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Bitcoin Exchange BitFloor Says It Will Replace Stolen Coins
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.
"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.
They'll have to generate/acquire new ones at their own expense, that's for sure.
"When information is power, privacy is freedom" - Jah-Wren Ryel
Gives me the willies...
Of course it's not much different than paper currency I suppose, it's all make-believe anyway.
They can't dilute the currency. They only way they can replace the coins is to earn them via business profits.
Nothing of value was gained.
Out of whose pocket come these bitcoins? Or are they just changing user's balance thus diluting the currency?
that would be extremely interesting to know, since apparently the theft is way beyond his own means of paying capability. also it's to note that he initially sat on peoples real money too.
the actual article says though that he _intends_ to pay back.
world was created 5 seconds before this post as it is.
They are going to resume operation and earn money via trading fees. Assuming they get enough volume the profits will eventually be able to replay the depositors.
In other words they will try to earn their way out of insolvency.
I don't know why anyone would trust exchanges or online wallets. At this time they aren't really regulated, and surely don't have insurance. It's too much of a risk. Instead, keep all your bitcoins in a wallet (an encypted one of course) on your own computer. And make sure you have a backup, 'cause backups are important.
If you are really paranoid, you have an offline wallet that is only on a USB stick or similar, and keep just a few coins in your 'online' (on your computer) wallet. But never keep any more than what you need to pay off in a real online account. Sort of like Paypal, you only keep the minimum in there (or not use Paypal at all, 'cause they are slimey bastards).
HELP MY ACCOUNT HAS BEEN HACKED BY AN ILLIBERAL ART STUDENT SET TO DESTROY THE INTERWEBZ!
It's not like *real* money that you can just print out of thin air.
You've got to come up with that some how, and at $10 (so I don't need a calculator) that's $240,000 you've got to come up with. That's a lot of mining or fees at $0.10 each. That's hard to make up with low volume of trades.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
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?
They're only insolvent at the point that debtors can legally demand the money and they're incapable of paying.
-WolfWithoutAClause
"Gravity is only a theory, not a fact!"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?
they would be insolvent if someone asked for the money.
oh, and someone did ask and he didn't pay. they(him) are insolvent because by their own words they don't have the money to pay back.
last time some numbers were thrown about the normal profits for bitfloor would take many years to cover up the losses.
this article didn't cover if he paid back the real money people had sitting in the system either.. that was/is a big issue. when it hit he basically just froze everything.
world was created 5 seconds before this post as it is.
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.
No one can make any more bitcoins than the pre-defined scheduled amount, and no one can guarantee that they're able to make them for themselves.. It takes a lot of (computer) work, and a bit of luck.. You basically buy lottery tickets to winning newly created money by agreeing to do work to process transactions.. That's not exactly right, but it'll get you a lot closer to understanding the system than where you're clearly at..
Only if he has an agreement to pay them money. It's a bitcoin thing, that people would hand over their coins with no agreement for them to be returned doesn't seem that unlikely.
I can ask you for $50 billion, that doesn't make you insolvent. I could ask a bank to return the $5000 I put in a term deposit, if the term hasn't expired they can not pay me back without being insolvent.
As I said it all depends on the contracts in place.
They left a large amount of bitcoins in an unencrypted wallet (to my understanding). What makes you think they'd have that level of sophistication in their contract?