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Bitcoin Exchange BitFloor Says It Will Replace Stolen Coins

Posted by timothy on from the fdic-never-replaces-bitcoins dept.

angry tapir writes "Bitcoin exchanges generally don't seem to recover that easily after security breaches. However, BitFloor, which was hacked and had 24,000 Bitcoins stolen in early September, is coming back online, refunding account holders whose coins were stolen and implementing new security measures, including cold storage for private keys." The key word is "intends" — but I hope it happens as promised.

4 of 117 comments (clear)

  1. pump and dump by Anonymous Coward · · Score: 3, Interesting

    "Yes, we plan on buying a large number of Buttcoins to replace the ones that 'external hackers' stole from our 'customers'."

    [price goes up on exchanges]

    ['stolen' coins all sold for cash out of an anonymous account that's surely not controlled buy the guy running BitFloor]

    [BitFloor never heard from again]

    Taking money from the Buttcoin crowd must be the easiest thing in the world. It's like if you took normal currency speculators and then gave them all severe head injuries.

    1. Re:pump and dump by scorp1us · · Score: 4, Interesting

      Anonymity was never a feature of Bitcoin, though first reports made claims to that. It is regarded currently and properly as pseudo-anonymous. Your bitcoin wallet maintains a ledger of every transaction ever made. So you can see money moving between people, unlike a stock exchange or bank. Scratch that, it's not a matter of can, it is a matter of having to see every transaction.

      Where they "anonymity" lies us unlike a bank, you can create an account (address) out of thin air. You can control any number of accounts in your wallet, and move money between them. So no one can tell what addresses are in your wallet and who (person) controls however many bitcoins. Two people having 10 btc might divide it up differently - 1 person has all 10btc in one address, the other has 10 addresses all with one. You don't know who controls what. The only way to find out is to get enough wallets with enough addresses in them that you can start identifying people for past transactions, but you can always invent a new address so you can't ever "watch" anyone. It is just like - until recently - moving money between swiss bank accounts.

      --
      Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
  2. Re:Refund how? by nedlohs · · Score: 4, Interesting

    If they didn't contract to refund in such cases then they aren't insolvent since there is no obligation to repay. If they did then if the terms for repaying are long enough in the contract they probably aren't insolvent either (you are allowed to carry debt without that automatically making you insolvent). If they do have such a contract but the penalties for breaking it are small enough or allowed to be paid over a long enough term then the same thing applies as above - you are allowed to have debt.

    So what information leads you to conclude they are insolvent?

  3. Re:Man by Anonymous Coward · · Score: 2, Interesting

    RTFA and you'll see that Roman took full responsibility for a huge security mistake that should never have occurred. How many banking executives at Goldman Sachs, Lehman Brothers, Chase, BofA, CitiBank or Wells Fargo have done anything like that? There are many ways to properly secure a bitcoin exchange, but even the biggest (Mt. Gox) was hacked last year, and the community learned a great deal from that experience. Gox did NOT go out of business and in fact, the exchange rate of BTC has skyrocketed from $2.30 the day of the worst crash to $12.46 today. Clearly, there are plenty of people who still have confidence in the market and the Bitcoin project. Poorly managed exchanges like Bitcoinica failed to implement proper security measures and crashed miserably. I'll give Roman credit for addressing the problem directly at the London Bitcoin conference and promising to return all deposits to his customers, but I'm not sure I would use his services until he fulfills that promise. He must have enough patient investors to absorb the loss (and to be fair, $240,000 isn't all that much money in the business world), so I won't count him out just yet.

    Perhaps some exchanges DO need deposit insurance, but that kind of service won't come from the financial industry. Bitcoin is a rebellion AGAINST that industry; the project needs to mature a bit more so that such a mechanism can be developed, just like new merchant tools are coming out every month or so (e.g., http://bitpay.com). I'm an early adopter because my faith in the current financial system has been completely destroyed, and I'm excited to see geeks taking ownership of the problem and developing an amazing new cryptographically secure structure to address the issue. Bitcoin will never be a clone of the existing currency system because it is an evolutionary step beyond the corrupt and badly broken system that has failed us.