' was completely artificial, the result of a malicious act, and only really affects the Mt.Gox exchange site. I suppose it probably also affects any sites that set their exchange rate by Mt.Gox, but many don't do that on a real-time basis anyway. I use Bitcoin Market, another trading site, and their prices are unaffected.
Friend: "The NIC is misconfigured..." Me: "No prob, I'll just telnet in and fix it." *Silence*
I have an Mt.Gox account but have never actually used it for anything. I received the following e-mail earlier today.
Gmail also flagged suspicious failed login attempts on my e-mail account, so I had to go through a password reset process on it. Although I used a unique password at Mt.Gox, the attacker apparently is running automated login attempts using the stolen e-mail addresses and Mt.Gox passwords, so anyone using non-unique passwords is likely in trouble.
So much as it is a MTGox story.
About a week ago the first rumors of MtGox being compromised by a SQL injection exploit began to circulate.
Here's one of the original claims from someone calling themselves Buttsec from June 14th. Others which I'm too lazy to dig up were more specific and named MtGox explictly:
http://pastebin.com/4NPemHfz
On that very same day, MTGox implemented a $1000 dollar withdrawal limit. Suspicious, right? For the past 3 days, there have been offers to sell MTGox's database of usernames and password hashes. Here's an example:
http://pastebin.com/ui0nusuZ
Today, there is this:
http://pastebin.com/hN7PxRhc
http://pastebin.com/w06pa2mB (there are many of these, the first link gives you the urls if you want to see them all)
This confirms MTGox was indeed hacked. One of the hackers offering to sell this database that came out today had even specifically mentioned that the hole he had used was CLOSED by MTGox a couple of days ago. Today, FINALLY, MTGox admits they were hacked and has sent out emails to all their users. Here is a copy:
http://pastebin.com/9Cx94wzs
In light of all of the evidence (more of which I'm sure you can find on your own), I find it very hard to believe that MtGox was not aware they had been hacked, and yet they've been denying it and operating normally (aside from the newly added withdrawal limit, which they even boast about in the linked press release). In fact, I found one reddit page of many where MtGox users were complaining there accounts had been compromised (There have been many over the past week) and the employee flat out denies that they have ANY reason to suspect they've been compromised:
Here's one such complaint among many: http://www.reddit.com/r/Bitcoin/comments/i17jd/i_just_got_ripped_off_on_mtgox/
And here's one with an employee denial: http://www.reddit.com/r/Bitcoin/comments/i2dkn/mt_gox_has_some_serious_issues/
Here's all that (purported) employees posts: http://www.reddit.com/user/MtGox_Adam
Long story short: For the last week (5 days at least), I've been wondering if MtGox had been truly hacked or if someone was just trying to depress the price of bitcoins by spreading rumors. Today I don't have to wonder anymore. What I do have to wonder about is why has MtGox kept silent for the past week when ALL indications were that they KNEW. They fixed the hole, added the withdrawal limit, and yet kept on denying they had an issue when dozens of users complained of account compromises. Rather than admit the issue and try to have it fixed, they apparently tried to keep it a secret. How can we trust any company that handles security issues in this manner?
other USD exchanges are still running fine.
From Bitcoin.org's market table:
Look at those tiny volumes. Total volume for all the little guys is under 0.1% of Mt. Gox, which was trading over 200,000 bitcoins per day. With Mt. Gox and TradeHill off-line, the market is dead. None of those little guys have any significant buyers available.
Imagine this headline: Forex.com hacked, concept of USD put into question. Doesn't that sound a bit ridiculous? This was a bad day for mtgox.com and bitcoin speculators, but it does not demonstrate inherent weaknesses in the system of bitcoin.
I agree, this does not "demonstrate inherent weaknesses" in the design or Bitcoin, per se, and I would add that an event such as this one could strangle Bitcoin in its cradle. Consider these points:
i) Unlike the USD, Bitcoin has still to establish legitimacy in the eyes of the serious investor.
ii) Sites such as Mt Gox, provide the primary (perhaps even exclusive) gateway to Bitcoin. FX dealing sites are very much down the list on how most people gain exposure to USD.
iii) The USD can be used by US citizens to settle their taxation debt. The USD can be used internationally to purchase oil. Within the US (and not only there), the USD can be used to purchase practically the entire range of goods and services.
If we apply critical thinking, it will be apparent that the analogy you propose with your headline, while appealing on the surface, cannot do justice to the differences between Bitcoin and the USD.
Better to be despised for too anxious apprehensions, than ruined by too confident a security. --Edmund Burke
Remember, most people are stupid
This is untrue, if you actually examine the world people, on average are VERY CLEVER. If "people" were stupid our species would have been wiped out long ago.
Now what people are, is selectively informed. They may not have chosen to be informed about topics you consider important, but it does not mean they are stupid...
I'm sure your average redneck ain't keeping his ammo dry, and your average gun nut (simply for lack of a better term) can't guarantee their storage spot is impervious to floods or broken water pipes
How "sure" are you? Because I'm damn sure you are wrong. Almost anyone I've ever seen keeps ammo in something like an ammo box, which is quite dry and mostly impervious to occasional water. The "redneck" that talks so funny probably knows quite a lot more than you about the care of ammo, and humorously would probably call you an idiot for not knowing the details on this better...
Grow up and realize that people who are different from you are not automatically stupid.
"There is more worth loving than we have strength to love." - Brian Jay Stanley