Bitcoin Thefts Surge, DDoS Hackers Take Millions

CowboyRobot writes "In November, Denmark-based Bitcoin Internet Payment System suffered a DDoS attack. Unfortunately for users of the company's free online wallets for storing bitcoins, the DDoS attack was merely a smokescreen for a digital heist that quickly drained numerous wallets, netting the attackers a reported 1,295 bitcoins — worth nearly $1 million — and leaving wallet users with little chance that they'd ever see their money again. Given the potential spoils from a successful online heist, related attacks are becoming more common. But not all bitcoin heists have been executed via hack attacks or malware. For example, a China-based bitcoin exchange called GBL launched in May. Almost 1,000 people used the service to deposit bitcoins worth about $4.1 million. But the exchange was revealed to be an elaborate scam after whoever launched the site shut it down on October 26 and absconded with the funds. The warnings are all the same: 'Don't trust any online wallet', 'Find alternative storage solutions as soon as possible', and 'You don't have to keep your Bitcoins online with someone else. You can store your Bitcoins yourself, encrypted and offline.'"

Comments

A limited number of Bitcoins

[fustakrakich]

Pretty soon they'll all be stolen, kinda like land

Re:A limited number of Bitcoins

[Anonymous Coward]

a reported 1,295 bitcoins — worth nearly $1 million

No they aren't really worth that much. Sure, you can extract $1 million from the market now, but if everyone does that the prices will fall to zero, the liquidity is pathetic compared to the $15 billion capitalization. And the only reason people don't run to crash the market is because they hope they will be able to earn even more in the future - a.k.a "The Greater Fool Game".

Re:A limited number of Bitcoins

[PopeRatzo]

They could easily sell all 1295 bitcoins and pocket $1 million due to buyers betting on the greater fool game.

It depends. Will someone have the $1mil to buy them all? If they start selling in smaller lots, the value will go down with each transaction.

The only difference between bitcoins and tulips is that at least you could smell the tulips.

Re:A limited number of Bitcoins

[schnell]

If you can sell them for $1 million, then by definition they are worth $1 million.

It seems pretty simple on the surface but it's actually not. The point that the GP post was trying to make is that in a small or illiquid market, large sales volumes can actually depress prices by introducing too much inventory to sell vs. people willing to buy. This is a somewhat different example, but back in the day when Bill Gates still had a meaningful percentage of all Microsoft's shares, he would be said in the media to be worth "[his share total] x [current MSFT quote]." But people who knew the market actually understood that if he ever decided to liquidate his shares all at once they would be worth far less because he would actually flood the market (leaving aside the fact that if people figured out that Bill Gates was selling all his MSFT shares, they would flee the stock in droves assuming he knew something they didn't.)

So long story short - if I have a trivial number of [shares, rare items, whatever] compared to the market size, then, yes, they are worth [quantity] x [going price]. But if I have a quantity that is significant to the size of the ability to make markets and I try to sell it all at once, it will invariably be worth far less.

Re:Something I've been ruminating about all day

[rasmusbr]

Somebody more familiar with bitcoin can answer this for me, undoubtedly, but based on my limited understanding, if the wallet file is lost or destroyed, the coins within it are effectively gone, correct? If so, then at some point there's an expected loss over time (fraction of the population who don't back up their wallet, expected size of wallet, drive failure rate), and at some point that's going to intersect with the size at which the pool expands, so that the total supply of bitcoins over time actually decreases. Theoretically, we'd hit some point where bitcoins are just being destroyed through loss. The situation will be exacerbated with thefts and personal storage.

Yep, that's correct. Bitcoin is designed to be ridiculously scarce in the long run.