Linode Exploit Caused Theft of Thousands of Bitcoins

Sabbetus writes "Popular web hosting service Linode had a serious exploit earlier today. Apparently the super admin password for their server management panel was leaked and allowed a malicious attacker to target multiple Bitcoin-related servers. The biggest loss happened to a major Bitcoin mining pool that lost over 3000 BTC, which is currently worth almost 15 000 USD. Now the question is, will Linode compensate for lost bitcoins?" Update: The 3000 BTC theft was not even close to being the biggest, Bitcoin trading site Bitcoinica lost over 40,000 BTC.

Comments

oops

[buzzsawddog]

oops...

Re:oops

[sg_oneill]

It has been said that on the internet, comedy is tragedy that ends in the words "And then I lost my bitcoins".

Thankyou randoids, thank you once again for proving that in the world there are people more comically thoughtless than I.

Re:oops

[subreality]

You accidentally all your bitcoins? :)

Re:oops

[jhoegl]

They are belong to them.

Newsflash

[Anonymous Coward]

Imaginary currency is not safe.

Re:Newsflash

[houstonbofh]

And real banks and credit systems are never robbed... They should have had insurance to cover this. If not, they are in a very bad way.

Re:Newsflash

[buzzsawddog]

I guess that goes for the currency for most major countries too.

Re:Newsflash

[Kenja]

That would be an interesting claim to file. "They stole my bits! I demand that you replace them."

Re:Newsflash

[Anonymous Coward]

Imaginary currency is not safe.

"...will Linode compensate for lost bitcoins?"
Meh, there's an app for that.

Re:Newsflash

[mrmeval]

Isn't that the point of bitcoin? To make the intangible tangible? If those bits can be stolen they're about as tangible as it gets. ;) So there is a loss. I'm sure Lloyds of London could write that policy but I don't see them doing it for a price that was affordable.

Re:Newsflash

[killkillkill]

Might be a bit difficult to find someone who even would insure their bitcoin balance, not to mention the difficulties that would probably arise if a claim was filed. Fortunately, in this case the operators of the services are absorbing the lose and their customers/clients are not directly affected.

Re:Newsflash

[matrim99]

All currency is imaginary.

Re:Newsflash

[Anonymous Coward]

Safer than using yellow rocks for currency, that's for sure. I don't need a fuckin' vault for bitcoins.

Re:Newsflash

[BenJCarter]

Perhaps if they paid for the policy in Bitcoins?

Re:Newsflash

[Anonymous Coward]

LOL, what do you think the majority of American dollars are in? Do you think your bank has physical dollars for each one they have on their (electronic) ledgers?

Re:Newsflash

[dlgeek]

How would insurance of bitcoins even work? It seems particularly challenging for many reasons.

Generally, insurance policies are written for things with a strongly-known approximate value. Jewlery, physical property, buildings, a fixed amount of cash in a safe.... You can't generally get insurance on things with fluctuating value like real estate (you can insure the building on top of it, but you can't insure the lot against loss of value), various financial instruments, commodities futures, etc. Bit coins are highly variable - if I take out a policy against 10,000 bit coins, and they're lost, what value would the policy pay out based on? The value at the time I got my policy? The value at the time they were stolen? The value at the time the claim is settled? Does this take into account that if someone steals a large number of bitcoins, they're probably going to liquidate them quickly, which would depress the market? If the policy is based on the value at the time it's issued, the insured party has a motivation to purposefully lose or destroy the coins if the market dramatically drops - the insured value is higher than the market value. On the other hand, if the policy is based on the market value at the time of the incident, the insurance company's costs can skyrocket and no sane underwriter would write such a policy.

Speaking of the insurred's motivation to defraud based on fluctuating value, the risk of fraud here is sky-high. A cryptographically-secure, untraceable currency where mere knowledge of a few numbers is enough to steal the entire value without leaving any evidence behind? It'd be trivial for the owner to purposefully leave a backdoor, then anonymously exploit it, especially given the nasscent state of computer security in the legal system. It wouldn't even have to be that subtle a hole, either. As far as I know, there isn't any precedent to establish what liability companies have with regard to negligence in the field, with the notable exception of PCI:DSS for the credit card industry. (For example, all the cases against Sony were dismissed as far as I'm aware.) In our current environment, the insurance company would have a hard time proving neglicence to dispute the claim. With that kind of risk, there's no way any insurer would issue that kind of policy. I just don't see any reasonable way that an insurance company would write a policy like this, at any price. Moreover, many of these issues reach past the bitcoin realm and apply to all sorts of online providers. As more and more of companies move data to "the cloud" - what kind of recourse do they have when security and availibility events happen. Can I get an insurance policy to protect me if my cloud email provider exposes confidential business informaton to the world which significantly impacts my revenue stream? It's a very thorny landscape...

Re:Newsflash

[Anonymous Coward]

You can't generally get insurance on things with fluctuating value like real estate (you can insure the building on top of it, but you can't insure the lot against loss of value), various financial instruments, commodities futures, etc.

Er, yeah, you can. They mightn't advertise such policies on the Geico website but you can insure against pretty much anything.

Bitcoin insurance may be impractical or expensive for other reasons but the fact that the value of the coins fluctuates is not an impediment to insuring them.

Re:Newsflash

[shaitand]

You can get just about anything insured including things with highly fluctuating value like an automobile, antiques, personal possessions in ones home, etc. For items like this the payout would be replacement or a cash payout for the cost of replacement. Given the publicly available markets it is pretty easy to determine the cost of replacement and settle the claim. This would be the cost of replacement on the actual day of settlement.

"If the policy is based on the value at the time it's issued, the insured party has a motivation to purposefully lose or destroy the coins if the market dramatically drops - the insured value is higher than the market value."

How does one destroy a bitcoin?

Re:Newsflash

[plover]

It may appear thorny, but insurance is simply legitimized gambling, which ultimately is dirt simple. The company will lay odds against your losses. Now, they're going to study what's happening, and they're going to change the premiums on a scheduled basis, and they're going to present a quote that represents their estimate of your chances of loss, and they're going to have a lawyer write as many weaselly exclusions in the policy that they think they can get away with. If you ask them to insure $10,000 worth of bitcoins against loss, and they're only 50% confident in your security, they may take those odds and set your premium at $6,000.

That's the other thing about insurance companies. They're exactly the same as the casino owner: the house always gets its cut.

Re:Newsflash

[shaitand]

"Might be a bit difficult to find someone who even would insure their bitcoin balance."

Their business liability insurance should cover this.

Re:Newsflash

[nedlohs]

How does one destroy a bitcoin?

Storing it at linode seems a good start.

Re:Newsflash

[ComaVN]

They're exactly the same as the casino owner: the house always gets its cut.

Not quite. The casino sets the rules of the game, making sure they know EXACTLY what the odds are, thereby turning long-term profit into a statistical certainty. The insurer has to guess the odds, and can actually guess wrong, so there's a lot less certainty. That's why there are reinsurers, who insure the insurers against unexpectedly large payouts.

Re:Newsflash

[physburn]

The curracy conversion rate and the legal force to pay debt never were. But we thought it was mathematically safe from hackers, but not it seems open third party coin generator sites. Back to the old Drawing board for cyber currency.

---

Cyber Currency Feed @ Feed Distiller

Re:Newsflash

[Anonymous Coward]

The difference is bank robbers very rarely ever get away. Also, FDIC member banks insure up to $250,000 USD.

Re:Newsflash

[ssmokee]

Real ones aren't either, incase you might be too busy watching Jersey Shore to notice the slow lingering decline of the US dollar? Where I would be without your great wisdom I can only wonder....

Re:Newsflash

[__aajfby9338]

How does one destroy a bitcoin?

Send it to a nonexistent address, or lose the private key that is needed to send the bitcoin to somebody else. Either case results in a bitcoin that cannot be spent, so it is effectively destroyed. So, if you lose your bitcoin wallet and all backups of it, the associated bitcoins are gone for good.

Both situations have happened, and bitcoins have been lost forever as a result. Well, if and when it becomes practical to break the encryption that bitcoin is based on, then it should be possible to recover those lost private keys. I think that is a moot point though, because that would also render the current implementation worthless, and cause it to be replaced with something else (optimistically assuming that anybody still cares about bitcoin once computing power renders the crypto trivially breakable).

Re:Newsflash

[plover]

True, casinos are substantially more honest than insurance companies. The house cut is right there printed on the table for anyone to see. The insurance company, on the other hand, doesn't have to tell you the odds they calculated. They can compute them at 1% and charge you 10%, and you will never know.

And there are lots of methods for assessing risk that yield probabilities. FAIR is one such practice that's gaining acceptance in the info security world. ISO 31000 is an attempt to standardize risk management across the board. It's a lot more disciplined than "guessing".

Re:Newsflash

[RulerOf]

How does one destroy a bitcoin?

Delete your wallet.dat file.

Sure, you *could* go from there and attempt to brute force those coins' private keys back.... but good luck with that one.

Re:Newsflash

[Anonymous Coward]

Mmm, but isn't part of the point of bitcoin it gets harder to break the more people use it? So by the time the computing power is available to trivially break it you won't be able to trivially break it any more...It's like a bittorrent file, the more people downloading it actually just makes it have more bandwidth...

Re:Newsflash

[Mister Transistor]

Actually more of them do than you think! I used to work for a bank, and we would NEVER publicize robberies. First, because of the fear of creating a wave of copycat crimes. Second, to not undermine the bank's secure image. There are 2-5 bank robberies a MONTH in the Chicagoland area, but none of them ever hits the news. Only when there's external involvement, like a shootout or a hostage situation does it ever make the evening news. I found this quite surprising how much the general public is kept in the dark about this sort of thing.

Re:Newsflash

[FatdogHaiku]

Well, we can replace the 1's with no problem, but we can't give you anything for the 0's...
Where would you like those emailed?

Re:Newsflash

[Dahamma]

Right now that may be true, but that's not something inherent to currency itself.

Currency used to be worth the value of the metal in a coin itself, which while valued largely on the scarcity of a metal rarely used for anything other than currency and jewelry, was clearly not *imaginary*. Even up to the 20th century the gold standard backed many currencies (which could have just as well been gold itself except that it's hard to fold in your wallet).

Re:Newsflash

[tlhIngan]

Generally, insurance policies are written for things with a strongly-known approximate value. Jewlery, physical property, buildings, a fixed amount of cash in a safe.... You can't generally get insurance on things with fluctuating value like real estate (you can insure the building on top of it, but you can't insure the lot against loss of value), various financial instruments, commodities futures, etc. Bit coins are highly variable - if I take out a policy against 10,000 bit coins, and they're lost, what value would the policy pay out based on? The value at the time I got my policy? The value at the time they were stolen? The value at the time the claim is settled? Does this take into account that if someone steals a large number of bitcoins, they're probably going to liquidate them quickly, which would depress the market? If the policy is based on the value at the time it's issued, the insured party has a motivation to purposefully lose or destroy the coins if the market dramatically drops - the insured value is higher than the market value. On the other hand, if the policy is based on the market value at the time of the incident, the insurance company's costs can skyrocket and no sane underwriter would write such a policy.

Guess what? All of them!

You can take an insurance policy on what the coins where worth when the agreement was signed. At that point, the insurer is basically converting it to a common currency (e.g., US Dollar) and insuring you for that amount.

You can take an insurance policy that gives you replacement value, too - at which point the insurance company will pick a day to pay out, and either give you the insured product, or the cash equivalent.

In all cases, the insurer will have to figure out the rate - if I was an insurer, I might take the spotty history of Bitcoin, and see that the past year, it topped at $20/coin. I would then set it out for 10,000 coins at $20/coin, or $200,000 plan. If it goes up to $30 one time, I would increase the premium you pay since it's cover $300,000 now.

And don't forget that there are often maximums as well. E.g., if the price goes up to $30, and you lose them all, the policy may state that it's replacement value, up to $200,000, whichever is lower.

Re:Newsflash

[Dwonis]

How does one destroy a bitcoin?

Send it to a nonexistent address...

That's exactly what happened to MtGox in October 2011. In Bitcoin, you don't technically send coins to an address, you send them to a script which must evaluate true in order for the coins to be spent again. MtGox wrote some code that generated a bogus script, which could never be satisfied, so the bitcoins were effectively destroyed. Oops!

Re:Newsflash

[sixtyeight]

That would be an interesting claim to file. "They stole my bits! I demand that you replace them."

The RIAA, MPAA and Microsoft have been doing it for years now.

Re:Newsflash

[snookums]

That would be an interesting claim to file. "They stole my bits! I demand that you replace them."

Do you think that when you deposit money in the bank they put a pile of cash in the safe for you?

Almost all modern currency is bits.

Re:Newsflash

[Dunbal]

Tell me, how much do you lose if your bank gets robbed?

Re:Newsflash

[Serious Callers Only]

What I find curious about these bit coin thefts is that they have no way to trace the coins once they have left - they see the account it goes to, but have no higher authority to dispute the transfer with, no way to find out who that is or where they are. It truly is virtual cash, but without the audit-trail which real banks have instituted for very good reasons for the cash in our bank accounts. So it seems once someone steals your digital wallet, it is truly gone, with no way to track who stole it, no compensation, no insurance (what insurance company would insure such risk?), and no way to call in the authorities. No wonder there have been a string of thefts, as this currency seems designed to avoid leaving an audit trail.

I can't see why someone would want to keep their wealth in something like bitcoin for this reason alone, quite apart from the volatility and potential for the entire currency to collapse at some point.

Re:Newsflash

[ultranova]

Imaginary currency is not safe.

All currency is imaginary. It's an abstract representation of wealth, which in turn is an abstract representation of resources and services owed to you. And of course the entire concept of owing - debt - is a purely social construct, and thus imaginary.

But yeah, wealth is not safe.

Re:Newsflash

[Dunbal]

But those bits have a paper-trail complete with signatures and rubber stamps.

Re:Newsflash

[Dunbal]

You're missing the point. Even gold, cocoa beans, cows, or large rocks with a hole in the middle used as currency are imaginary. Because although you might convince someone to move off a piece of property because you gave him 3 cows, both parties have to be in agreement that the the land is worth 3 cows, and that 3 cows are worth the land. When you are starving what is the real value of a large rock with a hole in it? When you child is terminally ill how will a lump of gold fix your problem?

All currencies have an imaginary value attached to them which is assigned by people. Exactly how this value is arrived at and agreed upon by both parties to a transaction is a mystery, but it has to do with history (how many cocoa beans cows went for last time), the availability of the good or service, the quality of the good or service, and the availability of the currency as well as the ease with which the purchaser expects to be able to obtain more of the currency. It's hard to get a poor person to part with their last nickel, whereas a rich person could easily round to the nearest $10,000 on a million dollar purchase. But it's all imaginary.

Re:Newsflash

[HJED]

How does one destroy a bitcoin?

Delete the file it is stored in. As far as I understand it you can't recover a bit coin (otherwise other people could steal it)

Re:Newsflash

[Anonymous Coward]

Actually, Bitcoin's leave an infinitely long trail in the block chain. Furthermore, the trail is generated and verified by the community, rather than a single authority, in way that makes it impossible for anyone to fake the money trail. Finally, it's made public to every Bitcoin client (the implementation depends on this) so there's no need to ask an authority for this information.

Anyone can find out with ease and absolute certainty which Bitcoins are being transferred and when. The problem lies in the fact that the addresses are anonymous and basically meaningless. You can easily see that the coins were transferred, but not to whom.

If there were a concerted effort, these sorts of thefts could be recorded however. Reputable exchanges and shops could then refuse to accept Bitcoins from dirty addresses, to deter theft.

Re:Newsflash

[HJED]

Actually anyone on the network can track all transactions, their is just no way of forcing them to be transferred back.

Re:Newsflash

[Anonymous Coward]

Why do you have +5 insightful? You're obviously just looking for trouble, and should be downvoted to hell.

Re:Newsflash

[Anonymous Coward]

"What I find curious about these bit coin thefts is that they have no way to trace the coins once they have left..."

Not exactly true.

http://blockexplorer.com/

Every part of every transaction is available online in the block explorer. Transactions can be diluted to a point only recognizable by practitioners of homeopathy - but nevertheless every last billionth of a bitcoin can be found and tracked, with enough patience.

Re:Newsflash

[subreality]

"They stole my $WHATEVER!" is exactly why umbrella insurance policies exist. Yes, they cover lost bits. Yes, they have value, and it costs real money to replace them, just like pieces of paper printed with green ink also have no intrinsic value but it's reasonable to have insurance to cover them.

As for the GP's point that Bitcoin is imaginary money: Your bank account balance is also just a bunch of bits in a database somewhere. The vast majority of those bits don't even have green pieces of paper to back them up.

Re:Newsflash

[Anonymous Coward]

Imaginary currency is not safe.

all currency is imaginary

Re:Newsflash

[repapetilto]

There are fool-proof methods that, if followed, allow you to keep your bitcoins safe from any hack. However, those methods are not usable when bitcoins need to be immediately accessible. This theft was actually only the "petty cash" of a major margin trading site as well as that of a mining pool.

Re:Newsflash

[Serious Callers Only]

Actually, Bitcoin's leave an infinitely long trail in the block chain....Anyone can find out with ease and absolute certainty which Bitcoins are being transferred and when. The problem lies in the fact that the addresses are anonymous and basically meaningless.

There is no verification of identity and therefore no audit trail - an audit trail of anonymous tokens is worthless, even if you can trace it to the n'th degree and watch your money being laundered anonymously.

Re:Newsflash

[DigiShaman]

Where I work, we have a small local bank that's been robbed at least two times in five years. I believe it happened just before the break of dawn. To early but minimal staff to assist on demand. I've personally had CC fraud where someone ordered many Palm Pilot unit under my name and shipped them elsewhere. When I reported it to my bank, they simply stated it would be handled and taken care of. Not too worry they said. Well, I didn't worry and everything seemed like it was swept under the rung.

So there you go. Banks must really hide the fraud and theft from the average citizen so as to not lose market share.

Re:Newsflash

[DarwinSurvivor]

If you can insure Gold, Oil and Troy Polamalu's hair, I'm sure you can insure bitcoins.

Re:Newsflash

[genik76]

It's the same situation as when somebody would hack a bank and illicitly transfer the bank's funds per wire. That would also be just bits. Most of the money is virtual anyway, there is cash for only a fraction of all the money value stored in bank accounts.

Re:Newsflash

[Anonymous Coward]

I've personally had CC fraud where someone ordered many Palm Pilot unit under my name and shipped them elsewhere. When I reported it to my bank, they simply stated it would be handled and taken care of. Not too worry they said. Well, I didn't worry and everything seemed like it was swept under the rung.

What did you expect the bank to do? Send you and some bank staff on a dramatic thrill-ride as they pursue credit card fraudsters through the Moscow Metro, pausing occasionally to exchange bullets and witty one-liners with vacationing Yakuza?

Fraud has to be handled very sensitively, not least of all because it can result in criminal or civil proceedings. It makes sense to keep specifics of a case and the processes on a need-to-know basis. Fraud is a cost of doing business, and in "normal" incidents, there's no point in alarming customer unnecessarily. If my card gets abused, all I want to know is what I'm liable for and what I need to do to prevent this from happening again?

Re:Newsflash

[Kjella]

The insurer has to guess the odds, and can actually guess wrong, so there's a lot less certainty. That's why there are reinsurers, who insure the insurers against unexpectedly large payouts.

I was under the impression that reinsurance existed not because there was uncertainty of the odds, but because there are known catastrophic risks that even insurance companies need risk pooling for. Like huge earthquakes, tsunamis, volcano eruptions, floods and so on that hit a very large number of your insurance clients at once. Consider it more that you subcontract out the really huge disasters.

Re:Newsflash

[gox]

Why is that interesting? Your money in the bank is also bits, no?

Re:Newsflash

[Omnifarious]

Well, the bank loses a whole ton, and they spread that loss among all their customers.

In this case, none of Slush's customers are going to lose anything. So it's even better for them than if their Bank was robbed.

If someone breaks into your home and steals all your jewelry and computer equipment, how much do you lose?

Re:Newsflash

[Compaqt]

>They should have had insurance to cover this.

I'd love to see the Youtube of you trying to explain Bitcoin to your local State Farm agent.

Re:Newsflash

[petermgreen]

The problem especially for liability insurance is systemic risks such as the risk of a commonly used material being found to cause cancer DECADES after exposure or the risk of a change in compensation attitudes by a major countries court system. Systemic risks unlike random risks don't dilute much as you make the pool of customers bigger.

Re:Newsflash

[Anonymous Coward]

You may notice the lack of people who promote bitcoin as a something to "keep their wealth in"... That's because it's not what bitcoin was designed for or is good at. You may also notice that all your complaints are directly usable against cash as well -- cash and bitcoins are very similar in this regard: storing your life savings in them is just stupid unless your (physical and financial) security precautions are extreme.

The problem here was the pool who decided to store their wealth in linode without good reasons: they should probably have either paid the money out earlier.

Re:Newsflash

[Troed]

I would think that one conclusion of the article is that it's anything but "imaginary".

Re:Newsflash

[Anonymous Coward]

The thing is this: a bank's customers are not really involved when a bank is robbed. It's not like they let some customers pay for the damages.

However, when a security breach happens with company like Linode, their customers are necessarily involved since the security of their systems depends on the security of that hosting company. A better analogue would be digital bank robberies; I'd be amazed if someone could hack into a bank's systems, transfer some amount of money and it's not publicized.

Re:Newsflash

[Anonymous Coward]

Currency used to be worth the value of the metal in a coin itself, which while valued largely on the scarcity of a metal rarely used for anything other than currency and jewelry, was clearly not *imaginary*.

Yes it was imaginary. You and I can agree that an ounce of gold is worth however-many loaves of bread, but that's based only on what we both imagine the gold (or bread) can be exchanged for further down the line.

Gold is in fact a perfect example of this because it's really not very useful at all outside of a few niche areas. The only reason people make jewellery out of it is because other people imagine it to be valuable.

Re:Newsflash

[Anonymous Coward]

>Imaginary currency is not safe.
the rest of the syllogism:
Modern currency is all imaginary
Ergo all modern currency is not safe.

Re:Newsflash

[Dodgy G33za]

All currency has been imaginary ever since the gold standard was dropped. In theory there is nothing to stop the central bank from printing massive amounts of new currency (actually nowadays it doesn't even need to print it, it just magics it out of thin digital air).

In fact this is happening right now, with a number of central banks creating money, and then loaning it to banks for 1% to prop up the banks.

When you consider that increasing the money supply by 10% effectively makes the ones you have (and earn) worth 10% less (actually not quite, but let's not quibble), this is effectively a redistribution of the wealth of a nation everyone, to those that own shares in the bank. Which will have the inevitable consequence of moving said wealth into the hands of the already wealthy, since everyone has SOME money but in general only the wealthy have shares in banks.

Why this doesn't get people out on the streets rioting I have no idea. Oh, wait...

Just for the record IANAE

Re:Newsflash

[GreyGroom]

You are confusing money and currency. Money is worth only the value of trade material it is made out of. The stamps on the money are a statement of quality. Currency is the measure of the flow of money and is a higher level of abstraction. An example of a lower level of abstraction trade would be barter.

Re:Newsflash

[Bert64]

And somehow signatures and rubber stamps are more viable than a cryptographic signature?
Anyone can make a rubber stamp...
Anyone can "sign" a piece of paper...
It's considerably harder to fake a cryptographic signature.

Re:Newsflash

[f3rret]

Most of the world's currency is imaginary, so...there's that.

Re:Newsflash

[Dan541]

So the content of your bank account is not safe?

Re:Newsflash

[heathen_01]

Actually, Bitcoin's leave an infinitely long trail in the block chain....Anyone can find out with ease and absolute certainty which Bitcoins are being transferred and when. The problem lies in the fact that the addresses are anonymous and basically meaningless.

There is no verification of identity and therefore no audit trail - an audit trail of anonymous tokens is worthless, even if you can trace it to the n'th degree and watch your money being laundered anonymously.

This is true only until you exchange your bitcoins for something else. At that point you need to provide extra information.

Re:Newsflash

[Anonymous Coward]

Young Jedi never a home bought has, see I...

Re:Newsflash

[UnHolier than ever]

How would insurance of bitcoins even work? It seems particularly challenging for many reasons. Generally, insurance policies are written for things with a strongly-known approximate value. (...) Bit coins are highly variable - if I take out a policy against 10,000 bit coins, and they're lost, what value would the policy pay out based on?

That's easy. If you take out an insurance on 10'000 bitcoins and they get stolen, then the insurance company would compensate you by giving you 10'000 bitcoins. Meanwhile, you would keep paying your premiums in real coins.

Re:Newsflash

[hpoul]

i'm not so sure.. what would happen if they stored their bank account login credentials there and someone managed to steal it - you wouldn't (just) blame the hoster, but the one who is so stupid to store something valuable without protection (or do you mean the bitcoin exchange should have the insurance, not linode.. then i'm with you :) )

Re:Newsflash

[fastest fascist]

I don't see how you could have a decentralized currency with mandatory verification of identity. You can do that with a central authority, but then your currency is dependent on the whims and survival of that authority, which hasn't worked out very well for e-currencies in the past.

Re:Newsflash

[Anonymous Coward]

You can also lose your wallet file completely, or the password to it

Re:Newsflash

[w_dragon]

They'll report it if there are a string of related robberies, but just the day-to-day ones really aren't any more interesting than a convenience store robbery. Banks generally don't keep huge amounts of cash where a teller can just grab it. A bank robber who gets very lucky may get away with 10k, but given that a thief needs to be gone before the police show up, which is pretty fast with a bank robbery, they can't sit around for the time-release safe to be opened. They just aren't important enough to report on the news, no more than a car accident is.

Re:Newsflash

[JoelKatz]

They're not a bank or credit system. I'll bet their user agreement makes it clear that they're not liable for incidental or consequential damages.

If you want a service provider that's going to cover these kinds of losses, they'll have to charge more. That's really not fair to the majority of users who don't store Bitcoin wallets on their servers.

Re:Newsflash

[Dunbal]

My deductible.

Re:Newsflash

[Dunbal]

The value is not in the signature or rubber stamp itself, it's in the fact that the bank is holding a copy at its office, and you are holding a copy at home, and both can be presented to a judge. Also neither of you have any intention of transferring said copy to anyone else. It exists as an insurance policy only.

While it may be theoretically hard to "forge" a cryptographic signature, apparently it's very easy to transfer them from person A to person B. Otherwise please explain to me how a bitcoin can be "stolen"?

Re:Newsflash

[minkie]

Insurance is all about sharing risk. I'm unwilling to risk my house burning down. I know it's not likely that it will, but if it does, the loss would be devastating to me. Most people feel that same way, so we all get together and share the risk. In return for a promise that none of us will ever have to suffer the catastrophic loss, we all chip in a small fraction of our home value every year and create a pool from which to compensate those who are unlucky enough to have their house burn down. What the insurance companies do is essentially act as a market maker for these risk pools. Rather then me have to go out and find 1,000,000 people to share the risk with, the insurance company does it for me (and takes a small fraction of the pool as their profit)

Now, the insurance company doesn't want risk any more than I do. To avoid that, they need to make sure they charge enough in premiums to pay off all likely claims. And to do that, they need to be able to accurately evaluate the probability of a claim. For open-ended liabilities (i.e. a replacement cost homeowners policy), they also need to be able to accurately estimate the maximum size of a claim.

For things like fire insurance on houses, there's tons of history to base these estimates on. They've insured hundreds of millions of houses, and have been doing it for many years. They've paid off millions of claims. For a given location, type of construction, age of house, etc, they know exactly what the risks are and can price the policy accordingly. Ditto for group health insurance, automobile insurance, and so on.

But, bitcoins? Insurance companies have no clue about bitcoins. There's essentially zero history establishing what they're worth, and likewise there's essentially zero history establishing what the risks are. How often do bitcoins get stolen, lost, destroyed, etc? What best practices exist to reduce the risk of these losses? What types of fraud might exist in bitcoin loss claims, and how can the company determine if a claim is fraudulent or not? For the most part, there are no answers to these questions. At least not today. Thus, it's unlikely that you would be willing to find an insurance company willing to accept any bitcoin risk. And if you did, it would probably come with a very high premium, fixed liability limit, and onerous conditions. For a large insured value, you might also find that the only way a company would take the risk would be if there was a consortium of companies which all took a part of the risk (this is what places like LLoyds of London are all about).

Re:Newsflash

[Anonymous Coward]

AIG insured bank loans in the same way sir. This isn't a foriegn concept or as hard as you make it seem.

Re:Newsflash

[DaveV1.0]

False. There is no copyright an a "bitcoin".

Re:Newsflash

[DarkOx]

Often insurance companies offer "stated value" polices on more difficult to value and thinly traded items. Classic cars are common situation here. The value of a specific make/model/year vehicle will vary widely depending on its condition how "original" it is, what options it has on it etc.

Very often as the person purchasing the policy the insurance company will let you name your price. Its going to have be something that falls within a few standard deviations of whatever limited market value data points do exist naturally; you can't just say its "its worth 1 billion dollars" while holding you pinky to your lips, but it is pretty flexible. Naturally the higher you state the value the more their risk goes up so and to offset that so do your premiums.

Re:Newsflash

[coldsalmon]

Remember the plot of Goldfinger? He wanted to irradiate all of the gold in Fort Knox so that his own gold supply's value would skyrocket. I can imagine a "Bitfinger" destroying all of the bitcoins at Mt. Gox for a similar reason. Let's hope Sean Connery knows how to code.

Re:Newsflash

[TheNinjaroach]

No wonder there have been a string of thefts, as this currency seems designed to avoid leaving an audit trail.

No, it's not the lack of an audit trail that makes bitcoins susceptible to this type of theft. It's the decentralized P2P nature of bitcoins that prevents any single entity (like your bank) from reversing an unauthorized transaction. With no central authority to regulate these transactions, bitcoins are very literally "finder's keepers."

Re:Newsflash

[Bert64]

You have to acquire a copy of the private key, and then you can make your own cryptographic signatures at will... But you do absolutely require a copy of the key. You can also verify with a very high degree of certainty that a cryptographic signature was signed by a particular private key. Thus the only practical avenue for nefarious activity, is to acquire knowledge of the private key...

A signature on the other hand is totally arbitrary, anyone can make a random mark on a piece of paper and call it a signature... Even *if* a comparison is made to one stored on file, it has to be a fuzzy match because regardless of how much you try it would never be quite the same twice.
I have been asked to "sign" all manner of forms recently, and they all look wildly different...

Similarly, if someone presents a piece of paper and claims you "signed" it, whats to stop you simply denying that it was you? Unless they have video footage of you actually doing it, it pretty much boils down to your word against theirs.

Re:Newsflash

[Glendale2x]

Imaginary currency is not safe.

Imaginary servers with backdoors that override any security their admin tries to impose equally so.

Re:Newsflash

[TheVision]

You can't generally get insurance on things with fluctuating value ... various financial instruments, commodities futures, etc.

In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price (the strike). The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the corresponding obligation to fulfil the transaction.

Options (finance)
Options on futures

Re:Newsflash

[Anonymous Coward]

Oh please. Colo/virtual hosting is not safe. Along with bitcoins any credit card numbers, bank routing numbers, and other financial data would also be at risk. Bitcoins are simply far more efficient at implementing properties people expect of currency, and permanent theft is unfortunately also one of the properties of a real currency.

Re:Newsflash

[xtal]

Can't tax what you can't track.

Re:Newsflash

[shaitand]

True enough. The insurance that applies in this case would be normal business liability insurance which does have a cap. They aren't just going to hand out the cap every time though. They will replace the Bitcoin or offer replacement value on the settlement date. Actually something like Bitcoin with public exchanges and extreme liquidity is probably about as easy as it gets for valuation. Even replacing a safe full of cash is more difficult because you have to value the safe!

Re:Newsflash

[Anonymous Coward]

The majority of the world's currency is virtual at this point. In this regard, you comment applies to most anything banks deal with on a daily basis. This cash thing, is a minority of what banks consider currency.

The fact your statement was moded up is fairly disappointing.

Re:Newsflash

[cdrguru]

Credit card fraud (now called Identity Theft by the FBI and reported as such) is almost never prosecuted. It isn't worth it because it is essentially a victimless crime.

No, the card holder is never liable for anything. Not even the $50 they claim they might charge you. In practice the card holder never, ever loses anything.

The credit card company simply does not pay the merchant so they lose nothing. This is part of the merchant agreement that they don't pay fraudulent charges.

If the merchant is worried about this - and all the big ones are - they take out insurance which covers their loss. Fraud happens, the insurance pays and the merchant loses ... nothing. I guess you could say that the merchant is the victim in having to have insurance which covers this, but the insurance also covers a lot of other things so they would have it anyway.

So of course when you report credit card fraud they say not to worry, it is all taken care of. Nothing happens and often the merchandise is really delivered. Most of the "work from home" jobs are in reality dealing with the sort of laundering that goes on from this kind of operation - you send out stuff that was obtained this way to an Ebay customer and then forward the money to the folks running the scheme. Too bad when you get caught with a garage full of the stuff - because that is "receiving stolen goods" and you can end up in jail just for thinking you had it great "working from home".

By the way, I understand that a current credit card number is worth about $0.50 when sold in bulk. So the next time you hand your card to a waiter understand that he needs to collect 100 of them to get $50. Which, considering the way these folks are paid, you can expect a good number of them are supplementing their income in this way.

Re:Newsflash

[shaitand]

Losing access to the coin does not destroy it. The coin still exists its just not any good to you. Good luck finding an insurance policy that would pay if you deleted the wallet.dat.

If you deleted the wallet.dat of a client business liability insurance might cover it. If you had a natural disaster you might get homeowners to cover it. But if you delete your own wallet.dat? Nothing is going to cover that.

And even if it did, you'd still only get replacement Bitcoin.

Re:Newsflash

[shaitand]

"Either case results in a bitcoin that cannot be spent, so it is effectively destroyed."

Inaccessible is not destroyed. Lost treasures are recovered all the time. You'd need an insurance policy that covers loss, not merely destruction to cover this.

Re:Newsflash

[shaitand]

"Mmm, but isn't part of the point of bitcoin it gets harder to break the more people use it?"

That assumes that the underlying algorithms and the mathematical assumptions they rely upon remain sound. It also depends upon the type of computing power required to brute force the key growing at a similar or lesser rate than the computing power used to encrypt the network. Specialized hardware targeted at breaking the encryption could tip these scales.

Re:Newsflash

[s73v3r]

Losing access to the coin does not destroy it.

No, but for all practical purposes, the coin is gone for the foreseeable future. The same outcome happens.

Re:Newsflash

[s73v3r]

It's considerably harder to fake a cryptographic signature.

Who needs to fake the cryptographic signature when in reality it means fuck all regarding the person that generated it?

Re:Newsflash

[s73v3r]

It isn't worth it because it is essentially a victimless crime.

Try telling that to someone who actually has had their identity stolen.

Re:Newsflash

[Actually, I do RTFA]

...insurance is simply legitimized gambling.

Casinos exist to increase variance in wealth based on luck; insurance exists to decrease variance. Therefore, there's a very significant reason why society accepts one, and condemns the other.

Re:Newsflash

[__aajfby9338]

"Either case results in a bitcoin that cannot be spent, so it is effectively destroyed."

Inaccessible is not destroyed. Lost treasures are recovered all the time. You'd need an insurance policy that covers loss, not merely destruction to cover this.

It is a moot point, because the ability to recover a truly lost private key would render the whole system worthless as currently implemented. If you can recover a lost private key with nothing but the information in the block chain then you can also spend anybody else's bitcoins. So, the bitcoin currency (assuming it is still in use) will be revised to use improved crypto before the existing crypto becomes practically breakable (thus avoiding the ability to spend bitcoins without prior knowledge of the corresponding private keys), or else it will utterly fail (rendering all bitcoins valueless).

For practical purposes, a bitcoin which belongs to an address for which no copy of the private key exists has the same value as a piece of paper currency which has been burned to ashes. Some remnant exists; the lost bitcoin is still recorded in the block chain, and the atoms that composed that dollar bill still exist (and may even form a visible pile). But neither can be spent any more, and thus either can be said to have been destroyed.

Re:Newsflash

[shaitand]

That is called privacy which has a value all its own. But yes there is a trade off in the form of having to provide your own security. Those audit trails have mostly been instituted for the benefit of tax authorities and whether that is a 'good' reason is up for debate. Bitcoin is digital CASH, money in your bank account is NOT cash. Money in your physical wallet is cash. If someone steals your physical wallet there is less chance of catching them than with Bitcoin.

Bitcoin itself doesn't implement an audit trail but digital access to a file certainly does. Unlike your physical wallet stealing your bitcoin requires hacking your computer system which is a federal crime. You can most definitely call the authorities if this happens and invite the federal crime lab to examine the digital trail left by the attacker. Unlike local law enforcement tracking your stolen physical wallet the FBI can trade the digital footprints involved and demand the cooperation of internet providers to do so. If you are talking about a substantial theft then forensic accounting can be used to trace the funds but unlike actual cash the bitcoin global audit trail is visible to authorities without requiring any warrants or foreign cooperation and not all bitcoin addresses are anonymous. Many are publicaly known.

Is all this going to happen for your couple thousand in bitcoin? Probably not but then again there isn't likely to be any actual manhours dedicated to your lost wallet with $2000 in it either. For that matter nobody is going to expend effort investigating $2000 stolen from your bank account or $2000 worth of credit card fraud.

Bitcoin is like gold. It has a value independent of fiat currency. If the US dollar collapses tomorrow my bitcoin still has worth. Like gold it is relatively trivial to 'wash' the take if its stolen so it is upon me to protect it. Like gold the value relative to fiat currency is not guaranteed. Like gold bitcoin is an option for storing wealth used for transactions that are none of anyone's business. Like gold, your an idiot if you put all your wealth in bitcoin. At the end of the day you have to physically and digitally secure your bitcoin but only physically secure your gold. Even if you print your keys and lock them in a safe deposit box you risk the network somehow being hacked. So gold is superior in this sense. But gold has practical limitations to its use for small transactions. A tiny amount of gold is worth too much to be practical for paying me back for lunch. Bitcoin is infinitely divisible. It really doesn't matter if my normal transaction unit is 1 BTC .1 BTC or .01 BTC because these are just numbers on a screen and I need no scale to accurately divide bitcoin in this way. Bitcoin also allows me to make what amounts to a cash transaction with someone across the world where this is difficult with cash or gold.

Bitcoin can also be easily converted into local currency when traveling internationally alleviating the need to carry large sums of precious metals or cash that could be stolen by customs or pick pockets.

Re:Newsflash

[Anonymous Coward]

How does one destroy a bitcoin?

One does not simply destroy a bitcoin.

http://www.quickmeme.com/One-Does-Not-Simply/

Re:Newsflash

[maxwell demon]

Losing access to the coin does not destroy it.

The original post said: effectively destroy it. That is, it has the same effect as if it had been destroyed.
If I burn your notes about something, that information isn't truly lost either. it still lives on in the details of the radiation, in minor variations on the distribution of air molecules, etc. And one of the bits might even one day resurface visible as whether there's a thunderstorm or not. However you'll never be able to collect all that scattered information and recombine it to whatever was written on that original paper. Therefore effectively your notes have been destroyed.

Re:Newsflash

[shaitand]

Yup just like your real wallet. At the same time you can also make printable keys and store them in a safe deposit box. Just like your real wallet. So either one can gain the benefits of the physical security of a bank. You can even keep your digital wallet on a portable device and store that in the bank.

Of course some states are known for using the slightest excuse to steal err seize SD boxes as unclaimed property *cough* california *cough* and then destroy/auction/spend the contents but that is another issue.

Re:Newsflash

[Dahamma]

No, that's not true - in fact you have it reversed.

Currency = physical. Money = abstraction. You can have money in a bank account that's purely digital, but that cash stashed under your mattress is currency. Look it up...

Re:Newsflash

[maxwell demon]

So the content of your bank account is not safe?

No, it isn't. It loses value due to inflation.

Re:Newsflash

[shaitand]

"It is a moot point, because the ability to recover a truly lost private key would render the whole system worthless as currently implemented"

Lost and Truly lost are the same thing it is lost or not lost. Remembering a password. Finding a print copy of a key. Recovering access to a safety deposit box. Data recovery on a damaged hard drive and Brute forcing are all examples of recovering a key.

Someone managing to brute force a key doesn't invalidate the system. The system is already known to be vulnerable to brute force along with all other encryption types. People always talk about brute forcing as if one has to try all the possible keys and therefore it takes however long it would take to try all the possible keys. That is the longest possible time brute forcing could take, not how long it does take. The correct key could be the first one I try.

All that aside the point is not whether losing access is the same as effectively destroying it. The point is whether it would qualify as destroyed for insurance purposes and if in doubt the answer is whichever one means the insurance company doesn't have to pay.

Re:Newsflash

[Dahamma]

Actually, no, you're missing the point - and I wasn't really very accurate in my previous statement, either. Currency is by definition the *material* medium of exchange in a money supply. Humans and/or the market in general may have arrived at an arbitrary value for that currency (relative to other physical goods, etc) but if you can hold it in your hand the currency itself is most definitely NOT imaginary.

In economic terms I would argue that money itself (which may be what you are thinking of, and is not the same as currency) is not imaginary. It's a representation or symbol of a commonly accepted value for exchange of goods, services, etc. Non-corporeal does not have to equal "imaginary".

Anyway, bitcoins really aren't in any practical terms a currency, anyway, they are a commodity. Once you can go spend them at the supermarket they might be a currency, but don't hold your breath on that.

Re:Newsflash

[shaitand]

No the same outcome doesn't happen.

If I hit your car and I hit a tree my car might be totaled either way but depending on which insurance policy I have there is a very different outcome.

If we are being technical then no the coin technically is not destroyed and may be recovered one day. If we are being practical, in context we are referring to an insurance payout, a policy that doesn't cover loss but does cover destruction wouldn't pay out because of the technical point just made. So, in this context, the coin neither technically nor practically destroyed.

Re:Newsflash

[segedunum]

When you child is terminally ill how will a lump of gold fix your problem?

Gold is not a currency. It is money. It's been that way for thousands of years because nothing else has worked. It's amazing how we have completely forgotten that in the western world.

Re:Newsflash

[metacell]

Bit coins are highly variable - if I take out a policy against 10,000 bit coins, and they're lost, what value would the policy pay out based on? The value at the time I got my policy? The value at the time they were stolen? The value at the time the claim is settled? Does this take into account that if someone steals a large number of bitcoins, they're probably going to liquidate them quickly, which would depress the market? If the policy is based on the value at the time it's issued, the insured party has a motivation to purposefully lose or destroy the coins if the market dramatically drops - the insured value is higher than the market value. On the other hand, if the policy is based on the market value at the time of the incident, the insurance company's costs can skyrocket and no sane underwriter would write such a policy.

The last - the BitCoins would be insured at the value they have at the time of loss, up to the insurance value. This is not different from how insuring a building works - you pay a sum each month (say, $500) based on the insurance value you choose (say, $1 million), and if the building burns up, you get the building's actual value at the time of the fire, but not more than $1 million.

Re:Newsflash

[shaitand]

No it didn't. The first post of this thread to mentioned Bitcoin destruction said this: "If the policy is based on the value at the time it's issued, the insured party has a motivation to purposefully lose or destroy the coins if the market dramatically drops - the insured value is higher than the market value."

To which I (in part) replied "How does one destroy a Bitcoin?" given the context that becomes, "How does one destroy, as opposed to lose, a Bitcoin?" It was a rhetorical question, one cannot actually destroy a Bitcoin.

Someone else in a different sub thread replied to that with a redundant post saying deleting the wallet.dat effectively destroyed the Bitcoin.

"If I burn your notes about something, that information isn't truly lost either. it still lives on in the details of the radiation, in minor variations on the distribution of air molecules, etc."

Uh huh and if I delete your wallet.dat that Bitcoin still lives on in the details of... the exact same actual Bitcoin because Bitcoins don't physically live in a wallet.dat. And yes if you burn my notes on something you've destroyed only my notes. If I write E=MC^2 on a note and then burn it the matter and energy of the universe doesn't stop conforming to E=MC^2 even if you burn all such writings throughout the entire world.

Re:Newsflash

[metacell]

If you exchange a plot of land for three cows, it's not just an agreed-upon value; it's the value you personally assign to the land. If that's imaginary, then all value is imaginary, whether it be cows, cocoa leaves, the plot of land, your computer, etc.

Re:Newsflash

[Serious Callers Only]

I do find bitcoin ( and its adherents) interesting, but I have no need of digital cash - they have taken what seems like a plus point of cash, that it is anonymous and fungible, and made it digital, but as you point out this makes it less secure. The trouble is people then see it as a way to store value, but trust their security to their woefully inadequate home computer os, or even, in this case, to a vps provider who hosts websites (!). If this were cash or gold, and a company stored tens of thousands of gold overnight in their distribution warehouse and was then robbed, it would not be news, just Stupidity on the part of the company. Re contacting the FBI to get your stolen bitcoins back - good luck with that, particularly when you tell them it is deliberately anonymous.

If I am holding or transferring money online I want authentication, authorisation and trackable, reversible transactions (proper tracking with an audit trail of cerified identities, just as I have with other currencies currently. I and most other people place far greater value on that than anonymity of transactions.

There are some great ideas in bitcoin, and I follow it with interest, but I would not trust it to store value for the reasons above, reasons which you view as plus points.

Re bitcoin being like gold, yes, it is very like gold, and subject to the same predation and speculation and the same gulling of the vulnerable who view it as a store of value, except unlike gold, the market is completely unregulated. Google 'gold corner' for possible consequences of that.

Re:Newsflash

[metacell]

Eh... BitCoins are supposed to be generated by third parties. That's part of the point.

Re:Newsflash

[shentino]

The sad part is that governments probably won't lift a finger to help any victims unless they get their regulatory fingers in it first so that they can tax it.

Re:Newsflash

[Anonymous Coward]

Nah! They would pay in a much earlier form of currency, Quatloos! ( Star Trek - "The Gamesters of Triskelion" )

Re:Newsflash

[Bert64]

Doesn't matter, the bitcoins are tied to the private key, not any individual... The private key could change hands.

Re:Newsflash

[shaitand]

"they have taken what seems like a plus point of cash, that it is anonymous and fungible, and made it digital, but as you point out this makes it less secure"

It isn't a one off trade. You are trading some security in one form (the potential for a third party to return stolen funds) for a great deal of security (a greatly reduced possibility of a third party being able to take your funds). A bank will protect your funds from unauthorized third parties but the government and financial industry and not you decides who is authorized. All those trails also make you vulnerable to data mining. For instance by reviewing your financial trail and correlating it to publicly available information I can determine if you have a security monitoring system, what type, what level of service, I can see if you've paid a security company to install a safe, I can tell by how much you paid them what price level of safe you have and with a little social engineering find out what models that company offers in that range. Armed with the amount of the transaction and the details the bank has on file for you I can probably social engineer who performed the installation and where his notes indicated he installed it! But who has access to this information? Low paid bank staff for one. But without them, Bank of America is one example that has lost account details for millions of accounts at least three times now.

With Bitcoin you have no stick ups. No charge-backs. No bounced checks. No hidden fees charged later. No recurring charge scams. Most importantly you and not some other party like a bank, government, or even a court are the final arbiter of when and if funds are released from your accounts.

"I and most other people place far greater value on that than anonymity of transactions."

For myself, it depends largely on the transaction.

"same gulling of the vulnerable who view it as a store of value"

Bitcoin is an excellent short term store of value especially as an exchange medium.

Examples of times when you will want Bitcoin:

* When carrying large quantities of Cash abroad (purchasing properties, acquiring dual citizenship, or even just traveling). People sometimes carry hundreds of thousands in cash for these situations and all of it runs the risk of being taken by third world customs.

* When you've have a debt or a have been accused of a financial, tax, political, or drug related crime and still need access to funds to survive.

* When you wish to keep transactions confidential from a spouse, family member, or guardian.

Everything carries a security risk. In the past I've had credit card companies post fraudulent e-checks against my accounts.

I've had banks charge fees on which we had no meeting of minds and engage in every dirty trick imaginable to milk more fees including re-writing history by re-ordering transactions to produce the most fees. My bank just adjusted its web page to cache account balances and added a delay to account-to-account transfers to cause additional fees.

My employer can take back funds from account at will. The bank can do the same and then blame you for any shortages it causes. So can the government. So can anyone you've ever given your account and routing number in the form of a check or electronic payment.

If you write me a check and I go to your bank to get them to honor it they will usually steal about $5 of the face value as a 'fee'. States jump on the slightest excuse to call safe deposit boxes unclaimed funds and destroy/fire sale the contents.

The SSA made up a mythical payment that is sent me in the past and deducted it from my tax return (nevermind that I've never collected any form of social security in my life).

The point being the people who are most likely to steal from me are the government and financial institutions in fact they are the only ones who actually have stolen from me in the past. A large part of my life has been spent with a smaller margin between managing to float food, roof, and utilities from being taken away and the amounts taken from my accounts by these other parties.

Banks certainly do not represent security these days, the vault doors are meaningless.

Re:Newsflash

[shentino]

In theory, that large rock with a hole in it, or that lump of gold, will be worth the food or medicine you can swap it for if you can find someone to trade with.

In practice, someone will get wise to your desperation and use your dire need as leverage to get themselves a windfall at your expense.

And that person may well value your rock or gold a fair bit more than they are willing to pay for it when they know you don't have the privilege of refusing to negotiate.

Re:Newsflash

[Anonymous Coward]

The exploits in market websites and trading websites HAS ABSOLUTELY NOTHING TO DO with the way Bitcoin works underneath. There was nothing wrong with the Bitcoin protocol and due to the specific openness of the Bitcoin network the entire world knows MUCH MORE about the theft than a normal 'successful bank hacking attempt'.

These exploits were from unrelated, normal, run-of-the-day hacks.. that slowly and surly gained more access and when the time was right they issued Bitcoins to specific Bitcoin address.

Re:Newsflash

[Anonymous Coward]

Bitcoin is digital CASH, money in your bank account is NOT cash. Money in your physical wallet is cash.

Insane statement #1. Some bits on a server are CASH, but other bits on another server aren't? Whaaaat?

Bitcoin itself doesn't implement an audit trail but digital access to a file certainly does.

Clueless statement #1. Bitcoin is literally built on top of an audit trail. So much so that "mining" bitcoins is actually integral to the scheme for distributed cryptographic authentication of the audit trail! You can trace how every bitcoin ever generated has moved between addresses. The only thing you can't do is connect addresses to a name.

Unlike your physical wallet stealing your bitcoin requires hacking your computer system which is a federal crime.

Clueless statement #2. Bitcoins can easily be stolen without hacking a thing. For example, if someone puts their only copy of a wallet file on an unencrypted USB key, and a thief steals that USB key, guess what? Bitcoins stolen, no hacking involved!

You can most definitely call the authorities if this happens and invite the federal crime lab to examine the digital trail left by the attacker. Unlike local law enforcement tracking your stolen physical wallet the FBI can trade the digital footprints involved and demand the cooperation of internet providers to do so.

Clueless statement #3. You're trying to imply that the Feds will go all out to chase down anybody who steals any Bitcoins. Sorry to break it to you, but for the amount of money people generally put in a physical wallet, the Feds won't lift a finger.

If you are talking about a substantial theft then forensic accounting can be used to trace the funds but unlike actual cash the bitcoin global audit trail is visible to authorities without requiring any warrants or foreign cooperation and not all bitcoin addresses are anonymous. Many are publicaly known.

Contradiction #1. It seems that, according to you, bitcoin either does or does not have an audit trail, depending on what's convenient for your current argument!

Is all this going to happen for your couple thousand in bitcoin? Probably not but then again there isn't likely to be any actual manhours dedicated to your lost wallet with $2000 in it either. For that matter nobody is going to expend effort investigating $2000 stolen from your bank account or $2000 worth of credit card fraud.

Contradiction #2. It seems that you do know nobody will bother investigating small crimes, and that real effort will go to large crimes!

Bitcoin is like gold. It has a value independent of fiat currency.

Insane statement #2. Bitcoin literally is a fiat currency. You crazy assholes decided it was valuable, therefore it is. That's all a "fiat" currency is!

The same thing actually applies to gold. People decided it was valuable, therefore it is. You know what actually has inherent value? Fresh water, food, shelter, and clothing. Gold will not keep you alive. Like anything else used as money, sometimes you can trade it for things which will keep you alive, but that's only true as long as both parties involved agree that gold is valuable, which is not a given. Especially not in the apocalyptic scenarios goldbugs love to talk about. (Sure buddy, during the total collapse of civilization it's going to be SO easy to find someone who will take a lump of pretty but soft metal which is literally useless for industrial purposes absent high tech, and give you back food. NOT!)

If the US dollar collapses tomorrow my bitcoin still has worth.

Insane statement #3. Almost nobody outside of bitcoin enthusiasts accepts bitcoins as payment. So all you can really use them for is to take advantage of enthusiasts with real money (and speculators) who want to

Re:Newsflash

[houstonbofh]

In practice the card holder never, ever loses anything.

Time, present value of money, missed opportunities (like the house you were trying to buy that sold while you were working on this) and occasionally real losses like lights and food that were not available when needed.

Re:Newsflash

[houstonbofh]

Actually I lost some sleep for a few days, and I can still vividly remember exactly how it feels to be drug around with a gun to your head. But the point was that banks are insured, and after the robbery they gave me all the cash I had on the table when the 3 guys came in.

Re:Newsflash

[houstonbofh]

"I want to add consequential damages to my umbrella policy." Kinda dull video, but if it makes you happy...

Re:Newsflash

[Serious Callers Only]

A bank will protect your funds from unauthorized third parties but the government and financial industry and not you decides who is authorized. All those trails also make you vulnerable to data mining.

I agree completely, there are tradeoffs with each approach, and I appreciate that proper audit trails (which include identity) are useful but also allow data mining, that's a price we pay, however there are (in my country at least) strict rules against them sharing your data. Our fundamental difference seems to be that I trust my government and bank more than I trust the bitcoin providers and ecosystem, whereas for you it is the reverse.

For instance by reviewing your financial trail and correlating it to publicly available information I can determine

Here I assume you mean 'I' as in my bank, as the only people with access to this information are my bank, and possibly police if they get a warrant. It is a bit misleading to phrase this as if anyone could access your financial audit trail. I would note that people give up this information voluntarily with store cards etc for tiny financial rewards (not that I do), and live happily with the results, the trail of transactions itself has some value but not a huge one, and does not equate with actual access to the account funds, which is even more closely guarded. I don't bank with organisations like BoA, but I guess they do have very lax security if employees can access these details without sanction.

I can't say I find any of your bitcoin examples compelling - for travelling abroad I use my bank card, which has zero fees on transactions abroad. I don't wish to keep transactions secret from a family member, but if I did, I'd use my own card, which they don't control/look at, my bank charges fees agreed in advance as part of the contract, it does not 'steal' money, and if I don't agree with a charge I can dispute it (and have, successfully). I'm sure I don't have to list the myriad advantages using a system more widely accepted than bitcoin brings.

I would caution people against viewing bitcoin as a store of value though - it is one of the less secure stores of value, and a completely unregulated market, which means it is subject to all kinds of manipulation and speculation. It is also analogous to keeping hard cash or gold under your bed, unless you have a *very* secure bitcoin repository. Fine for small amounts for a short time, not a good idea for large amounts short term OR any amount for the long term. If your aim is to avoid debasement of your currency by your government, you have options including voting them out, and diversifying into other more or less inflation-proof assets like other fiat currencies, property, shares, gold etc. Bitcoin would be low down my list personally for this.

We do have a mass of financial regulation and banks have to go through a huge amount of certification to keep their funds secure (though perhaps less so in the states) precisely because financial markets are a prime target for scammers and thieves. Imagine if a bank or other money transfer service stored its account details on a rented server shared with several other websites and controlled by a third party who doesn't normally deal with financial transactions - they'd be shut down by the government immediately. That's what happened here and yet people still trust these bitcoin operations to continue using $20 a month servers to store value. Maybe since they're unhappy now with linode they'll move to dreamhost next :).

While I agree somewhat with the sentiment that the vault doors are meaningless (since so much cash nowadays lives as bits, not physical paper notes), since my bank has an entire team of people tasked with security, another tasked with fraud, and dedicated servers for financial transactions separate from their website etc, etc I trust them a bit more than any bitcoin operator in existence, and certainly more than my home computer.

Re:Newsflash

[mrmeval]

That is an odd one. If the value of the commodity is variable which many are how do you calculate a premium and payout to mitigate your risk yet provide a product your customers value enough to pay for.

I would have to leave that to an expert. I'm sure there has to be one insurance geek around here somewhere.

Re:Newsflash

[Dunbal]

If that's imaginary, then all value is imaginary,

Now you get it. All value IS imaginary. I can get you to change your mind about a value easily with an army, a gun, a law, a relative, etc. When humans are long gone, things will still be there, have no value at all, and yet still exist.

Re:Newsflash

[metacell]

Then I don't disagree with you, but there's still a difference between things which derive most of their value from how useful we perceive them to be (such as cows), and things which derive most of their value from being used as currency (such as paper money).

The greatest value of bitcoin

[cold fjord]

The greatest value of bitcoin seems to be in generating headlines.

Re:The greatest value of bitcoin

[repapetilto]

Ever read/watch/listen to the news? Besides terrible things happening to people, 90% of the headlines are the government doing something questionable. Following your logic...

Re:The greatest value of bitcoin

[Anonymous Coward]

Really? I see sports taking up at least 1/5 of the headlines. Then there's weather, with another fifth.

Sure, sometimes those overlap with terrible things happening to people, but then so does government doing things.

Re:The greatest value of bitcoin

[repapetilto]

Hmm, sometimes I forget I get all my mainstream news from talk radio that usually avoids sports.

Re:The greatest value of bitcoin

[shaitand]

Speak for yourself. I conduct trade in Bitcoin on a regular basis.

Linode Terms of Service

[Laebshade]

http://www.linode.com/tos.cfm

Section 9, paragraph 1:

Subscriber acknowledges that the service provided is of such a nature that service can be interrupted for many reasons other than the negligence of Linode.com and that damages resulting from any interruption of service are difficult to ascertain. Therefore, subscriber agrees that Linode.com shall not be liable for any damages arising from such causes beyond the direct and exclusive control of Linode.com. Subscriber further acknowledges that Linode.com's liability for its own negligence may not in any event exceed an amount equivalent to charges payable by subscriber for services during the period damages occurred. In no event shall Linode.com be liable for any special or consequential damages, loss or injury. Linode.com is not responsible for any damages your business may suffer. Linode.com does not make implied or written warranties for any of our services. Linode.com denies any warranty or merchantability for a specific purpose. This includes loss of data resulting from delays, non-deliveries, wrong delivery, and any and all service interruptions caused by Linode.com.

Re:Linode Terms of Service

[Wonko the Sane]

Those people had no business storing $15,000 worth of irreplaceable data, electronic currency or not, on a service with these kinds of terms. Instead of spending an appropriate amount of money for the proper security they gambled with a service not designed to insure against that kind of liability and lost.

Re:Linode Terms of Service

[v1]

Subscriber further acknowledges that Linode.com's liability for its own negligence may not in any event exceed an amount equivalent to charges payable by subscriber for services during the period damages occurred.

So if this is binding and enforceable, (which should always be questioned, you can put just about anything in your TOS) that means if they are incompetent retards and let your hosted server get hacked through their back door to your hosted machine they won't be liable for anything beyond the monthly fees you paid them while being hacked?

That's very likely to go to court. They may win or they may lose, but that fails the "common sense" assumption that part of what you are paying for is at least reasonable security for your IP at the facility you are leasing time on. And losing control of your hypervisor-ish password should be easy to prove to be negligent.

I think if they came right out and had to decode that and say "we reserve the right to let random vandals come in and snoop all your data and you won't have any legal recourse" they'd lose a lot of customers. But that's basically what this is going to tell all their customers now. They'd have been a lot smarter to just have quietly reimbursed them. It'll cost them more due to bad publicity.

Re:Linode Terms of Service

[Anonymous Coward]

Subscriber further acknowledges that Linode.com's liability for its own negligence may not in any event exceed an amount equivalent to charges payable by subscriber for services during the period damages occurred.

So if this is binding and enforceable, (which should always be questioned, you can put just about anything in your TOS) that means if they are incompetent retards and let your hosted server get hacked through their back door to your hosted machine they won't be liable for anything beyond the monthly fees you paid them while being hacked?

That's very likely to go to court. They may win or they may lose, but that fails the "common sense" assumption that part of what you are paying for is at least reasonable security for your IP at the facility you are leasing time on. And losing control of your hypervisor-ish password should be easy to prove to be negligent.

I think if they came right out and had to decode that and say "we reserve the right to let random vandals come in and snoop all your data and you won't have any legal recourse" they'd lose a lot of customers. But that's basically what this is going to tell all their customers now. They'd have been a lot smarter to just have quietly reimbursed them. It'll cost them more due to bad publicity.

This is no different from a consumer internet connection being used to run a business. If it goes down and you lose money, you're SOL.

If these individuals wanted protection, they should have paid a company that could provide it, rather than looking for the cheapest service possible. Yes, those options cost more. Wonder why?

Re:Linode Terms of Service

[jpmorgan]

And? You get what you pay for. Linode is a cheap VPS provider. I doubt Linode signed up to accept tens of thousands of dollars of potential liability when they took these guys on as customers. I sure as hell wouldn't, not without charging a lot more.

Cheap is fine if you want to run a normal website, but obviously not sufficient if you plan on storing bitcoin. Remember this is currency. There's a reason banks have vaults and don't store their currency in utility closets built by the lowest bidder. And these are quasi-financial trading websites... does your bank or stock broker run its online banking on a lowest-bidder VPS platform? Probably not.

In the real world mistakes happen, and part of due diligence is making sure that either you've got a backup plan when things go wrong, or insurance. That these trading platforms haven't done that is incredible negligence.

Re:Linode Terms of Service

[Frosty Piss]

...of such a nature that service can be interrupted for many reasons other than the negligence of Linode.com

Allowing a "super user" password to fall into unauthorized hands *is not* negligence of Linode.com?

Re:Linode Terms of Service

[killkillkill]

It wasn't irreplaceable. The losses are being covered by the operators. The balances of their clients will not be affected. Some lessons about keeping all your eggs in one basket had already been learned.

Re:Linode Terms of Service

[mysidia]

Linode can put in disclaimers until they are blue in the face. Obviously they have made an effort to disclaim liability for service interruptions.

The issue they could likely be sued over is not the service interruption, and not necessarily negligence in regards to proferring the service.

But the issue, being that Linode may be strictly liable for their exposure of sensitive customer data due to their direct failure to maintain reasonable care in the maintenance of Linode systems' security, in the form of the "Linode backdoor".

Liability waivers in a ToS are only capable of disclaiming liability that the company is actually legally capable of waiving.

Re:Linode Terms of Service

[Wonko the Sane]

It's irreplaceable in the sense that Bitcoin transactions can not be reversed. Once they've been transferred to another address the strength of the encryption involved prevents the stolen Bitcoins from being returned to their previous owner.

Re:Linode Terms of Service

[mysidia]

P.S. Linode may be implicitly and strictly liable for damages caused by the "linode admin" product on hosted servers.

Separate from any liability for the manner in which service is provided.

In many states, manufacturers cannot disclaim one or more forms of implicit liability.

Just in the same manner, as a manufacturer cannot disclaim warranty in case, your brand new toaster blows itself up the first time you plug it in, due to a manufacturing defect

The manufacturer will be responsible for your injuries, incidental, and consequential damages, even if the warranty, "Terms of use" and stickers on the box say otherwise, due to the manufacturer's negligence, in selling a defective product that causes damage to its user when used as directed.

Re:Linode Terms of Service

[exomondo]

I think if they came right out and had to decode that and say "we reserve the right to let random vandals come in and snoop all your data and you won't have any legal recourse" they'd lose a lot of customers.

So you're suggesting they had no security and they just 'let random vandals come in'? That's clearly not what happened.
And realistically if you're storing that sort of data you don't just plonk it on any service and hope for the best, you go for a service that offers insurance and some added security.

So if this is binding and enforceable, (which should always be questioned, you can put just about anything in your TOS) that means if they are incompetent retards and let your hosted server get hacked through their back door to your hosted machine they won't be liable for anything beyond the monthly fees you paid them while being hacked?

Yes, in which case people storing valuable data will go with a service designed for that sort of thing, probably at a higher price to cover insurance and added security costs.

Re:Linode Terms of Service

[Anonymous Coward]

If somebody decides to file a lawsuit (which I find unlikely considering that it isn't a lot of money in absolute terms and it is a group), whether or not their agreement would hold up.

In some ways, I think they should be liable for security breeches and should have insurance on such problems.

Re:Linode Terms of Service

[zippthorne]

The vault at the bank does not contain the money. It contains banks of small, thin-walled boxes. The purpose of the vault is to appear impressive, to attract customers.

Re:Linode Terms of Service

[Cylix]

Great Scott!

I've had a brilliant idea.

I'm going to build ultra low cost banks.

Now the every man can enjoy running his own credit institution from the comfort of his own backyard. There may be issues with neighborhood housing associations sanctioning said vault owners as I plan to use some old wood and rusty nails. Still, the price/performance ratio should be well received.

Re:Linode Terms of Service

[Jeremi]

It's irreplaceable in the sense that Bitcoin transactions can not be reversed.

That would be 'irreversible', not irreplaceable. Obviously the stolen bitcoins can be replaced by transferring an equivalent number of bitcoins to victims' accounts.

It's not as if a particular BitCoin ID string is of great sentimental value to anyone here; it's the value of the stolen coins that is the issue. Bitcoins are fungible.

Re:Linode Terms of Service

[plover]

Umm, I'm not sure you get the whole "replaceable" thing. A replacement is not the same thing as the original. It's compensation for your loss.

But in the case of Bitcoins, that's completely irrelevant. Unlike an insurance company writing you a check for a stolen car (which does not magically put your old car back in the garage for you), Bitcoins are absolutely perfectly replaceable. Someone stole your Bitcoin #12345? Here, have one numbered #23456. If the old Bitcoin was worth $6.00, the new Bitcoin is also worth $6.00. To the client, there was a transient inconvenience, but they still have exactly the same value.

And as far as the transactions go, once you've received recompense, whatever the thief did with your old bitcoins is now the problem of the entity who replaced them, not you. It's not irreplaceable data, not by a long shot. It's easily replaced with money.

Re:Linode Terms of Service

[Mister Transistor]

You're thinking of a "Safe Depository" which is for storing customer's valuables. The money is in a vault but in most larger banks it's usually in one you don't see, typically it's underground, and referred to as "The Cash Room" or something like that. But at night you don't think they leave all the money in the teller drawers, do you? They put it somewhere else, like, oh, say, a big room with a large locked door like a VAULT, maybe?

Re:Linode Terms of Service

[Dunbal]

You needed to read on, to the part where it says (paraphrasing) "in any case if it IS negligence we're only liable for the service charges you would have had to pay". Kinda like when airlines say they're only liable for $200/suitcase or whatever. Hell $200 nowadays will hardly buy the suitcase, much less its contents. But there you go, you clicked "I agree".

Re:Linode Terms of Service

[Anonymous Coward]

If the old Bitcoin was worth $6.00, the new Bitcoin is also worth $6.00.

err...

Re:Linode Terms of Service

[mwvdlee]

Is a leaked password negligence? If it is, that that entire paragraph does not apply.

Re:Linode Terms of Service

[thsths]

> Linode.com does not make implied or written warranties for any of our services.

Why would you pay these guys to do anything? Obviously the only thing the promise is to take your money...

Re:Linode Terms of Service

[Omnifarious]

This is no different from a consumer internet connection being used to run a business. If it goes down and you lose money, you're SOL.

If these individuals wanted protection, they should have paid a company that could provide it, rather than looking for the cheapest service possible. Yes, those options cost more. Wonder why?

Wrong. It's not the same. Loss of service is very different than having your stuff stolen. Of course, until now hosting companies didn't have to worry about anything with any value being stolen or otherwise destroyed. You should have backups. And copies of the data on your machine doesn't really have a very quantifiable value in most cases.

But now, it does. Changes the rules of the game a bit.

Re:Linode Terms of Service

[gl4ss]

linodes terms seem to be the kind of that wouldn't stand up in court.

their terms say that they're not responsible for their own negligence.

HELL... the terms are such that _they_ probably stole the bitcoins. they're not responsible if their employee just steals them like that..

Re:Linode Terms of Service

[ndogg]

Sorry, but you're wrong on this. Linode makes these terms clear on a number of pages throughout their site, including when signing up for their service. They even politely ask that if this is what you wanted then you should go elsewhere. They even make it clear they don't have SLAs, even though their uptime is better than most VPS hosts.

Re:Linode Terms of Service

[Anonymous Coward]

Bitcoinica alone lost 40k BTC - that's almost $200k.

Re:Linode Terms of Service

[JoelKatz]

It doesn't say they're not responsible for their own negligence, it says their liability is limited to the cost of the service.

Re:Linode Terms of Service

[JoelKatz]

People like best effort services because they're cheap and the vast majority of the time, they're sufficient. They're just not suitable for applications where a very large amount of money is at stake. I think it's safe to say that's a very small minority of linode's customers. (And frankly, probably customers Linode would prefer not to have.)

Re:Linode Terms of Service

[coldsalmon]

...that means if they are incompetent retards and let your hosted server get hacked through their back door to your hosted machine they won't be liable for anything beyond the monthly fees you paid them while being hacked?

Yes, that's what it means, and it is perfectly valid and enforceable. If you rent a space where you can put anything you want, then you yourself must insure whatever you put there. The provider is not your insurance company.

Re:Linode Terms of Service

[Anonymous Coward]

Maybe not for you. But wait until people start collecting bitcoins!

Re:Linode Terms of Service

[v1]

Yes, that's what it means, and it is perfectly valid and enforceable. If you rent a space where you can put anything you want, then you yourself must insure whatever you put there. The provider is not your insurance company.

But this wasn't a case of random act of vandalism. The host's negligence led to the loss. If you lease an apartment from me and someone robs you, ok that's not my fault if I didn't contribute to it. But if I have a copy of your key and leave it laying in front of your door, and you are robbed as a result, that's negligence on my part, and it's not a risk "you should just have to accept". You should be able to sue me and at least get back some of your loss because I am at least partly responsible for the loss.

Re:Linode Terms of Service

[Serious Callers Only]

But this wasn't a case of random act of vandalism. The host's negligence led to the loss. If you lease an apartment from me and someone robs you, ok that's not my fault if I didn't contribute to it. But if I have a copy of your key and leave it laying in front of your door, and you are robbed as a result, that's negligence on my part, and it's not a risk "you should just have to accept". You should be able to sue me and at least get back some of your loss because I am at least partly responsible for the loss.

Good thing that the current situation is nothing like your analogy then isn't it? Stop creating straw men in an effort to argue that Linode are somehow liable for this. I doubt very much any sane judge would agree they were liable, given the service is not provided for the purpose of storing bit coins or other high-value items.

Obviously a cheap hosting service is not meant for storing unique data worth 10000 times the monthly cost of the service with no backups. A more fitting analogy would be a cheap storage service meant for storing furniture where someone hires a box and starts storing their gold in it. You can store your gold bars there if you like, but don't be surprised if someone bypasses security on that warehouse and steals your gold (which is what happened here, not 'leaving a copy of a key laying [sic] in front of the door"). You'd be laughed out of court if you somehow got to trial.

Re:Linode Terms of Service

[Serious Callers Only]

in selling a defective product that causes damage to its user when used as directed.

Can you show us somewhere Linode directs its users to store bitcoins on their servers?

Re:Linode Terms of Service

[Compaqt]

OK, I'll bite.

Now, could you tell me if or to what extent a storage facility would be liable if customer were to store $3000 in cash in their alloted space?

Or using a domestic washer for commercial use (if a fire were to happen)?

Re:Linode Terms of Service

[s73v3r]

I'm sorry, but no. When you agree to host financial services, you agree to provide a certain level of security for those transactions. Simply saying, "Well, you should have paid a reputable business for that!" is not an answer, and doesn't help anyone. Except the assholes who want to make a quick buck without putting in any of the work.

Re:Linode Terms of Service

[coldsalmon]

Landlords will usually limit their liability even in cases of negligence, and this is also enforceable (at least in my jurisdiction, in commercial transactions). The principle is the same: get insurance for anything valuable, because the landlord is not an insurance company. In this case, they would be able to get back "some of the loss" to the tune of one month's service charge: "Subscriber further acknowledges that Linode.com's liability for its own negligence may not in any event exceed an amount equivalent to charges payable by subscriber for services during the period damages occurred."

Here's a fun hypothetical for you if you like thinking about liability for damages: You are an executive at a chemical company. You go away on vacation and I agree to feed your cat in your absence. One day, I accidentally leave the back door unlocked. A thief enters the house through the unlocked door and steals $100 in cash, an original Picasso worth $18 million, and your laptop, which has unencrypted information about your business's trade secrets on it. The thief leaves the door open, and your cat escapes, never to be found. The thief sells the trade secrets on the laptop to a competing business. As a result, you lose your job, your employer loses millions of dollars, and Mrs. Jones, who lives down the block, also loses $450 as a result of your company's stock price going down. Am I liable for:

the $100 in cash?
the $18 million Picasso?
your cat?
your laptop?
your lost wages?
your company's lost millions?
Mrs. Jones's lost $450?

If you find this interesting, you might want to go to law school.

Re:Linode Terms of Service

[v1]

Good example. I guess what it boils down to is if you pay someone for a service, and they screw it up, the most they need to do is not charge you for not providing the service.

But in your example, the only way to have recovered the picasso for example, is if you'd paid me $18 million+ to babysit the cat. But in no case is that reasonable. The whole point of hiring someone to protect something is to spend less on protecting it than the replacement cost should it get stolen. Then factoring in the odds of loss and the level of protection to arrive at a reasonable charge. Otherwise why bother paying someone in the first place?

Paying $15 to babysit a cat and be responsible for the security of millions does not compare well with spending hundreds a month to protect thousands, which is the matter at hand. If I pay a home security company $200/month to secure my house with a piccaso in it, I expect a chunk of that money to go toward them being bonded and insured against incompetency, and if my house IS robbed and they are shown to have been negligent, I will be expecting full compensation for my loss as a result.

On the other hand, if I hire my neighbor for $15 to watch over my house with a piccaso in it, I get what I deserve if the place gets robbed, even if due to the neglegence of my neighbor. I had no reasonable expectation of the level of security and coverage I needed.

This host should be the same way, they should be bonded and insured so their own stupidity does not (A) put them out of business and (B) insure I am compensated for my losses should there be any. As a hosting business, if they are NOT bonded/insured, they deserve the lawsuit. There are several service industries that require bond/insurance to get a license to perform the service, for exactly this reason - people tried to serve on the cheap in a high risk market and too many were screwing up and just shuttering up and sticking their customers with most of the bill when they'd screw up big. Too much of that in a given industry leads to regulation and proper coverage for the customers.

In the same way, if I pay the high school geek down the block $10/mo to host my online storefront in his parents' basement, I have no reasonable expectation of high security or loss compensation.

These guys are running a professional large-scale business. They're a real business in the real world, and they need to behave like one and shall be held accountable as such.

Re:Linode Terms of Service

[coldsalmon]

If I pay a home security company $200/month to secure my house with a piccaso in it, I expect a chunk of that money to go toward them being bonded and insured against incompetency, and if my house IS robbed and they are shown to have been negligent, I will be expecting full compensation for my loss as a result.

This is exactly the issue: expectations versus explicit contract provisions. If there is no written contract, the law will usually try to imagine the reasonable expectations of the parties involved. However, if there is a written contract, the law will almost never modify its provisions after the fact. This is why every vendor contract has an explicit limitation of liability in it. Unfortunately, your "expectation" of receiving insurance coverage in addition to home security will mean nothing if you signed a contract that explicitly says the opposite.

However, you're exactly correct when you say that there are many businesses that are required to be insured and/or licensed, for the very reason that certain firms were taking advantage of consumers' "reasonable expectations." In many cases, it is more efficient for the service provider to get the insurance. However, I disagree that hosts such as Linode should be regulated in this way, for one basic reason. If Linode doesn't know what you're storing in your rented space, their liability is literally unlimited, and there is no way to insure for completely unknown and unlimited liability. In order for Linode to efficiently insure your content, you would have to tell them what it is and what its value is. I'm sure that nobody wants to give that data to their host -- especially if the content really is extremely valuable. Such a situation would result in 1) people with valueless data (my poetry for example) having to pay for extremely expensive insurance that they don't need, 2) people with very valuable data (trade secrets for example) getting a comparatively cheap insurance policy, subsidized by poets, and 3) Linode knowing everything about all of their data.

The bottom line is that contracts matter, and if you really care about something like insurance you should read the contract. If you are paying your home security company $200/month and they say to you, "By the way, we are not going to cover any damage if our security fails, even if it's our own fault," then you would probably look for another company. This is exactly what Linode said to these users, but they didn't look for another company. They said, "Okay, I agree."

Now, there are also situations where the law guarantees certain rights which cannot be altered by contract, but these are very few. For example, many states don't allow residential tenants to give up their right to heat in the winter. This is because we recognize that most people don't read contracts, and there is often unequal bargaining power between poor tenants and their landlords. In cases such as these, I don't mind paying a little bit extra in rent, taxes, etc. to ensure that I get treated fairly and that my neighbors won't freeze to death. However, I don't want to have to pay an additional $15 per month for my Minecraft server so that your unencrypted Bitcoins are protected from theft.

Finally, make sure that you read the next paragraph extremely carefully, since it applies directly to what we're talking about.

DISCLAIMER: The foregoing is provided for informational purposes only, and does not constitute legal advice. It is not a substitute for legal or professional advice. Any legal advice should be tailored to specific clients and their specific needs. No attorney-client relationship is created by any use of this website. You should not act on the information contained in any of the materials on this website without first consulting a competent attorney licensed to practice in your jurisdiction.

Re:Linode Terms of Service

[randomsearch]

> Those people had no business storing $15,000 worth of irreplaceable data, electronic currency or not, on a service with these kinds of terms. Instead of spending an appropriate amount of money for the proper security they gambled with a service not designed to insure against that kind of liability and lost.

This is absolutely correct. I'm reading the most basic introductory books to cloud architectures at the moment, and this is constantly brought up. If you have vital data like this, store it encrypted and off-cloud. If you have to use it within your application servers, either fetch it from the off-cloud location, or else use encryption and distribute the data so that a single compromise (e.g. of one cloud provider) cannot result in a complete compromise of your data.

Linode should pay up, but the users are (for once) to blame.

RS

Re:Linode Terms of Service

[mysidia]

Now, could you tell me if or to what extent a storage facility would be liable if customer were to store $3000 in cash in their alloted space?

If the storage facility built a private backdoor into every storage locker, and they were negligent in safeguarding the master key that opened all the storage lockers; the storage facility could be held responsible for compensating customers for any items stolen as a result of their neglectful failure.

Or using a domestic washer for commercial use (if a fire were to happen)?

That would depend on if the fire were a result from a substantial defect in the product, or if the product were used in a manner inconsistent with warnings that were prominent on and about the product and its documentation.

In general product manufacturers are strictly liable, unless there was actually an inconsistency. "This was designed to be a domestic product"; does not free the manufacturer from liability resulting from damages caused by a defect in the product;
It may allow the manufacturer to void certain warranties.

For example... desktop hard drives are rated for X number of daily power-on hours (8 hours a day) for the warranty period, and a total number of power-on hours for its lifetime. If you exceed this rating, for example, by placing the hard drive in a server powered 24x7, the warranty against mechanical failure is expired very quickly.

But the manufacturer is still liable if the hard drive catches fire due to a fault in the design, even if powered on for more power-on hours than the device is warranted.

Re:Linode Terms of Service

[mysidia]

What can I do with my Linode?

It's probably easier to tell you what you cannot do: Nothing illegal and nothing that interferes with other customers and services. Our Terms of Service document is located here: Terms of Service

In other words, they have stated that their product can be used for any intended purpose, except things that are illegal or interfere with their services.

Re:Linode Terms of Service

[shentino]

I think you can only disclaim ordinary negligence.

Last time I checked, *gross* negligence can't be contracted away.

and the rest

[Anonymous Coward]

Bitcoinica has confirmed 10,000 btc stolen, thats another $50,000 USD

Mmm...

[ActionDesignStudios]

With 10,000 BTC stolen I'd be heading on over to Silk Road very quickly!

LOL

[Anonymous Coward]

"Worth 15,000" Good luck cashing them out for a currency you can actually use.

This is the equivalent of stealing Monopoly money.

Re:LOL

[plopez]

or Euros.

Re:LOL

[Anonymous Coward]

He already said Monopoly money. No need to repeat him.

Re:Don't you just LOVE an unregulated service

[houstonbofh]

And after this, if Linode does not make the users whole, they will leave for someone who will. That is the dream of Librarians.

ToS

[Rinisari]

I saw an analysis of their Terms of Service somewhere, indicating that they will only compensate up to the value of the service paid. So, if your service was $100/mo, they'd only compensate you for the downtime you experienced, or up to that month's service charge of $100.

If Linode cares about Bitcoin, it will find a way to compensate its users. Otherwise, if the users who lost money are up to it, I'm sure there is at least one lawyer out there willing to be counsel on the first case involving theft of a digital currency, testing whether or not the data/rights to data stolen are legitimate property of legal value. We supporters of Bitcoin say, "Of course!" but it's not until there's a legal precedent that we really can say that.

Or, Linode can sit behind its ToS and test contract law.

Or, the users can vote with their money and leave Linode and tell others why they're leaving.

At least in my eyes, that I would ever consider Linode in the future is hanging in the balance, and they've previously always had a good reputation in my mind. I would venture that there are plenty of other like-minded geeks out there. Given that Linode's market is primarily we geeks, I believe it behooves them to do the right thing and compensate for the losses.

Re:ToS

[93 Escort Wagon]

If Linode cares about Bitcoin, it will find a way to compensate its users. Otherwise, if the users who lost money are up to it, I'm sure there is at least one lawyer out there willing to be counsel on the first case involving theft of a digital currency, testing whether or not the data/rights to data stolen are legitimate property of legal value.

Out of principle, shouldn't the complainants only hire a lawyer who will agree to be paid in Bitcoins?

Re:ToS

[kiore]

I would imagine that the crackers would want the same deal with their lawyers

Re:ToS

[thegarbz]

Or, Linode can sit behind its ToS and test contract law.

That's the funny thing about contract law. You best have a DAMN good reason to impose a cap on liability. Negligence is rarely a damn good reason.

Re:ToS

[dkf]

I saw an analysis of their Terms of Service somewhere, indicating that they will only compensate up to the value of the service paid. So, if your service was $100/mo, they'd only compensate you for the downtime you experienced, or up to that month's service charge of $100.

But such limitations would not necessarily apply if they (or some of their employees) were engaging in malfeasance. Criminal activity by a trusted party changes the game quite substantially. Was this the case this time? I have no idea, but <hypothentically> if an employee were to see that someone is using a server for BTC mining and was to use this knowledge plus their own privileges to steal, it would leave the firm at least partially on the hook. </hypothetically> Whether or not a system is correctly and sanely used and adequately protected doesn't make it right to steal from it, though it might affect compensation levels (and whether any insurers involved give you anything; they usually include clauses to require you to take proper steps to protect your property).

Re:ToS

[Anonymous Coward]

Agreed. Although not in mainstream news, a large proportion of people who would consider Linode in the future will be aware of this incident by now. Linode must choose between coughing up 200`000 USD or having its reputation severely damaged.

Re:Don't you just LOVE an unregulated service

[repapetilto]

No, it is just that things will go more smoothly and fairly than under the alternatives.

Safe harbor, eh?

[macraig]

Seems like Linode had more in common with Disney's Pirates of the Caribbean ride than, say, San Francisco Bay. Yarrr!

Doesn't the DMCA somehow make this illegal?

[Narcocide]

Why isn't the MPAA up in arms about this? They clearly subverted DRM to steal these bitcoins.

Re:Don't you just LOVE an unregulated service

[Anonymous Coward]

Really? Isn't the dream of librarians of that top button finally being released to expose the...

Oh wait, that's my dream of librarians.

So, to sum up...

[jht]

And nothing of value was lost.

Then again, I'm not one who sees any particular use to bitcoin other than interesting math.

Re:So, to sum up...

[Anonymous Coward]

In the article summary: They were valued at $15,000.

Re:So, to sum up...

[Anonymous Coward]

15k is nothing of value eh? Doesn't matter if you think they are worthless. Fact is, they are worth real value to about a million people who use them for a lot more then just interesting math.

Re:So, to sum up...

[benjamindees]

What use do you see in Federal Reserve Notes?

Re:So, to sum up...

[slimjim8094]

They're worth US dollars, which I can use to pay for stuff, including my taxes. Even if every retailer on the planet took BitCoin, they'd still be less valuable than whatever the national currency is.

Re:So, to sum up...

[Anonymous Coward]

I can buy things with them, at the store. Do you tell all the chicks you're bitcoin rich?

Re:So, to sum up...

[repapetilto]

So I am assuming you keep all your wealth in a savings account then? No stocks, commodities, property, etc?

Re:So, to sum up...

[Anonymous Coward]

You can use them to pay taxes, snort cocaine, or wipe your ass. That's three more things than bitcoins are good for.

Re:So, to sum up...

[bondsbw]

Even if every retailer on the planet took BitCoin, they'd still be less valuable than whatever the national currency is.

Such a currency would be at least as valuable, because it would be of enough widespread use to be convertible to the national currency. And better, you can follow the financial trends of the day and decide whether to keep your savings in the national currency or the international currency (BitCoin in your example).

Re:So, to sum up...

[nedlohs]

So in say 2008 in Zimbabwe you seriously think US dollars were less valuable than Zimbabwe dollars just because the government said Zimbabwe dollars were the national currency?

If every retailer on the planet took Bitcoin then all your local retailers would. So how would they be less valuable than the national currency?

Sure it's an illiquid market and you'd be silly to mark to market a large number of them at whatever the most recent trade was priced at and declare that that is what they are worth. But that's not the same as being worthless.

I have a 1 ounce silver round on my desk - I couldn't use it at the grocery store, I couldn't pay my taxes with it, it's completely useless to me aside from being the paper weight it's acting as. But that doesn't make it worthless - it's worth whatever I can find someone else to pay for it - most likely about $25 these days (it's not exactly pristine given it serves as a card protector in poker games when it isn't a paper weight and isn't in plastic or anything).

Re:So, to sum up...

[Beelzebud]

Sure, if you can find someone to give you that much cash for them. Good luck. I'd put more faith in the value of rare comic books, personally. I know people that will pay real money for those. In life I've met exactly zero people who know wtf a bitcoin is, let alone that would actually take them as currency.

Re:So, to sum up...

[Anonymous Coward]

and i've met exactly zero people in life who will pay real money for comic books. so what? just because i don't hang out in the comic book collectors circle, doesn't mean they don't exist. i know that if i go looking for them, i'll find them.

same idea applies to bitcoin - if you go looking for people who will pay real money for bitcoins, you will find them. just like comic books, it is a niche market, and a 'random joe on the street' is not likely to be part of the niche.

Re:So, to sum up...

[Anonymous Coward]

Wrong, I can use them to pay my taxes. Buy cocaine, and buy ass wipe.
I can also use them to gamble (bypassing state laws), play games & play lottery.

I have invested zero into bitcoins. (I mine using existing graphic cards I had)

I have thousands in gold, silver, and items I purchased in return by using them.

If you think bitcoins are worth nothing, then your blind to reality.

Re:So, to sum up...

[Beelzebud]

But the difference between comic books and bitcoins, is that one of them doesn't pretend to be a currency... If you have to find a niche market for your bitcoins, they're not any more a currency than comic books... that was my whole point.

Re:So, to sum up...

[Anonymous Coward]

You could pay someone to pay your taxes, shove cocaine up your noise, or whip your ass ... in Bitcoins.

Re:So, to sum up...

[repapetilto]

It is so funny because it is so damn easy to get money for them once you know how. You just have no idea at all what you are talking about.

There used to be a majority of people here shitting on this idea but most have eventually learned about it and decided whether they think the project will either fail or not. It seems like only the lazy/ignorant remain spouting this pointless "its not real money, it's worthless" argument. Yea we all get it, all money is worthless unless someone else will accept it. People will accept different things as currency, or in trade, depending on personal needs/wants/opinion.

Apparently one reason YOU would not accept bitcoins because in your mind a currency cannot be niche. In that case:

How many people must use a currency before it is non-niche? If this number of people started trading comic books for money, would it make comic books a currency?

Re:Don't you just LOVE an unregulated service

[Anonymous Coward]

American Libertarians, you mean. They've co-opted the term and twisted it to mean something other than its original meaning.

What kind of exploit?

[Nutria]

Social or technical?

No correlation.

[Anonymous Coward]

Meh. No correlation. Linode has nothing to do with Bitcoins. You could store magic unicorns on their servers, want compensation if they get stolen? In the end _you_ are responsible for your data, not the host. So sorry if Bitcoin is flawed to the point where it can be so easily stolen by little old root. If you purchase service with a back up plan and the servers get hacked and your content is deleted, then you would legally/reasonably expect a restore but sorry fake money that gets "stolen" doesn't count.

Re:No correlation.

[Anonymous Coward]

All that Linode owes depends on what was really lost.

If it was "CPU TIME" lost, then at most Linode could credit for replacement time, but they are so not getting a refund.

It's like anything else, If your computer catches fire, you aren't going to sue your landlord for the loss of the data on the computer, the most you'll get is maybe the computer replaced if it can be found that it was an electrical problem caused by the landlord's negligence. Though in practice this rarely happens.

If I was Linode I'd be like "good riddance", because there's no tangible claim.

Re:No correlation.

[Anonymous Coward]

>So sorry if Bitcoin is flawed to the point where it can be so easily stolen by little old root.

If you root a box, then anything on that box is vulnerable.

Re:No correlation.

[Anonymous Coward]

You should be responsible for your own data but unless you have your own dedicated servers, in your own unshared data center, you have to trust someone else with partial responsibility for your data at some point.

Re:No correlation.

[gl4ss]

not with bitcoins, but this has to do with linodes "we can steal your stuff if we like" terms of service though.

Re:No correlation.

[Dan541]

Perhaps Linode will be able to restore the bitcoins from backup, but if they've been transacted then it's hard cheese.

Re:No correlation.

[Zironic]

Though if you arn't a moron and use their server to store bitcoins, what would they steal?

Re:No correlation.

[randomsearch]

> So sorry if Bitcoin is flawed to the point where it can be so easily stolen by little old root

This is a really good point. Why is such an important password even known by anyone? If it is a system-wide password that can be used in the way it has, then you might think its very existence is a bad idea. Use public/private key authentication instead, if this account *must* exist, and physically print those keys out, possibly in parts, and distribute them in extremely safe locations (security deposit boxes, for example) just in case the account ever needs to be used. It should not be required on a day-to-day basis. Even if you make the mistake of allowing it to be used in that way, then the people with access to that information should be very few and highly vetted.

RS

The bank left the combination to their safe out

[atari2600a]

Let's write a news article about it

Re:The bank left the combination to their safe out

[Anonymous Coward]

The "bank" had nothing to do with it. Linode got hacked. They happen to serve some customers who held Bitcoins. Fake news.

Re:The bank left the combination to their safe out

[Jeremi]

Let's write a news article about it

A "bank leaving the combination to its safe out" would get many articles written about it, and rightly so. If your intent was to indicate that this event wasn't newsworthy, then I think you need to come up with a different analogy.

Free Insurance

[bill_mcgonigle]

Ain't that the dream of Libertarians, that without regulation, things will go so much smoother and more effectively, and nobody will have cause for complaint.

I have an idea - let's make ISP's fully responsible for all incidental and consquential damages.

OK, your turn - figure out what the monthly pricing is going to look like.

Re:Free Insurance

[bmo]

Oh, look, it's reductio ad absurdum *and* a strawman *and* a false dichotomy all in one neat little package!

Always the libertarian argument: Less regulation is ALWAYS good, and ANY regulation means TOTAL FASCISM and NO MIDDLE GROUND AT ALL.

--
BMO

Re:Free Insurance

[Anonymous Coward]

Just think, if ISPs WERE held responsible, how much we'd save in dealing with SPAM and the related fraud.

Ok, so 99.99% of the effort would go to enforcement of copyrights for major media corporations instead, I'm still working on a way to actually protect the customers.

Re:Free Insurance

[bill_mcgonigle]

Oh, look, it's reductio ad absurdum *and* a strawman *and* a false dichotomy all in one neat little package!

Oh, look, a list of fallacies with no backing - always a strong argument!

Go ahead, though, propose a mechanism where legal responsibility for lost revenue doesn't raise prices. Show me the magic money.

Always the libertarian argument: Less regulation is ALWAYS good, and ANY regulation means TOTAL FASCISM and NO MIDDLE GROUND AT ALL.

No, more customer regulation is a great thing. See GoDaddy/SOPA for how this works.

Re:Free Insurance

[Anonymous Coward]

Oh, look, a list of fallacies ...

That's not a list of fallacies. Strawman and false dichotomy may be, but reductio ad absurdum is a proof, not a fallacy.

Re:Free Insurance

[bmo]

> let's make ISP's fully responsible for all incidental and consquential damages.

Strawman: Hi, you didn't say this, but I'm going to say that you want to have ISPs responsible for content and then I'm going to attack it.

False dichotomy: "obviously" some regulation leads to regulation of everything down to the most minor minutia, implying that you can either have no regulation at all or intrusive regulation, excluding the middle.

Reductio ad absurdum: "I'm going to take what you said and invent a mythical case (ISPs responsible for content) that would never exist in reality and somehow this is proof of something"

All three of these are related. Can you guess how?

In case you can't, I'll put it in simple terms: You are putting words in the parent's mouth that were never said. In even simpler terms, it's a lie.

>Calling you out on bullshit isn't allowed

Oh yes it is.

Good Day.

--
BMO

Re:Free Insurance

[spidr_mnky]

Always the libertarian argument:

Always?

Re:Free Insurance

[O('_')O_Bush]

I don't know what world you are imagining, but I imagine something like all ISPs having root access and absolute content control over everything in their service (even that not owned by them).

And regularly stopping in unannounced to strip the sites of any valuable content to prevent them from having to pay if something is lost.

Sounds worse than what we have.

Re:Free Insurance

[s73v3r]

OK, your turn - figure out what the monthly pricing is going to look like.

Same as it is today. Unless you think they should be able to get away with selling shoddy service.

Re:Free Insurance

[bill_mcgonigle]

Reductio ad absurdum: "I'm going to take what you said and invent a mythical case (ISPs responsible for content) that would never exist in reality and somehow this is proof of something"

Did you follow the thread?

Person A posted the ToS for Linode which disclaims responsibility for what this article is about.

Person B, in reply, said they should be regulated. The logical construction is that this is a call to be regulated to be responsible for what they've disclaimed.

Are you claiming that this call for regulation exists in a vacuum and is not is not related to what it responds to?

What kind of regulation here do you think we're arguing about?

Re:Free Insurance

[bmo]

You said:

> let's make ISP's fully responsible for all incidental and consquential damages.

You're taking an argument that a business should be held up to its promises to be an invitation to make them "responsible for all incidental and consequential damages" which is anything and everything. And then you say that "hey, wouldn't it be swell if we apply it to ISPs" which means they're liable for everything, even infringing content posted by users, among other things (or hate speech or whatever).

That is not what the parent is asking for.

The parent is asking for businesses to deal fairly. If it takes regulation to make businesses deal fairly, then that's what should happen. But to take this basic idea and twist it into about how onerous the slightest regulation is by exaggerating the case at hand is intellectually dishonest.

Banks are responsible if they lose your money. That's why tellers are bonded and the bank is insured. Why should you expect less from someone else who is also holding your money, be it real or synthetic? Business who act as brokers *and* traders in bitcoins should be required to have insurance as a matter of course. This is not onerous. It is goddamn common sense.

--
BMO

Re:Free Insurance

[bill_mcgonigle]

You're taking an argument that a business should be held up to its promises

The promises are clearly laid out by their contract. That's what a contract is - a set of mutual promises.

Banks are responsible if they lose your money. That's why tellers are bonded and the bank is insured.

Right, they have insurance. They pass along the cost of that insurance in the prices of their services.

Why should you expect less from someone else who is also holding your money, be it real or synthetic?

Because insurance isn't part of the agreement, and there wasn't an agreement here to hold money, only to provide hosting services. You could make a different agreement, that had insurance, but that would add to the cost of the services.

Business who act as brokers *and* traders in bitcoins should be required to have insurance as a matter of course. This is not onerous. It is goddamn common sense.

The hosting company wasn't a broker or a trader in bitcoins. They offer hosting services. It's just like a landlord rents a commercial space, he doesn't offer Tae Kwon Do lesson. Perhaps dealing with bitcoin traders who have insurance is a good idea - maybe people will start demanding that from their brokers. That would be a good example of customer regulation in action.

There's approximately a zero percent chance that the government will start licensing dealers in an alternate currency; if you're looking for government regulation, you're looking to shut down bitcoin.

Re:Free Insurance

[bmo]

>if you're looking for government regulation, you're looking to shut down bitcoin.

Then maybe that's what needs to be done.

I'm serious. The only "uses" for bitcoin seem to be money laundering.

--
BMO

$15000 USD????

[Anonymous Coward]

Jeez,
So Bitcoin is a viable currency?? Diss it all you want, but it seems to be holding up well, even growing against the US$.

Re:$15000 USD????

[Fluffeh]

Diss it all you want, but it seems to be holding up well, even growing against the US$.

Not taking a stand on bitcoins either way, but at the moment, just about everything is growing against the US$.

Re:$15000 USD????

[Soluzar]

I'm skeptical. Just where exactly can I spend a bitcoin, and if I do so today, will in fact be worth five US Dollars? Can I spend a few bitcoins to buy myself lunch? Can I spend bitcoins to fill up my car? Can I buy a movie or a videogame with them?

Re:$15000 USD????

[Anonymous Coward]

http://stuffexists.com/bitcoin/

Re:$15000 USD????

[Anonymous Coward]

Yes, you can do all of that with bitcoins. Just follow these steps:

1) you need to already have bitcoins. If you don't have any bitcoins, you can go to one of the sites that will convert dollars into bitcoins.
2) When you want to buy lunch/gas/videogame/whatever, go to one of the sites that will convert bitcoins into dollars, and convert your bitcoins to dollars.

Re:$15000 USD????

[Anonymous Coward]

Yes, you can do all of that with bitcoins. Just follow these steps:

1) you need to already have bitcoins. If you don't have any bitcoins, you can go to one of the sites that will convert dollars into bitcoins.
2) When you want to buy lunch/gas/videogame/whatever, go to one of the sites that will convert bitcoins into dollars, and convert your bitcoins to dollars.

So really, it's like a PayPal debit scenario? :0

Re:$15000 USD????

[Anonymous Coward]

Not taking a stand on bitcoins either way, but at the moment, just about everything is growing against the US$.

Everything? Lemme see, last June 1 bitcoin as around $35, by the end of the year they had hit $3, recovered back to $7 and right now just below $5 ... Hmm

Lucky this didn't happen last June though ...

Re:$15000 USD????

[shaitand]

I can, there is a little cafe down the street that takes Bitcoin. In our office Bitcoin is also the typical method of settling a shared check for lunches. You can also conduct all manner of black market trade with Bitcoin. Drugs, guns, prostitutes, all on the table. Or you can just turn it into your local currency to conduct business.

Bitcoin has plenty of uses. It doesn't have to be used as a drop in replacement for us dollars.

Re:$15000 USD????

[Dahamma]

So basically they are NOT a currency at all.

They are about as much "currency" (defined as "a widely accepted medium of exchange") as cancelled postage stamps or baseball cards.

Re:$15000 USD????

[snookums]

So basically they are NOT a currency at all.

They are about as much "currency" (defined as "a widely accepted medium of exchange") as cancelled postage stamps or baseball cards.

or gold

Re:$15000 USD????

[vipvop]

Dear god your office sounds horrible, and you must live in an insufferable city. If my coworkers wanted to settle a check with bitcoins, I'd lobby to get them fired. Do they all like Ron Paul too?

Re:$15000 USD????

[repapetilto]

Here is a place that accepts bitcoins for videogames:
http://gamerkeys.net/

Here is an ebay-like auction site:
http://bitmit.net/en/shop/c/13-pc-and-video-games/2-pc-games

There are no chargebacks with bitcoins, so you need to do research on the rep of various sellers and merchants. You save money on fees you would otherwise pay to cover chargebacks, etc.

Re:$15000 USD????

[Dahamma]

Yep, gold is not a currency either. Hasn't been in a while. Now it's mostly a commodity traded on the market like other commodities. I think I'd prefer to trade in gold than freaking bitcoins, though.

Re:$15000 USD????

[Dunbal]

or gold

Not true. I bet you in 10,000 years if the human race is still around, gold will still be tradeable for anything used as a form of currency anywhere on the planet. Bitcoins? LOL. People are quick to point out how worthless they think gold is. Not one of them would pass up the opportunity to grab a bunch of gold coins if they were just lying there. Why? Because they recognize the value. They just don't want to admit it. The value of gold is not in the gold itself, it's in the fact that everyone on the planet is taught from an early age that it has value.

Re:$15000 USD????

[M. Baranczak]

You can also conduct all manner of black market trade with Bitcoin. Drugs, guns, prostitutes, all on the table.

I would really like to see the prostitute who takes bitcoins.

No, on second thought, I would really not like to see the prostitute who takes bitcoins.

Re:$15000 USD????

[White Flame]

The value of gold is not in the gold itself, it's in the fact that everyone on the planet is taught from an early age that it has value.

Not quite. Gold is visibly unique, difficult to fake due to its density, very portable/workable, and very durable. It does make for a good lasting token, and has enough scarcity & shininess to do the necessary primal things in people's brains to desire it.

Re:$15000 USD????

[Anonymous Coward]

Growing? I believe this cache would be worth $60k a few months ago. It's fluctuating as rapidly as zimbabwean dollar.

Re:$15000 USD????

[mikael_j]

It would be pertinent to point out that BC basically topped out around $35 for a very short while, classic boom and bust cycle which was then replaced by organic growth.

Before the massive increase in BC value that led up to the crash the value was actually a lot lower than it is right now.

Re:$15000 USD????

[Bert64]

Well, that's a rather inefficient use...
There are various services you can buy directly with bitcoins, like hosted servers, domain names etc... There are even goods you can buy online with bitcoins and have physically shipped to you.

Bitcoin is also very useful as a way of paying people in foreign countries, avoiding the high fees imposed by banks and services such as paypal.

Re:$15000 USD????

[betterunixthanunix]

People are quick to point out how worthless they think gold is. Not one of them would pass up the opportunity to grab a bunch of gold coins if they were just lying there.

Most of them would take the gold down to the nearest pawn shop and sell the gold for their nation's currency. Why? Because you cannot spend gold coins anywhere.

Re:$15000 USD????

[Bert64]

ZWD doesn't fluctuate, it's been on a pretty consistent downward plummet for years.

Re:$15000 USD????

[Anonymous Coward]

Hey buddy, ever notice that "Bitcoins are visibly unique, difficult to fake due to its density, very portable/workable, and very durable"?

Re:$15000 USD????

[Dunbal]

Gold is visibly unique, difficult to fake due to its density, very portable/workable, and very durable.

Your argument consists in telling me that gold has the combination of all the qualities that make gold gold. However none of these properties is special. There is not one single thing above that makes gold special - there are many materials that are denser, more rare, shinier, more portable, more durable, etc. In fact gold is no longer used as a daily currency because of its many flaws and other less adulterable materials are put into circulation instead.

No, the value of gold lies in its recognition as the de facto underlying currency for the past several thousand years. Things like plutonium are worth much more "dollars" per kg, but no one trades plutonium. Gold has been removed from general circulation, but most major financial institutions will issue currency to you in exchange for gold, properly assayed, inventoried or vouched for by recognized third parties.

Re:$15000 USD????

[Dunbal]

Because you cannot spend gold coins anywhere.

Yes you can. At your local pawnshop/jewellers. You pointed out yourself the ease with which gold can be converted into other "stuff". Yeah the grocer won't take it. You probably can't pay for a hotel room with it. But I'm sure you can turn it into almost any other currency within a couple hours, anywhere in the world.

Re:$15000 USD????

[TheNinjaroach]

Just where exactly can I spend a bitcoin

Once I learned where and how to spend bitcoins, I kinda felt like repeating the "Fight Club" mantra to myself. Rule #1 is you don't talk about it. Rule #2 is you don't talk about it.

Rule #3 is go download Tor and see if you can dig up any interesting .onion URLs.

Re:$15000 USD????

[betterunixthanunix]

Well, if we are going to split hairs over this, then yes you can take your gold coins down to the pawn shop or jeweler and buy some of your nation's currency. That does not make gold a form of currency, since as you pointed out, your grocer won't take it, hotels won't take it, and most importantly, the government won't take it when you pay your taxes. At one time things were different, and gold coins were the currency used by society; we still feel the lingering effects of that today, which is why the market price for gold is so high.

Re:$15000 USD????

[Anonymous Coward]

A chunk of plutonium, unlike gold, will oxidize and burn in moist air. So that's a really bad example.

And scarcity isn't everything -- a medium of exchange needs to be scarce enough that a small percentage of GDP goes to making money, instead of everyone going "meh, I'll dig some up in my backyard instead", and increasing the money supply out of pace with the economy, this deflation. But it also must be common enough that you can use reasonably sized chunks for all the circulating money in the economy. Divide the amount of Pu in the US (about 100t) by the number of dollars in circulation (about 1 trillion), and you're looking at less than 1 mg for a dollar coin. A $100 "coin" would be perhaps a millimeter cube or sphere. (Of course, plutonium is actually worth MORE than that for nuclear weapon and power purposes, so you'd end up using only a fraction of plutonium inventories used for coinage, and the coins would be even smaller...)

Re:$15000 USD????

[LateArthurDent]

Not true. I bet you in 10,000 years if the human race is still around, gold will still be tradeable for anything used as a form of currency anywhere on the planet.

If in 10,000 years gold is still scarce, humanity doesn't deserve to be around. After that long a time, technology better be up to the point where your 3d printer can make you an object made of solid gold by fusing the air molecules around it. The only thing that should be worth anything is the energy to do all that.

People are quick to point out how worthless they think gold is.

No, nobody says gold is worthless. Many people, myself included, say that the *gold standard* is worthless. The same people supporting the gold standard are quick to tell you how the free market is the best method for setting prices, instead of any other price control, but when it comes to currency, floating it doesn't seem to be enough. What gives?

Not one of them would pass up the opportunity to grab a bunch of gold coins if they were just lying there.

I wouldn't pass up the opportunity to grab a bunch of bitcoins if they were just lying there, would you? It's not because I believe in bitcoins as a currency, but because right now I can sell them for money.

Re:$15000 USD????

[shaitand]

The prostitute who takes bitcoins also probably takes IT work in trade... how else did she get set up for bitcoins and the dark web?

Re:$15000 USD????

[shaitand]

Jokes aside think about it. Nobody carries cash these days and nobody delivers lunch. Somebody has to pick it up and everyone who uses a card has to be present to sign their slip even if cashiers are competent enough to split a check among cards. We tried Paypal but the fees are annoying especially when co-workers are picky about the cents. Some of us got "square" so we could take a card right on our phones. After the cool factor wore off the fees were just as annoying as paypal.

Finally it settles to Bitcoin. No transaction fees required. We don't even wait for all the confirmations so instant transactions. If a co-worker wants to hack fake bitcoin to screw you on a lunch transaction then more power to him... it'll work once with a maximum take of maybe ten bucks.

Re:$15000 USD????

[s73v3r]

Ahhh, so I can't actually use bitcoins for anything. I still have to use US Dollars (or Euros, or whatever they use where ever you are).

Re:$15000 USD????

[s73v3r]

I bet you in 10,000 years if the human race is still around, gold will still be tradeable for anything used as a form of currency anywhere on the planet.

And I bet you're wrong. Tell me, what actual worth does gold have? Outside of it's use as a conductor, not a whole hell of a lot. And if we get to a Mad Max or apocalyptic scenario, what use will gold actually have? Why would you take gold in exchange for food, or bullets?

Re:$15000 USD????

[s73v3r]

I gotta say, that "gamerkeys" site looks pretty questionable to me.

Re:$15000 USD????

[s73v3r]

And this right here is why Bitcoin is going to struggle to take off. Very few people want to actually go through the trouble to do this just to spend some money.

Re:$15000 USD????

[Anonymous Coward]

What the fuck are you talking about?

I can get a huge variety of food delivered for lunch. Short of a fancy sit down meal I can't think of exceptions. We have 2 businesses who's only service is to pick up food from places who don't deliver and deliver it.

I work in a small city in a fly over state.

Re:$15000 USD????

[shaitand]

If you want to count what delivery services can pick up then sure. We have one of those too but the fees are ridiculous. If you don't count overpriced delivery services that will charge $8 plus another 20% tip (likely to total more than your lunch) your options for delivery include pizza joints and... pizza joints. We are downtown but this is true of pretty much the entire city (Albuquerque) unless you are in one of the large office buildings which often have someone making a few bucks by taking orders from a limited menu and picking them all up and delivering in bulk.

Seriously if we don't like paying paypal fees or 2.75% fee to use a card for a "square" phone payment why would be okay with doubling the price of the meal by using a third party delivery service?

Re:$15000 USD????

[maxwell demon]

Well, it would be a good thing that Pu coins are so small, because otherwise any larger amount of money would instantly self-destroy by nuclear explosion.

Re:$15000 USD????

[Anonymous Coward]

Again what the fuck are you talking about?

Not counting the delivery services I have dozens of places that deliver.

I can eat better than kings of old on just places that deliver themselves.

I simply mentioned the delivery service to show that I can effectively get anything. Disregarding that I can get mostly anything.

Re:$15000 USD????

[shaitand]

And the delivery available to you affects me or anyone who doesn't live where you do in what way? I've lived in IL, NV, FL, NM, DE, in towns and cities ranging from pop 12k to cities as large as (and including) Miami. In none of those places was there a delivery experience like you describe unless "mostly anything" is limited to things sold by pizza places, Italian restaurants, Chinese, and sandwiches in exactly that order of likelihood. The list in the delivery section of the phone book and other directories is longer but that is because they mix take out and delivery. Pretty much everywhere does take out.

Do you actually put so much stock in your personal anecdotal evidence that you actually think it means that it is impossible for me to be telling the truth about limited delivery options to my office? I don't even buy your claims.

So tell me, without a third party delivery service can you get proper Mediterranean? Cajun? Thai? Can you order Churches, Golden Pride, Subway, Olive Garden, Carrabas, Outback, Hooters, Red Lobster, Wing Basket or any of the other major chains that aren't one of the things I mentioned above? If yes to any of the above, could you if you weren't within say 1/4-1/2 mile? The answer has been a no everywhere I've been from rural Illinois, to Albuquerque, to Miami, to downtown Chicago. Most of those chains are national and nationally don't deliver so the answer is no where you are too wherever that may be. Pretty much all of them are listed in the delivery/take-out menu section of the phone book but are take-out only.

Re:$15000 USD????

[segedunum]

The same people supporting the gold standard are quick to tell you how the free market is the best method for setting prices, instead of any other price control, but when it comes to currency, floating it doesn't seem to be enough. What gives?

Because free floating currencies are manipulated by central banks, not free markets, and their value always goes to zero because they cannot resist printing more and more of the stuff. You can't just print gold.

Re:$15000 USD????

[segedunum]

And I bet you're wrong. Tell me, what actual worth does gold have? Outside of it's use as a conductor, not a whole hell of a lot. And if we get to a Mad Max or apocalyptic scenario, what use will gold actually have? Why would you take gold in exchange for food, or bullets?

It's amazing how in the western world we've been totally brainwashed about what money actually is. In a Mad Max scenario there will have to be money. This money is used as a form of exchange and for pricing the equivalence between otherwise inequivalent goods, otherwise we get inefficient bartering that civilizations naturally get away from. The only two things that have satisfied over many millennia have been gold and silver. In Zimbabwe, which looks like something from Mad Max but worse, they're all digging for gold and using their Zimbabwe dollars to hold gold fragments. It's been this way for thousands of years and it won't change. I do wish people would actually look at history.

Re:$15000 USD????

[LateArthurDent]

Because free floating currencies are manipulated by central banks, not free markets, and their value always goes to zero because they cannot resist printing more and more of the stuff. You can't just print gold.

And the board of a corporation can always issue more stock. What's your point?

Re:$15000 USD????

[TheNinjaroach]

Very few people want to actually go through the trouble to do this just to spend some money.

And that's completely fine by me. But I think if most people actually knew what you could do with it, that "very few" number would become "overwhelming" over night.

Re:$15000 USD????

[repapetilto]

I have no idea, thats why I said to research the merchant. I never tried to buy videogames with bitcoins...

Re:$15000 USD????

[Anonymous Coward]

In a Mad Max scenario there will have to be money. This money is used as a form of exchange and for pricing the equivalence between otherwise inequivalent goods, otherwise we get inefficient bartering that civilizations naturally get away from. The only two things that have satisfied over many millennia have been gold and silver. In Zimbabwe, which looks like something from Mad Max but worse, they're all digging for gold and using their Zimbabwe dollars to hold gold fragments. It's been this way for thousands of years and it won't change. I do wish people would actually look at history.

I do wish goldbugs like you would study real history instead of regurgitated goldbug propaganda which sweeps all the real, historical problems with gold-as-currency under the rug. Or that goldbugs could ever come up with an argument more compelling than emotional appeals about how "gold is real money", and it's such a crying shame that everyone went crazy and abandoned the One True Thing Of Value.

(Hint: historically, gold and silver didn't satisfy, which is why major world economies eventually all came to the same conclusion and left "hard" money standards behind.)

Re:$15000 USD????

[Dilaudid]

Holding up well? It's June 2011 peak was 30 USD per BTC. Now it's 5 USD per BTC. It appears to be holding up about as well as Greek bonds.

Re:$15000 USD????

[Anonymous Coward]

Yeah... try going into wal-mart right now and convincing them to make change for your gold brick.

Re:$15000 USD????

[segedunum]

I do wish goldbugs like you would study real history instead of regurgitated goldbug propaganda which sweeps all the real, historical problems with gold-as-currency under the rug.

You're not convincing me with anything approaching an argument sweetheart. Gold is money, not currency. The value of bits of paper that central banks can print more of always goes to zero. As sure as eggs is eggs. Telling me to study real history without going into any detail isn't telling me anything.

Hint: historically, gold and silver didn't satisfy, which is why major world economies eventually all came to the same conclusion and left "hard" money standards behind.

Tell that to the Zimbabweans. What happened was that bankers simply couldn't resist taking themselves off being linked to gold and silver so they could print and mint more cash whenever they wanted and play gambling games. Those monetary systems never last. The Greeks' didn't. Neither did the Romans'. Neither will ours.

Re:$15000 USD????

[segedunum]

And the board of a corporation can always issue more stock. What's your point?

What is stock measured in? What's your point here, because it is a non-sensical comparison?

Re:$15000 USD????

[segedunum]

In addition, I find the comparison of central banks to corporations quite amusing.

Re:$15000 USD????

[AmiMoJo]

Depends how you acquired it, where you keep it and what you are trading it for. If your laptop is encrypted and you use Tor properly then you can own large amounts of currency and spend it anonymously and untraceably. Very useful if you, say, need to pay for web hosting for your heretical views that might otherwise land you in jail, or wish to provide services to people who can't send you other forms of payment (political dissidents in China, for example).

Re:$15000 USD????

[s73v3r]

The value of bits of paper that central banks can print more of always goes to zero.

Now who's the one not giving anything approaching an argument?

The Greeks' didn't.

And I'm sure that had absolutely nothing to do with them being conquered.

FTFY

[killkillkill]

Ain't that the dream of Libertarians, that without regulation, things will go so much smoother and more effectively.

-or-

Ain't that the dream of Utopian Socialists, that with regulation, things will go so much smoother and more effectively, and nobody will have cause for complaint.

Re:FTFY

[Anonymous Coward]

Utopian Socialist? Never met one. On the other hand, the Libertarians, you can't cross the Internet without stepping in a few.

But last I checked, those who do want regulation recognize complaints, and seek the resolve them through structured methods that avoid imposing upon the non-guilty.

Libertarians just say "It's not me, tough being you" and walk their way.

Re:FTFY

[Anonymous Coward]

"Libertarians just say "It's not me, tough being you" and walk their way."

You speak for everyone that you think is covered by your personal definition of libertarian? Isn't that just a tad presumptive?

Re:FTFY

[Anonymous Coward]

I speak from my experiences with them. Selfish and self-entitled describes them, along with a few other terms.

If there's some collective of kind and considerate libertarians out there, I've never met them.

I've just met a bunch of people who proclaim their utopian ideas of the world being better who would screw you and your aged grandmother in a heartbeat.

Re:FTFY

[Black Parrot]

I've just met a bunch of people who proclaim their utopian ideas of the world being better who would screw you and your aged grandmother in a heartbeat.

You missed the fine print: they think their ideas would make the world better for them.

(Though I've never met one who wasn't delusional, thinking he - always a he - has enough money or influence to come out ahead in a free-for-all society.)

Re:FTFY

[Anonymous Coward]

Utopian Socialist

Was the derogatory term used by Marx to attack those socialists who he felt had no practical programme for achieving the just society.

And the dream of "Utopian Socialists" was not that "with regulation, things will go much smoother," but that with freedom people would all work doing exactly what they liked doing and everything would get done. Even taking away garbage would be done, according to Saint-Simon, but children who after all, "love playing with filth."

Re:FTFY

[dbIII]

The last one I came across wanted to abolish the government and fill the empty space with vast numbers of lawyers. Weird that they didn't understand that is pretty well what has already happened.

Re:FTFY

[s73v3r]

I would see something like that as being almost a reverse of Google's 20% time: You spend the vast majority of your time working on whatever you like doing, and then maybe one day a week you spend helping out, and doing the things that society needs doing. Like taking away the trash.

Spread risk around

[weave]

Got me, but if I had $50k in digital currency I think I'd spread my risk around and stash bits (no pun intended) across many servers at many different hosting sites and companies. The things are like $20/month, for pete's sake.

Re:Spread risk around

[gox]

Why do you think they didn't do that? 3000 BTC that got stolen was the hot wallet, not the total account. You could however question whether the hot wallet could be thinner. Either way, best way to store money with Bitcoin, whether it's an actual or savings account, is with support for multiple signatures. That way, the thief wouldn't be able to spend money without having the additional signatures, which you keep in other servers.

Re:Spread risk around

[fastest fascist]

If you had that kind of money in digital currency, I'd hope you'd store most of it offline.

if you pay $10/mo, you can't really expect damages

[Chalex]

Back when I worked for a web host company, we occasionally (rarely) had some issues where customers got screwed. In the worst case, your VPS is on a box where multiple disks die in a RAID array, and you don't have backups, and that's that.

We were customer-friendly, so we would refund the customer's hosting charges if something went terribly wrong. But if you're paying $19/month, you can't really expect us to refund you more than $19/mo when something goes wrong.

There's a rule of thumb in physical security; you should spend ~5% of the value of the thing to secure the thing. E.g. ~$1000 bicycle means ~$50 bicycle lock. If you're using a $19/mo service to hold $10k worth of value, you better be taking some other precautions. These guys were doing the equivalent of keeping $10k in cash in a $20 lockbox in a public place.

Re:if you pay $10/mo, you can't really expect dama

[Anonymous Coward]

This. Linode was hobbyist VPS', their TOS explicitly says you aren't owed anything. Why were people hosting such vast sums of 'money' without an SLA?

overblown news story, here's the real truth

[slashmydots]

Oh the drama. As an actual bitcoin miner, let me fill you in on the real story instead of that media fluff that's purposely inflated to overdramatic proportions. Almost all bitcoin mining pool websites are configured to pay people every time 1 BTC is reached. That's around $5 US and takes a mediocre mining rig approximately 2 days to generate. So the most that the average person probably lost is $0.01 - $5.00. NOBODY keeps massive piles of BTC sitting around at the pool itself. The exchanges, yeah, but not the pools. They're known for lax security too. At the #1 biggest mining pool, your miners' login passwords are listed as plaintext on the page because what are people going to do, mine for you? And none of your money stay there for long so nobody really cares.
What really doesn't add up is the 3000 BTC estimate. Even Deepbit, the largest pool, doesn't have 6000 members, which would be the number required to, at any given point in time, have an average of 3000 BTC on-hand. So it likely was the site owner's profit pool that got robbed the most heavily.

Re:overblown news story, here's the real truth

[godofpumpkins]

What about the 43,000 coins bitcoinica reported stolen in the same breach? Still overblown? https://bitcointalk.org/index.php?topic=66979.0

Re:overblown news story, here's the real truth

[Anonymous Coward]

if that amount is true.. or really any excessive amount (anything more than *necessary* or more than immediate needs of service/site/person)... it's their own fucking fault for storing those "valuable" data files on a public-connected computer. you wouldn't store 10s of thousands of dollars in cash in a shoe box and leave it out on the public sidewalk next to your house...... so why would you be that careless with electronic files believed to be worth a lot?

Re:overblown news story, here's the real truth

[Beelzebud]

Because they're not worth a lot.

Re:overblown news story, here's the real truth

[subreality]

That amount is reasonable for the immediate needs of an active exchange. They have to be able to send BTC when people request a withdrawal. Note that they're only keeping the necessary amount online. The bulk of their funds are stored elsewhere.

Re:overblown news story, here's the real truth

[mikael_j]

The current exchange rate for Bitcoins to USD is around 4.6 USD for 1 BC. That makes 43,000 BC worth almost $200k. I'd say that's a decent amount of money.

Re:overblown news story, here's the real truth

[Anonymous Coward]

People will pay you a lot of money for it, so I'd say that makes it worth a lot. That's pretty much one of the easiest definitions of worth.

Re:overblown news story, here's the real truth

[G-forze]

That must be why nobody cares to steal them... Oh, wait!

Re:overblown news story, here's the real truth

[dbIII]

NOBODY keeps massive piles of BTC sitting around at the pool itself

I'm sorry, but do you really expect us to think that people who get taken in by ponzi schemes are likely to be careful with their get rich quick scheme?
It looks like we've got our own little cut rate reality TV show here where we can marvel at the sharks and minnows in a squalid little pretend ecosystem.

Re:overblown news story, here's the real truth

[selven]

They're a financial services business, they have to deal with issues like these in ways no one else does. Given that MF Global can have $1.2 billion, or about 100% of what was its net worth, just disappear, this really isn't that unreasonable.

Re:overblown news story, here's the real truth

[ClioCJS]

So you make $5 every 2 days? That's $910 a year. Peopel keep saying the electricity doesn't cover the money you make, but hey, if you live in a place that gives free electricity....

Re:overblown news story, here's the real truth

[Anonymous Coward]

Eh? There's a reason Ponzi schemes are more-or-less illegal -- it's because they're quite profitable for everyone who realizes what they are and gets in and out before the end. If nobody stood to make real piles of cash, they wouldn't need to ban them.

So, given reasonably good estimates of how likely the bubble is to burst within a given time frame -- isn't it clear that rational people (who may or may not be morally reprehensible, depending on how Randian a view you take of fools' attachments to their money), the kind to take some interest in protecting their profits, would be involved?

Bitcoins and US Customs

[Anonymous Coward]

A question I consider sometimes is the relationship between Bitcoins and the US Customs (or any other border agency.)

When we cross the border there are obvious signs making it clear that if you carry more than $10,000 across the border (Canadian or American in my case) in either direction you must declare the transaction. Suppose one's bitcoin wallet is on their cellphone and they are carrying more than $10,000 worth of bitcoins on their cellphone. Would these need to be declared?

I guess it would be similar to carrying bearer bonds across the border but I'm not certain what the conditions are for those, either.

The concern would be whether two people with cellphone bitcoin wallets could meet and move bitcoins from one cellphone wallet to the other without another server or service being involved in the transaction. If so then I can certainly see how this process could be used to facilitate illegal transactions with less obvious traces than carrying large volumes of actual cash.

Re:Bitcoins and US Customs

[ThatsMyNick]

Have you tried carrying a checkbook through customs? Its the equivalent. Customs only has a need to know of real cash or valuables (say gold, meth) being carried through them, they dont really have to bother about anything else.

Re:Bitcoins and US Customs

[repapetilto]

You are correct, bitcoins make it easier for the average person to move large amounts of money across borders to facilitate any transaction (illegal or not). As it currently stands, you need the resources to set up a reliable way to cross the border with the money undocumented or shell corporations, etc that hide the true purpose of the money transfer.

The real question is :
Since the well connected and wealthy will find a way to do this either way, is it not better that everyone can now do it?

The answer:
I dunno. It's complicated.

Re:Bitcoins and US Customs

[ThatsMyNick]

You are correct, bitcoins make it easier for the average person to move large amounts of money across borders to facilitate any transaction (illegal or not). As it currently stands, you need the resources to set up a reliable way to cross the border with the money undocumented or shell corporations, etc that hide the true purpose of the money transfer.

This is called hawala, and is very much legal, and is much more efficient that bank transfers in many cases.

Re:Bitcoins and US Customs

[Anonymous Coward]

A checkbook isn't the same thing because the money isn't carried in the checkbook, it's still in the bank. If you write a check to someone on the other side of the border then the transaction is recorded through the banking system and can be tracked. You can even write the check so that it represents the currency of the country where the check is to be cashed and the banks will automatically, and with ample service charges, perform the exchange.

Re:Bitcoins and US Customs

[arth1]

This is called hawala, and is very much legal,

Not the way most hawala operators operate. The money transfer agency must be registered as well as following guidelines and reporting requirements.
See here for some more details, including hawala operators who have been arrested and convicted.

Re:Bitcoins and US Customs

[Vegemeister]

1. Bitcoin's protection against double-spending requires that the transaction be communicated to the P2P network.
2. You could create a wallet containing the amount of bitcoin you wanted to transfer, but sneakernet really presents no advantages over a simple encrypted email.

Re:Bitcoins and US Customs

[Black Parrot]

A question I consider sometimes is the relationship between Bitcoins and the US Customs (or any other border agency.)

I doubt that it's legal in the USA anyway. Supposedly there was a big bust on an "alternative currency" system last year.

(Flagfox shows bitcoin.org to be on a US server, so I'm *guessing* that they are operating out of the USA.)

Re:Bitcoins and US Customs

[witherstaff]

It's perfectly legal to carry over as many gift cards or even a pre-pay credit card with 20,000 on it. Cash the feds don't like, stored value instruments are another matter. But why bother with the bitcoins and cell phone meetup, that's what offshore accounts are for.

Re:Bitcoins and US Customs

[Dunbal]

About that - funny how inflation is eating away at the value of the dollar. When this law was made in the late 1970's, $10,000 was a chunk of change. It could certainly buy you a couple cars. My dad actually bought an apartment for $25,000 back then. Now $10,000 won't even buy you one car. But there's no sign of the limit being moved. So pretty soon we're all going to be criminals, or have to cross the border with less than a week's worth of spending/travel money with us. Fun how that works huh? Now think about tax brackets and how they suffer the same fate.

Re:Bitcoins and US Customs

[ThatsMyNick]

It doesnt matter if it can be tracked or not. That is not the responsibility of US Customs (IRS and related entries are the one who care about them). Hell I dont have to go through Customs to get these "goods" to the other person. Absolutely not the domain of Customs.

Re:Bitcoins and US Customs

[Anonymous Coward]

I think, legally, you would have to declare. It's silly though, you don't need a wallet to store bitcoins, you can store them in your head, private keys can be generated by hashing memorized phrases for instance.

I don't know about crossing border with them "on me", but I myself paid customs tax on my Bitcoin purchases in my own country, calculated by the government office. They are pretty capable of converting Bitcoin to EUR when it comes to taxation. Most interesting part was that they told me it was in Bitcoins without me mentioning.

So, for all that say "Bitcoin has no value", well, tell it to the customs office here.

Re:Bitcoins and US Customs

[gox]

I doubt that it's legal in the USA anyway.

Why would it be illegal? I've never been in the USA, but having heard about it in Bitcoin forums, it shouldn't be. I think by "alternative currencies", you mean currencies that are created to pass as legal tender. Those are more likely frauds. Keep in mind that Euro is also an alternative currency.

Re:Bitcoins and US Customs

[JoelKatz]

The same is true of a bitcoin wallet. The wallet just holds the credentials necessary to transfer the bitcoins, just like a checkbook. The bitcoins themselves aren't in the wallet at all.

Re:Bitcoins and US Customs

[benjamindees]

So, in other words, you don't know and are just talking out of your ass.

Re:Bitcoins and US Customs

[St.Creed]

If you're found to operate a Hawala shop you will be investigated under the anti-terrorism act in The Netherlands. I can assure you that you'd much rather rob a bank.

Re:Bitcoins and US Customs

[repapetilto]

Haha, this has to be the laziest post ever. The irony is that probably wasn't worth the effort of typing out.

how this will affect the price

[slashmydots]

Everyone gets all scared when big piles of BTC are stolen because the price usually crashes afterwards. In case you were wondering about that, selling off 3000BTC all at once, right now this very second would drop it from $4.94 US to $4.83. See for yourself:
Live graph of MTGox who does 80-90% of all exchange transactions

Re:how this will affect the price

[repapetilto]

haha someone just dumped to 5k 4.65. Not sure what the volume was.

Re:how this will affect the price

[repapetilto]

Sorry, at least 5k.

Re:how this will affect the price

[Black Parrot]

Everyone gets all scared when big piles of BTC are stolen because the price usually crashes afterwards.

If you were confident that it would recover, you could turn that into a money pump.

linode corporate post on incident

[YesIAmAScript]

If anyone (like me) was wondering if there was any confirmation that linode accepted blame other than from the person who was robbed, there is.

http://status.linode.com/2012/03/manager-security-incident.html

Linode is actually rather lucky this person who did this only went for 8 machines. They could have been in a whole lot more trouble when someone got access like this.

Re:linode corporate post on incident

[mikael_j]

Just the info I was looking for (as I have a Linode VPS that isn't used for anything Bitcoin-related). Still, I'll just go ahead and run my usual log scraping and intrusion detection scripts, might as well be diligent.

Re:linode corporate post on incident

[Anonymous Coward]

either that, or they just don't know the actual extent of the damage yet.

Multisignature transactions

[emeitner]

Bad decisions were made. If you have ever had to deal with PCI DSS certification then you know what the credit card processing companies expect of their merchant customers. Now imagine the standards the credit card companies themselves try to adhere to. Some developers using BitCoin need to think about the security Big Picture before creating infrastructure for their projects/businesses. Keeping a BitCoin wallet containing thousands of BTC on a little cloud server is not wise.

Having said that, there is a solution in the pipe to help with this problem. Gavin Andresen, lead BitCoin developer, had his Bitcoin Faucet Linode server hacked. While only a few Bitcoins were lost he now is using this incident to support his proposal for Multisignature Transactions.

Re:Multisignature transactions

[makomk]

In my opinion, the way Bitcoin is implementing multi-signature transactions is scary. They're trying to change the rules of a complicated distributed financial system when it's in active use, which is kind of like trying to rebuild an airplane mid-flight, and it looks like due to some unfortunate oversights by the developers this is going to break stuff like protection against double-spending for the duration of the switch-over period even for users that don't themselves use multi-signature functionality. (It's actually a lot worse than that thread implies; for example it turns out that an attacker can cause the part of the Bitcoin network running newer clients to decide the part running older clients is attacking it by sending invalid transactions and cut off all communications with it.)

Super admin password leaked?

[lsolano]

Is it not supposed that a super admin password should be stored only in the brains of the super admins?

I don't foresee compensation in their future.

[Lose]

Unless Linode decides to cough up $15k in a private deal, there will likely be no compensation. IANAL, but since the United States government doesn't recognize bitcoins as a legal form of currency anyway, taking this to court would probably be fruitless and a waste of time. Unless I'm missing details, of course.

If they were to be compensated, though, there is some potential to have this incident set a major precedent in regards to the legitimacy of bitcoins in the U.S.

Re:I don't foresee compensation in their future.

[benjamindees]

IANAL, but since the United States government doesn't recognize bitcoins as a legal form of currency anyway, taking this to court would probably be fruitless and a waste of time.

And if your gold coins get stolen, the police should not investigate and prosecute the thieves since gold is not a "legal" form of currency?

Re:I don't foresee compensation in their future.

[cdrguru]

If you could get the police to believe that a bitcoin has value to anyone other than a dedicated cult, they might.

However, most local police just pass any "cyber" investigations on to a federal agency, they probably aren't going to do anything anyway. The federal minimum is $25,000 in loss - if you don't have that, they aren't interested. So for a $15,000 loss there probably will be no law enforcement action no matter what.

Awesome

[glwtta]

So I take it we're back on the BitCoin thing full-time?

Does this mean that we at least don't have to see anything about Raspberry Pie or Strawberry Jam, or whatever, for a few weeks?

Re:Awesome

[Bieeanda]

You wish. As soon as the second batch goes out, there's going to be a flurry of articles about some guy who daisy-chained a hundred of them together for mining.

Re:Awesome

[sixtyeight]

So I take it we're back on the BitCoin thing full-time?

Does this mean that we at least don't have to see anything about Raspberry Pie or Strawberry Jam, or whatever, for a few weeks?

I hope you don't also bury your relatives before they're dead.

tip of the ice berg - not even the real story!

[slashmydots]

Boy did they bury the lead. Here's the entire story. Allegedly someone broke into the Linode web hosting company, hacked specifically just 8 sites involved in bitcoins and THAT'S IT, no other sites, and stole a hell of a lot more than 3000 BTC. 3000BTC isn't significant but 43,554 BTC were stolen from another major exchange, Bitcoinica. That company is claiming they have the money to cover it and will reimburse everyone. That's almost a quarter of a million US dollars by the way.

Apparently the word on the street is this was targeted and definitely an inside job from an employee or multiple employees at Linode. The easiest way a simultaneous 8-site web control panel hack would be to simply log in with a secret back-door master password that basically all web hosts have. Either someone hacked Linode and found out that master password or it was an employee, the latter of which is obviously a lot simpler and more believable.

Re:tip of the ice berg - not even the real story!

[Anonymous Coward]

Bitcoinica is not an exchange, technically its a bucket shop (http://en.wikipedia.org/wiki/Bucket_shop_%28stock_market%29) a gambling service where people place side-bets on the large multiples of the change of prices of commodities.

Re:tip of the ice berg - not even the real story!

[Anonymous Coward]

I would agree with you, but would a mere Linode employee be elite enough to custom script a bitcoin transaction with a size of 1337 bytes?

http://blockchain.info/tx-index/2893660/d9804de366aa4c2a01565c3a3c8aa2ea20baafc276dc875f80b9044841205333

Re:tip of the ice berg - not even the real story!

[Anonymous Coward]

I was wondering if this might be government sponsored, since an external currency that can not be controlled by any governments is a threat to various typical currencies, and the general financial system (with its various inefficiencies and redundancies).

Re:tip of the ice berg - not even the real story!

[Larryish]

secret back-door master password

Was the HACKER in question getting a BLOWJOB at the time while having a GUN pointed at his head?

Re:tip of the ice berg - not even the real story!

[subreality]

I'm not really a fan of Bitcoinica (they give far too much margin to noobs), but they're not a bucket shop. People call them that sometimes because they match-make internally without forwarding to the larger market, but all net positions are hedged by actual trades. Actual delivery of goods (Bitcoins) does take place - and in fact the "hot" wallet that does so is what got stolen today. Fortunately the bulk of their deposits are in cold storage and weren't hit.

Re:tip of the ice berg - not even the real story!

[slashmydots]

Maybe if you ever read slashdot, you'd know about the complaint years ago about someone finding out that their web hosting company, despite them renting an individual server, demanded that they keep an administrator password to access it whenever they wanted. Since it's THEIR server, that makes perfect sense. I wouldn't let someone lock me out of my own server. That's like a lessee changing the locks and locking a landlord out of their apartment. Basically all web hosting companies have a backdoor password and rarely do they bother to individualize it to each server. Thus making it a "master" backdoor password. So what's your issue with that?

Re:tip of the ice berg - not even the real story!

[SomethingOrOther]

That's like a lessee changing the locks and locking a landlord out of their apartment.

I can assure you, this is quite normal and perfectly legal behaviour in the UK and indeed, much of Europe. Whilst you are renting, you have exclusive access, and the landlord would be committing an act of trespass if they entered your apartment without your permission and 24hrs notice. (Except in an emergency obviously).

In some parts of Scotland, the landlord might also get a smack in the mouth into the bargain :-)

Similarly, I can think of plenty of examples where only exclusive access to a hosted server would be acceptable (perhaps even legal), due to strict security or data protection requirements.

Re:tip of the ice berg - not even the real story!

[Tim C]

Hand in your geek card, please.

Re:tip of the ice berg - not even the real story!

[Anonymous Coward]

Goes to show you that the crooked Chinese exchanges like Bitcoinica have waaaay too much money...

Re:tip of the ice berg - not even the real story!

[Existential Wombat]

Shoulda used a double secret back-door master password...

Re:tip of the ice berg - not even the real story!

[Anonymous Coward]

God. I hope so

Re:Don't you just LOVE an unregulated service

[Anonymous Coward]

Instead, why not just take money from those who manage their affairs prudently, and use it to prop up incompetent busnessmen to continue in their ways, as long as they promise not to do it again.

Re:Don't you just LOVE an unregulated service

[MindlessAutomata]

The crash of the beanie baby market clearly shows that government regulation is needed.

References people, references!

[ashpool7]

http://status.linode.com/2012/03/manager-security-incident.html

Would AWS or Windows Azure be any better?

[Anonymous Coward]

Honest question, since I haven't waded through their ToS. But I bet not, at least in terms of compensation for a security fault on their side. They might be more secure to begin with though...

Rumplestiltskin?

[Anonymous Coward]

Spinning straw into bitcoins. The computational effort doesn't create value, it just creates entropy in the case of bitcoins. Theoretically interesting, and perhaps it will provide a lot of useful lessons in creating a practical digital currency, but for now, it has no trust, no backing, no guarantor, and no fungible value.

How to covert bitcoins to hard currency

[yukk]

1. Generate bitcoins.
2. Hack in and steal bitcoins.
3. Sue for real money.
4. Profit!

Re:How to covert bitcoins to hard currency

[Anonymous Coward]

Or use an established market site like Mt. Gox where thousands of transactions happen every second.

I hate this myth that there's no where that sees Bitcoin as valuable anywhere. People will buy it from you if you sell it easily.

Wikileaks being strangled?

[plopez]

If you don't know, bitcoin was one of the few ways to get money to Wikileaks and Julian Assange left. EFTs and Credit card transaction have been halted by the banks. Is this an accident or a conspiracy?

Re:Wikileaks being strangled?

[gox]

The money transferred to Wikileaks is minuscule compared to the Bitcoin commerce in general. They stole hundreds of thousands dollars worth of coins, which they will slowly liquidate. It's very likely an honest theft. ;-)

If they do destroy it though, it would really be news.

another possibility

[YesIAmAScript]

As linode says that a machine with access was hacked from outside and then was used to access the other machines.

This wouldn't require a master password nor an employee.

This is what linode claims. Do I believe it? I don't think I even believe that only 8 machines were compromised.

But I don't take the "word on the street" very seriously. People repeat conspiracy theories very easily, regardless whether they are true or not.

Re:another possibility

[gl4ss]

only thing that would look worse for linode would be if they changed their liability terms the day before the hack happened...

because, the 8 machines weren't all ran by the same people were they?

Fletch Lives

[Anonymous Coward]

what are you in for?

Molesting a dead horse.

Claim settlement difficulties

[tlambert]

Might be a bit difficult to find someone who even would insure their bitcoin balance, not to mention the difficulties that would probably arise if a claim was filed. Fortunately, in this case the operators of the services are absorbing the lose and their customers/clients are not directly affected.

It should be easily settled by converting real dollars into BTC.

I head about 3000 BTC has coincidentally just become available on the market, which if they put up the US$15,000 to buy them, should cover the "stolen" BTC.

1. Mine a bunch of BTC
2. Fake an online break-in and theft
3. Sell the not really stolen property to the entity who has to replace it, using an untraceable currency
4. Profit!

PS: There is no ???? step when it comes to insurance fraud, it's a rather well researched field.

-- Terry

Re:Claim settlement difficulties

[gox]

The problem is, Bitcoin is not untraceable, like digital cash. It is probably the most traceable form of money. Every transaction is public and very available. In ordinary use cases, you don't know who controls what address, so it's almost anonymous, but still certainly traceable. In the case of a robbery, it is better than cash from this aspect because you don't know the robber's identity either way, and with Bitcoin, you know exactly what they did with the money. Though, you don't need guns, bombs and vehicles, so I guess running off with Bitcoins is still a lot easier. From the insurer's perspective however, there are many measures you can put in place to be able to identify the authenticity of the claim when there's a theft.

Re:Claim settlement difficulties

[Rhacman]

You missed step 3. In his example the not-really-stollen bitcoins are sold for a non-bitcoin currency which is returned to the original entity. It leaves the bitcoin system at that point and thus is not tracked by it.

Re:Claim settlement difficulties

[repapetilto]

Huh? What does "it" refer to in your last sentence?

Let's get something straight

[mathimus1863]

I'm really tired of hearing the same Bitcoin-is-worthless jargon coming out of /. on every Bitcoin headline. And it's not like there's a Bitcoin story every day... it's once every couple months, so you can't really be getting "sick" of it...

People can argue all they want about economic theory and fiat currency, intrinsic value, etc. But the fact is that Bitcoin has had value >=$1/BTC for over a year now. And it's growing. When the speculator bubble burst, everyone thought for sure that was the end of it. But what really happened was that the speculators got out of the game, and now Bitcoin is progressing much more naturally... and so far it's been successful.

I don't care what your economic theories are: Bitcoin still exists and is used for online commerce. I don't care whether you think it's worthless: they have clearly demonstrated they are not worthless, and in fact have very non-negligible value to a great very many people. I don't care whether you think the gold-standard was a bad idea, or whether Bitcoin is a commodity or a currency: Bitcoin is thriving and has been thriving for a long time. There's still plenty of questions left to be answered about Bitcoin and its place in society, politics and economics. But one fact remains: Bitcoin itself is empirical evidence that all your theories about whether it should, could or will remain valuable, may not be accurate. That's not to say there's no truth at all in your arguments. But Bitcoin is a truly novel, one-of-a-kind thing, and it has demonstrated more than just being worthless-bits, simply by the fact that it not only still exists, but that it is thriving.

And geezuz: I thought /. was about geeks. Bitcoin should be a popular topic here, as it represents online freedom, cryptography, politics, economics, computing, and networking all in one big, brilliant mess of bits -- basically everything everyone loves talking about, here. Even if you think the currency will crash tomorrow, it should still be a fascinating topic, hardly worth the intransigent beatings that it receives on every slashdot story.

Re:Let's get something straight

[Anonymous Coward]

And geezuz: I thought /. was about geeks. Bitcoin should be a popular topic here, as it represents online freedom, cryptography, politics, economics, computing, and networking all in one big, brilliant mess of bits -- basically everything everyone loves talking about, here. Even if you think the currency will crash tomorrow, it should still be a fascinating topic, hardly worth the intransigent beatings that it receives on every slashdot story.

Oh, sure, it's a geeky topic. What of it? You bitcointards get a thrashing because you have really idiotic opinions about how currency works. Also, you tend to be woefully uneducated about the very object of your fervor, which has numerous fatal flaws. Here are a few, for your edification.

Fatal flaw #1: the total number of Bitcoins which can ever be mined is fixed, and the rate of "manufacture" will slow dramatically as that amount is approached. This means that if the currency ever takes off outside of the circle jerk of Bitcoin fanatics, it will turn deflationary so fast that nobody will want to use it any more. And no, near-infinite divisibility is not a good solution, because it doesn't deal with the problem (for everyone except you Bitcointards) of creating a nouveau riche class who didn't do anything to earn insane Bill Gates type riches beyond being in the mining game before Bitcoin hit the bigtime.

Fatal flaw #2: The Bitcoin protocol does not scale. It requires every participant in the network to keep a complete record of every transaction ever made by anybody in the network, and to compute cryptographic functions across that complete transaction record. If Bitcoin had to support real economic activity, as opposed to miners, speculators, and the pathetically small handful of online vendors which accept payment in Bitcoins, the block chain would explode in size to impractical levels.

Arguably fatal flaw #3: Bitcoin inherently requires wasting a ton of computing effort, and therefore, energy, contributing to global warming. Seriously, it does. The entire thing is built on the concept of "proof of work", which means that you have to contribute a certain amount of computing power to the network, and the work done by the distributed computer is asymmetrical such that it's very hard and time consuming to do, but easy to verify. The work done is of no value outside keeping Bitcoin going. Why do we need to pointlessly burn fuel on a lot of worthless make-work just because it possesses the property of being verifiable without a central authority? Basically for no good reason other than FIGHT THE POWER, STICK IT TO THE MAN. Except that if Bitcoin gets as big as all of you wish it would get, Bitcoin will be the power, and it will be coopted by The Man. And it will be hideously wasteful. Congratulations I guess?

Breaking: Bitcoinica got hit, too.

[Dwonis]

Bitcoinica lost 43,554 BTC (valued at about US$200K) in the same incident.

Re:Breaking: Bitcoinica got hit, too.

[Anonymous Coward]

Aww. that's too bad. I guess someone shouldn't have left (what they thought was valued at) $200,000 sitting out in a box on the sidewalk then. Idiots deserve what they got (err. lost). tough shit. don't be so stupid next time.

Re:Breaking: Bitcoinica got hit, too.

[Black Parrot]

Bitcoinica lost 43,554 BTC (valued at about US$200K) in the same incident.

Funny enough, your post was at the bottom of the page when I read it, so I could see the daily cookie right below your post:

But like the Good Book says... There's BIGGER DEALS to come!

Re:Breaking: Bitcoinica got hit, too.

[Anonymous Coward]

Bitcoinica will apparently eat the loss. Pretty impressive. I have no idea why people would trust their cash to well known (in certain circles at least) Chinese criminals like Bitcoinica though.

Re:Don't you just LOVE an unregulated service

[Anonymous Coward]

Really? Isn't the dream of librarians of that top button finally being released to expose the...

Oh wait, that's my dream of librarians.

.. expose the 70 year old boobs? You're sick, mister!

Correction to "the real truth"

[subreality]

Actually, pool users aren't losing anything. The "hot" wallet stored at Linode was only the daily-use petty cash fund used for routine payouts. The bulk of the pool's balance is in "cold" storage and was not affected, so it's not like they were cleaned out. They got the register at the front, but not the safe in the back.

The owner of the pool, Slush, is covering the losses out of pocket, so nobody is losing anything except him.

The same story (though with a larger "hot" wallet) is happening over at Bitcoinica as well.

Re:Correction to "the real truth"

[ccguy]

The owner of the pool, Slush

Sounds totally legit, how do I sign up?

Re:Correction to "the real truth"

[subreality]

It's just a handle, ccguy. He doesn't hide his real identity.

Re:Correction to "the real truth"

[ccguy]

You made my day :-)

Re:Correction to "the real truth"

[subreality]

How so?

Interruption is not break in

[dutchwhizzman]

This is a disclaimer for damages occurring due to interruption of service. The service wasn't interrupted at all. This is a break-in due to bad security and in my opinion, not covered in this disclaimer. No, I am not a lawyer, but this disclaimer is rather explicit about what Linode is is not responsible or accountable and data theft due to bad security is not excluded from liability in this piece of text.

Bitcoin enthusiasts

[dadioflex]

are really starting to sound a lot like gold/silver bugs do on the investment forums. I'm invested in uranium exploration, oil exploration and undersea exploration companies and I suspect they are no more safe an investment that Bitcoin, or (right now) gold and silver. But damn, you don't hear me frothing at the mouth every time someone starts talking about BP or Fukushima. Fact is, the value of my risky investments and Bitcoin can both flat-line - if you're not prepared to accept that, then you shouldn't be investing either real money, or your time and energy in it. But honestly, best of luck to Bitcoin - I find the experiment at turns fascinating and ridiculous, but it never fails to entertain.

Re:Bitcoin enthusiasts

[Sycraft-fu]

Well there's two problems with bitcoins that make them more open to people to be stupid about.

One is that they are so easy to get in to. Anyone can buy in for a low price, and you can actually "mine" your own with a computer. You see it on hardware forums all the time, people looking to drop a grand on hardware to "make money" mining bitcoins.

The other is that there are more than a few True Believers(tm) who think this will be The Next Big Thing in currencies. They read Cryptonomicron and think it is a prediction, not science fiction, and see bitcoins as the digital currency from that novel made real. So they have an investment in it past just attempting to make money. They are emotionally invested in its success.

Re:Bitcoin enthusiasts

[gox]

You're right from the investment perspective, but for me, Bitcoin is a revolution, not an investment. I don't have much money invested in Bitcoin, it's too volatile as a long term investment tool and I'm not a speculator. I invest my money in land. I invest my hopes in Bitcoin.

Re:Bitcoin enthusiasts

[Anonymous Coward]

Agreed. Honestly I think the whole Bitcoin project is marvellous but wish there were fewer rabid fanatics.

On the flip side of that coin though, there is certainly a large default amount of hostility towards Bitcoin on Slashdot; maybe as much as Flash receives! I certainly wish the people who think that Bitcoin is stupid would not take the time to comment on Bitcoin stories.

Re:Bitcoin enthusiasts

[Yunzil]

Starting?

really why does anyone care

[luther349]

i really am asking this there value is so low now that it cost you more on your power bill to mine them then they are worth. and all these thefts are going to do is drop it even lower.

Re:Don't you just LOVE an unregulated service

[Anonymous Coward]

Well, yeah, especially because of the parents who decided a college fund in the form of highly flammable stuffed animals was a good idea.

It's also really well regulated at casinos

[Sycraft-fu]

At least US ones. The gaming commission of the various states that engage in it checks to make sure payouts are as required. They catch any tampering with it, there is hell to pay.

In the case of physical game (like Roulette) there are possibilities for some strange streaks, the overall payout is regulated by payout vs probability (like every number has a 1/36 probability of occurring but a bet on any number pays only 34:1) but on machine games it is regulated even tighter. The machines have specific percentages they are expected to pay out, and there's also usually regulation about how they have to make sure there are no long losing streaks (that's what "progressive" slots are). So they don't just check the odds on those, but can make sure of things like "Machine A paid out precisely 95% of the money it took in."

Casinos are just the entertainment industry. They don't take any risks, and they don't even pretend to (all the odds are 100% known to you, as to them). It is just people seem to like the thrill of the chance of winning. Some people DO win big, and that tiny chance is enough to make people enjoy the thrill of playing.

They have to man

[Sycraft-fu]

If the people who play with Bitcoins don't keep making headlines and hype, they face the very real possibility of their "investment" going down to zero. They are not catching on as use as a general currency. You can't go spend BTC at Newegg or Amazon or the like. So they have to keep new people interested to keep this going. Otherwise nobody will want to buy BTC meaning the value will effectively be zero. You'd still be able to trade them among people who take them, but since that is almost nobody it gets you nothing.

Re:They have to man

[Anonymous Coward]

So the way to go, is status quo.

Re:They have to man

[Bert64]

And how exactly is this different from any other investment opportunity or currency?
A volatile investment can mean big rewards or big losses, and smaller investments are more likely to be volatile due to the ability of a smaller group to influence the market price more easily.
Investments can crash and burn, currencies have also crashed and burned in the past... Investing in anything is a gamble, and with higher risk comes the potential of bigger reward. Or if you're a bank, zero risk because the taxpayer will bail you out if the investment doesn't pay off.

Legally? Yes. Practically? Probably not

[Sycraft-fu]

The law is pretty broad. US law says if you have more than $10,000 in monetary instruments you have to declare. That means any currency from any nation, they don't give a shit, if the total value is more than $10k they want to know about it. Fail to declare it and they can seize it if they notice it, which is good incentive to declare it (or better incentive to just not carry that much on you, and transfer it through banks).

So letter of the law, ya you'd need to declare. As a practical matter, they'd never notice bitcoins, at least not at this point, so you wouldn't risk anything directly.

Linode doesn't give a shit about bitcoins

[Sycraft-fu]

Go to their homepage. They are a cut rate Linux VPS host. If you decide you want your own Linux server instance, with root and all, but you don't want to pay very much to have it, that is what they do. What you do with it they don't care, so long as it isn't illegal (and I imagine then they only care if someone complains).

They are a budget host, that is all. Some BTCtards though they'd be a great place to host some infrastructure related to playing with BTC. It got broken in to and now they are crying. Linode is going to tell them to piss up a rope. Doesn't matter that they decided that their bits were expensive bits, that isn't Linode's business. As a low end web host their thing is "Make sure you back up your shit."

Same with any low end (and even many high end) hosts. Hostgator does back up your data if under a certain amount, but they warn you that this isn't to be taken as a guarantee. Shit can happen that causes loss and it is on you to have a backup copy.

In the case of bitcoins doesn't quite work like that but that is not the web host's problem. Don't put "special bits" on a cheap service.

Also, maybe this helps enlighten some people to the reason why there are things like tracking and regulation in real banks.

The Obvious...

[Anonymous Coward]

... and nothing of value was lost.

Re:if you pay $10/mo, you can't really expect dama

[thsths]

> We were customer-friendly, so we would refund the customer's hosting charges if something went terribly wrong. But if you're paying $19/month, you can't really expect us to refund you more than $19/mo when something goes wrong.

Of course you can - since everybody is responsible for the consequences of their actions. If you buy a radio for 19 USD, it short circuits and burns down, you can go after the manufacturer for your damages. Same with services, unless it says otherwise in the contract.

And in terms of their digital currency

[Sycraft-fu]

It is stored on secure systems which are more importantly tracked and audited. It is true most currency these days is just an entry in a digital system. It is much more convenient that way. However it isn't like it is just in some excel spreadsheet and if that sheet goes away the money is gone. It is on special system, and is very well accounted for. When money gets transfered bank to bank it is carefully tracked. At the immediate level it happens via some system like ACH, which itself is monitored and tracked, but that is just the banks chattering basically. Bank A says "You have $5000 more to go in to account X," and Bank B says "I now have $5000 more in that account," and balances are updated accordingly. However that is the banks loaning money, more or less. The actual transfer takes place on the fedwire later which is watched by the federal reserve, as the name implies.

Banks keep careful track of their digital currency, just like their physical currency. It isn't just having secure systems, it is having auditing and tracking. So if something unauthorized happens, it can be rolled back.

That's one of the big reasons to keep your money in a bank and not in a safe or something like that. You keep $10k in bills in a safe and someone steals it, it is gone, you are fucked. You keep $10k electronically in a bank and someone steals it, good chance the transaction can be reversed and you lose nothing.

Targeted attack

[bLanark]

I reckon this was a targeted attack.

There were at least two big bitcoin users with accounts there - if you actually RTFA, the biggest loss was 10,000 bitcoins (~45,000 USD) from Bitcoinica in addition to the 3,000 bitcoins from Palatinus.

If it was well-known, or could be easily discovered, that several bitcoin sites used the same hosting service, then that would be something worth breaking into, wouldn't it? Social attack, brute-force, some custom malware on a stick in the parking lot of the hosting site - it would be worth it to get your hands on big money.

Everyone should do their own research when choosing which hosting service to use (cost, uptime, features, history of security cock-ups), but it might also be worthwhile making sure no big players use the same host. If they do, then maybe avoid them and look at the next-best option.

Re:Targeted attack

[bLanark]

if you actually RTFA the biggest loss was 10,000 bitcoins (~45,000 USD) from Bitcoinica

And from the comments, I learned that Bitcoinica lost 43,554 bitcoins.

Sheesh!

Re:Targeted attack

[TheNinjaroach]

With all of this talk about bitcoins, which are based on cryptography, why aren't there more Slashdotters asking why in the hell those bitcoins weren't stored in an encrypted format?

It doesn't matter who hosts your VPS if you apply some common sense to your valuable data.

Re:Targeted attack

[bLanark]

With all of this talk about bitcoins, which are based on cryptography, why aren't there more Slashdotters asking why in the hell those bitcoins weren't stored in an encrypted format?

It doesn't matter who hosts your VPS if you apply some common sense to your valuable data.

Well, it comes down to this. These people were renting a slice of server to mine bitcoins. That meant that any coins that were created had to be put somewhere. And, that somewhere had to be online at the time the coins were discovered. It would be seriously inconvenient if the mining process paused because it had a block of coins, but couldn't store them - at risk from power failure, for example. Imagine getting an SMS at 03:34 asking you to log on to make the wallet available- and realising you'd missed the first SMS, and your process had lost eight hours of processing time. Or realising that the server had had a power outage, and the coins were lost forever because they weren't stored before the power went down.

So, as reported, most people had a short-term "wallet" that was online, and they withdrew mined coins periodically. Some of the questions in the forums have been around why such large balances built up. I guess complacency and lack of rigour. But if your process needs access to an encrypted file, you either give it the key to (1) decrypt it ([i]hard-coded key in source, [ii]passed in key on command-line, or [iii] pass in key via environment), or (2) you leave the file online. Personally, I'd probably go for 1.i, but not leave the source on the mining machine, as 1.ii and 1.iii are vulnerable if the mining machine is compromised. But (2), if you trust yourself to empty the live file regularly, does seem nice and easy.

Epic failure on two fronts for those that lost

[dbIII]

Let's say I had seismic data that cost millions to collect, I'm stupid enough to have no copy other than the one on linode and then something goes wrong. Even if it's linode's fault that their copy of the data is lost I'd have no grounds to hit them for millions. If that happened it would be my own fault for being too stupid to have a backup of very easily copied digital information.
I really do not see any difference between that situation and the participants in the bitcoin pyramid scheme who failed to keep backups or were prevented from having a backup by some quirk of the scam they are involved in.

So from my point of view it's an epic failure on two fronts for the people that lost their "coins" - first for not having a copy and second for being involved in a pyramid selling get rich quick scam that just happens to have shiny bait for the technophillic. The more people that adopt bitcoin the more the "coins" of the early adopters are worth - it's the classic ponzi scheme barely disguised.
So sorry kids, I don't think linode owes you anything other than a refund on lost time. They won't say it because such a thing pisses customers off, but I'm not them and not even a customer (but I did read their terms of service once before deciding to host stuff closer to me instead).

Re:Epic failure on two fronts for those that lost

[repapetilto]

Yea I know, isn't it so quirky that you can't just copy a $20 bill...

On the other hand, agreed that keeping unencrypted wallets on Linode's servers was dumb (which is what you were trying to describe).

Re:Epic failure on two fronts for those that lost

[dbIII]

But it isn't a $20 bill but instead a string of bits that the owner does not want to lose. It's only a quirk of the window dressing on the ponzi scheme that prevents the owner from having a backup if that's why they don't have one. If the scheme has checks for uniqueness and there is no reason why you can't have two copies so long as you only trade with other participants with one then there is no excuse at all.
It's so easy to make copies of digitised information that there is not really any valid excuse to not have backups of any digitised information that you have access to and consider important. How much is a blank DVD these days? An 8GB usb stick? Blue-ray? When you get into serious amounts of data to keep for a decade or more even LTO5 (1.5 TB) is under $100 per tape.

Re:Epic failure on two fronts for those that lost

[repapetilto]

Right, backing up "your wallet" is good practice in case one copy gets deleted. However, if someone else gains access to one of your "wallet's" and transfers the bitcoins elsewhere, this transfer will be verified by the bitcoin network and any other copies of the wallet become worthless. This is not a quirk, it is a clever way to prevent double-spending (counterfeiting).

Re:Epic failure on two fronts for those that lost

[dbIII]

It's a bug not a feature. See my other post comparing it to credit cards that can be cancelled.

Re:Epic failure on two fronts for those that lost

[repapetilto]

You should compare a bitcoin to cash in your wallet, not credit cards. It was designed this way on purpose. See my responses to your other post.

Re:Epic failure on two fronts for those that lost

[dbIII]

Personally I don't think I should because it is real digital data and not merely an abstraction of cash. I get your point from you other posts but simply disagree, and have a major disagreement with the philosopy behind the bitcoin scheme in the first place. I've read Cryptonomicon and various other things and agree that the concept of a digital currency is cool. I just do not agree that bitcoin is actually such a thing but instead something merely taking advantage of people that like the idea of a digital currency.

Re:Epic failure on two fronts for those that lost

[repapetilto]

Well nothing is perfect, and usually nothing is the best option for everyone all the time. With that in mind, can you outline how your idea of an ideal digital currency would function? Include practical issues of how to get people to use it, prevent double spends, retaining value, etc.

Re:Epic failure on two fronts for those that lost

[dbIII]

Of a form that means that people are going to stake their reputations on trading you things of real physical value for it and they stand to lose if they lose their reputations. It isn't there yet. The problem where the early adopter gets far more value than the later participants rings a lot of alarm bells and puts it into pyramid scheme territory. The item depicting value itself not having any value (not even the value of a backed promise) puts it firmly into ponzi scheme territory. Sorry, but I see it as no more of a currency than I see the Scientology scam as a religeon.

Re:Epic failure on two fronts for those that lost

[repapetilto]

Are you describing Ripple?

Re:Epic failure on two fronts for those that lost

[dbIII]

That sounds like something along those lines, but if you want an entertaining general rundown of how I see currency I suggest reading the three Neal Stephenson novels set in the 16-1700s. Of course I don't actually expect you to read them on my suggestion, but if you already have you'll know where I'm coming from.

Re:if you pay $10/mo, you can't really expect dama

[sithlord2]

I don't agree. The exploit was in Linode's admin panel. Even if the user had spent 3000$ on a security consultant to secure his VPS, it still would have been bypassed.

And the answer is...

[Anonymous Coward]

Now the question is, will Linode compensate for lost bitcoins?

And the answer is "No".

Insurance agent: Any valuables in the house?
Homer: Well, the Picasso, my collection of classic cars...
Insurance agent: Sorry, this policy only covers actualy losses, not made-up stuff.
Homer: [miffed] Well that's just great!
-- ``Homer the Heretic''

Also while they are pretending to be a currency

[dbIII]

Couldn't circulating a hash of the stolen "coins" be used to prevent the theif using it, just like banks blacklist stolen credit card numbers? What's the use of a "digital currency" without such a blindingly obvious application of it?

Re:Also while they are pretending to be a currency

[heathen_01]

How do you prove they are stolen in such a way that all BTC users agree?

Re:Also while they are pretending to be a currency

[dbIII]

Good point and another way the system is broken. There is no oversight to stop single players gaming a new angle on the system even if everyone else agrees they should be stopped.

Re:Also while they are pretending to be a currency

[repapetilto]

Yes there is, it is called democracy.

If a large percentage of the miners decide that someone is acting too unfairly they will just fork the blockchain. People will then choose which bitcoin they wish to use: The old one being gamed, or the new one with some new rule to prevent this particular "gaming" of the system (but may open up new methods).

Re:Also while they are pretending to be a currency

[repapetilto]

The "coins" themselves don't have hash's, but there is ledger that keeps track of all transactions. It is possible for everyone (or some subset of people) to agree not to verify transactions originating from "tainted" wallets. Unless everyone does this it is very difficult to track though (coins can be split up into 100,000 wallets, etc)

However, the decentralized nature makes this politically impractical.

Also most think this will hurt honest people more than thieves, so this is politically undesirable. It is better to investigate the crime (unauthorized access to a computer) to seek out and track down the thief as well as develop better security practices, rather than treat the money as tainted.

If you want chargebacks and tracking then use credit cards. It will cost you more to do business but it is easier to deal with theft.

Re:Also while they are pretending to be a currency

[dbIII]

That is good to hear. More things like that and the currency aspect could end up to be viable and more than just window dressing.

Re:Don't you just LOVE an unregulated service

[History's Coming To]

That's why I moved all my beanie baby stock into tulip futures.

Use the present tense!

[Anonymous Coward]

A note for submitters and editors - if something has happened recently, it's conventional to use the present tense. I read this and thought it had happened some time ago, only being brought to light recently.

That's a really simple question

[DomHawken]

and the answer is no.

Re:if you pay $10/mo, you can't really expect dama

[gl4ss]

I don't think linodes admin panel has a memory debugger, so some in-vps security could have helped with this actually.

And...

[Anonymous Coward]

nothing of value was lost.

Section 9: Limitation of Liability

[coldsalmon]

Like any vendor, Linode has included language in their contract which limits their liability. This is standard language, and it operates according to the following principal, which originated in landlord/tenant law: Linode has no control over the value or sensitivity of the property that you store on its site, so you must get insurance against the loss of this property yourself. No landlord/host wants to act as an insurance company, and they are in no position to do so. I can put anything I want in a rented space; it could be a $5,000,000.00 supercomputer, or a $30,000,000.00 Van Gogh. If there is a leak in my landlord's roof and a drop of water destroys the supercomputer, I must look to my own insurance policy, because I am the one why owns this property. If I want to store $15,000 in cash, I am not going to rent a storage unit and leave it lying all over the floor (the equivalent of what these Linode users did). I am going to put it in a BANK, which is a business specifically designed to store one type of thing, and which provides insurance against its loss.

Here's a link to the TOS: http://www.linode.com/tos.cfm

THIS POST DOES NOT CONSTITUTE LEGAL ADVICE OR CREATE AN ATTORNEY-CLIENT RELATIONSHIP. ANY LEGAL ADVICE MUST BE TAILORED TO YOUR INDIVIDUAL NEEDS BY AN ATTORNEY LICENSED IN YOUR JURISDICTION.

Re:Section 9: Limitation of Liability

[Anonymous Coward]

Do you lawyers ever feel absurd for the disclaimers other lawyers have forced you to have?

The damage done by the need?

Encrypted Wallets

[TheNinjaroach]

Hmm, storing valuable data on a 3rd party host? Better not forget to use the "Encrypt Wallet" option.

Net loss

[coldsalmon]

Estimated value of entire bitcoin market: $39.6 Million
Estimated value of lost productivity due to Bitcoin news stories and comment threads: $41.8 Million

Awful pun is...

[Anonymous Coward]

Now this is my kind of Lin-sanity!

Re:Don't you just LOVE an unregulated service

[alexgieg]

American Libertarians, you mean. They've co-opted the term and twisted it to mean something other than its original meaning.

This is because American Liberals did the same with this word. Everywhere else "liberal" is a person opposed to both religious and State intervention, as well as hell-bent on defending free markets. But since that's not the meaning the word ended with in US English, the anti-authoritarian free-market advocates were without a single word to describe themselves, and thus went for the most similar sounding one they managed to find that wasn't being actively used by someone else. The other attempted terms are either two-worded ("classic liberalism", "paleo-liberalism" and "anarcho-capitalism") or completely at-a-glance unintelligible ("minarchism"), hence much less useful.

By the way: what Americans call "liberalism" is better know around the world as "social democracy".

Re:Don't you just LOVE an unregulated service

[s73v3r]

To be fucked over, and have almost no recourse for it?

Forgive me if I'd rather wake up.

Re:Don't you just LOVE an unregulated service

[s73v3r]

Being fucked over, and not getting some form of restitution is your definition of "going smoothly"?

I really hope you always find yourself in a position of being able to absorb those losses, and never get fucked over on something that could potentially ruin you. And in such an event, I hope your "recourse" in taking your now, non-existent ability to conduct business elsewhere gives you comfort.

Avoid being a target

[psydeshow]

So what I've learned here today is that I should ask my cloud hosting company whether they allow or encourage the use of their servers to generate bitcoin. And if they do, I should drop them for another company that doesn't.

Isn't that about the size of it? I don't want my cloud hosts to be in the same place as somebody's financial instruments, because when the burglars come looking for money they are going to give me a security nightmare at the same time.

Or maybe I should just make sure my cloud hosting company has more layers of security in place than just a password in order to gain access to ring 0.

Some info for those who do not know what happened

[Anonymous Coward]

First. That $15k everyone is talking abut is what we call a "Hot Wallet". Most people who use bitcoin tend to use encrypted wallets or have multiple physical backups (I keep one in my safety deposit box at my bank). In this case, the site that lost this amount. www.bitcoin.cz or Slushpool, pays out people who hash bitcoins collectively. The 3000btc that were stolen was from the funsd used to distribute these payments. This is the equivalent of a cash drawer at a local retailer. They do not keep every cent in that drawer, but only what is needed for the day to day transactions of their business.

Now for the 40k btc from Bitcoinca. Unlike Slushpool, Bitcoinica is an Bitcoin trading exchange with some pretty impressive options relating to short sale, interest and some other investment tools. However, just like Slushpool, they need to keep an HotWallet in order to quickly execute withdraws to its customers. Bitcoinica had issues earlier this year when they used a second but larger exchange and bitcoin payment processor (Mt.gox) and the volume of Bitcoinica grew beyond the daily limits that Mt.Gox allows you to withdraw without providing documentation for AML compliance. This can be overcome by providing such documents, but the head of Bitconica is a 17 year old Chinnese national living in mainland China.

Other affected sites include TradeHill, GLBSE (the global bitcoin stock exchange) and a few other smaller sites. Where Linode is screwed is where for in the case of Slush and Bitcoinica, is that the passwords and admin accounts used where in no way visible, known or authorized by either site. In the Slushpool case, this was discussed prior to moving the server over in which the operator of Slushpool specifically stated that no such accounts were allowed and that a full disclosure of the security system was provided. In simple terms, They said this would not happen because there was no account on the server like the one that was compromised.

As far as where did the coins go? A 99% likely scam exchange known as www.coinexchanger.com made a public statement this morning that his exchange received a 20btc deposit and a 12k btc deposit. This was called out imediately not in regards to the theft, but due to the lack of volume the site has, wide price spread between bid and ask prices, and evidence that this individual in fact has failed to provide payment to people food services. When asked to show proof of these said deposits (bitcoins transparency can allow this with a simple web link) communication broke down and this piece of info came to light.

http://blockchain.info/address/0d9e2cd87cef275505cd1a831a8fdf86cd2ff571

A quick 24hour run down of all large volume bitcoin transactions shows this to be the only one large enough to match the ops claim, but also to be one of the few that can only really come from the theft. Even if the op of coinexchange is not involved, it is very possible that the theif is attempting to use this fly-by-night exchange instead of the standard ones in order to hide his theft. Also that this exchange belives it does not have to comply to AML laws as they withdraw to LibertyReserve.

Crazy monetary systems...

[ITShaman]

All this rigamarole makes me want to indulge my Luddite tendencies, dump all my credit cards and automatic withdrawls, deposits, bitcoins, and any other virtual currencies, convert it all to cash or better yet, gold coins, and move to the middle of nowhere. When I need something, I'll drive my beatup old clunker to the nearest town and buy everything I need with cold, hard, currency...

Re:Don't you just LOVE an unregulated service

[repapetilto]

You are so dumb. Really, what are you going on about? People can "fuck you over" with or without regulation and often there is no restitution, all you can do is mitigate the chances of this. This is such basic information it doesn't even have anything to do with libertarianism vs statism (or whatever), you are just acting like an idiot.

If you want to argue that government licensing, regulation, etc is the mitigation strategy that provides the best value for the money. Then ok.

Go for the Twain instead of Rand

[dbIII]

Look at the wikipedia (or any other) article on ponzi schemes and then compare it with the basic sales mechanism of bitcoin while ignoring the fluffy bits to reel in the technophillic as the window dressing that it is. You'll see what I mean. The early players may not have started the scam but they get almost as much out of the poor suckers that come in late as the initiators. You could add it's no more morally wrong than "claim salting" or selling at false weight, but those society needs to be protected from people that think that is OK and put it into practice.
Randian? I'm not from the USA where that trash only became popular because it was home grown and recent (then stuck like bubblegum to a shoe so current generations are stuck with it), but do mean the views of "every man for himself", "never give a sucker an even break". Or do you mean the truly ridiculous crap from the "Atlas Shrugged" title of thinking that a valid third choice of pick up or put down is to do the job so fucking badly that people will wish you've never picked it up in the first place? Or is it something more realistic that was borrowed from elsewhere but has Rand's label on it in the USA?

Re:Some info for those who do not know what happen

[repapetilto]

Why would you believe anything coin exchanger says?

Really?

[luk3Z]

How you can lose something what doesn't exist ?