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Security Breach Forces Bitcoin Bank Inputs.io To Halt Operations
New submitter BitVulture writes "The hardcore Bitcoin community is abuzz with news of the closure of Inputs.io, a supposedly secure online Bitcoin wallet, after an attack resulted in the loss of 4100 Bitcoins. A PGP-signed message at the home page of the now mostly non-operational site briefly explains the situation: 'Two hacks totalling about 4100 BTC have left Inputs.io unable to pay all user balances. The attacker compromised the hosting account through compromising email accounts (some very old, and without phone numbers attached, so it was easy to reset). The attacker was able to bypass 2FA due to a flaw on the server host side.'
There's no word yet whether Inputs.io will eventually resume operations or whether the security breach will force the Bitcoin bank out of business."
Pick any two.
We seem to be fast approaching the point where computer-based theft will be the way you "really rob a bank".
It's not like today's banks have all got huge safes full of bags with dollar signs on them -- not in the U.S., anyway. Money is becoming increasingly virtual. A dollar bill doesn't actually represent value; it represents debt, an IOU. A bank doesn't need to keep one physical dollar bill on hand for every dollar in its bank accounts; it only needs a fraction, because you don't expect 100% of your customers to come in on the same day to cash out. And thanks to the Federal Reserve system, there aren't even physical assets (like gold bars) of equal value to all the Federal Reserve notes in circulation. It's a bizarre system that only works as long as debt keeps circulating (buying and selling) and accumulating (loans with interest).
Koans and fables for the software engineer
This is the thing about BitCoin I never understood. The proponents of BitCoin claim that it was untraceable, but all transactions are traceable by looking at who spent the coin and who owns it now, at least by their public key. This information is included in the data blob that IS the coin and lots of people have to observe the transaction before it becomes valid. You may not know who's key is who's, but you certainly can trace ownership of the BitCoin.
So, you may not know who owns a single coin, but though simple observation of transactions and a bit of foot work you can easily piece together who's who and who's spending their coins on what. It becomes a data mining operation with a bit of detective work to trace where folks are converting traditional currency into and out of BitCoin. Which is totally different than trading say dollars in currency. You *might* be able to trace currency transactions though things like DNA traces left on the bills or serial numbers (if you know them), but if somebody passes a briefcase of money around, there will be no way to trace each transaction that might have taken place.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
Now that the whole plan is crashing down in flames
What? Did you read the article, or even its summary? A site named inputs.io which used bitcoins was hacked. Bitcoin itself wasn't hacked. Your post is like complaining the US dollar is going up in flames because a bank robbery happened somewhere.