How Silk Road Bounced Back From Its Multimillion-Dollar Hack

Daniel_Stuckey writes: "Silk Road, the online marketplace notable for selling drugs and attempting to operate over Tor, was shut down last October. Its successor, Silk Road 2.0 survived for a few months before suffering a security breach. In total, an estimated $2.7 million worth of Bitcoin belonging to users and staff of the site was stolen. Some in the Silk Road community suspected that the hack might have involved staff members of the site itself, echoing scams on other sites. Project Black Flag closed down after its owner scampered with all of their customers' Bitcoin, and after that users of Sheep Marketplace had their funds stolen, in an incident that has never been conclusively proven as an inside job or otherwise. Many site owners would probably have given up at this point, and perhaps attempted to join another site, or start up a new one under a different alias. Why would you bother to pay back millions of dollars when you could just disappear into the digital ether? But Silk Road appears to be trying to rebuild, and to repay users' lost Bitcoins."

Comments

better than FDIC

[deodiaus2]

The FDIC will only pay back the first $250K and can take up to 10 years.

Re:better than FDIC

[AlphaWolf_HK]

Having money in US banks is risky anyways. If you can't account for a large sum of money, government organizations are known for just outright taking the whole damn thing. Not even taxing, it, just fucking outright taking ALL of it away. I even know people who had the police confiscate cash (in one case, $5,000) and just flat out keep it if they can't provide receipts showing where it came from. I honestly don't blame the super rich for hiding money in offshore accounts; you never know what the government will suddenly and irrevocably decide is "theirs," and public opinion will never be on your side either if you ever made an issue of it (popular opinion seems to be that the wealthy are only wealthy if they steal or inherit, in spite of some 70% of the forbes 400 not having wealthy parents.)

Re:better than FDIC

[Unkl_Shvelven]

The ten years part is a myth, see Snopes.

From the relevant primary source (Spring 2006 FDIC Consumer News newsletter):

If a bank fails, the FDIC could take up to 99 years to pay depositors for their insured accounts.

This is a completely false notion that many bank customers have told us they heard from someone attempting to sell them another kind of financial product.

The truth is that federal law requires the FDIC to pay the insured deposits "as soon as possible" after an insured bank fails.

Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.

Re:better than FDIC

[Gryle]

Paraphrasing an observation I once heard, the US has a funny way of looking at wealth. If I'm wealthy I made my money fair and square through hard-work, determination, and maybe a pinch of luck, and I deserve to keep my hard-won earnings.. If you're wealthy you're a lying, thieving bastard who exploited someone else and don't really deserve your earnings.

Why they're rebuilding.

[ddt]

Their customer base includes hit men?

Re:Why they're rebuilding.

[erichill]

Indeed, reading this one wonders how long before something bad happens to those who at least apparently have run off with the money. Part of the usual overhead for playing in a black market, after all.

A fool and their money...

[iroll]

These losses illustrate perfectly the stupidity of giving some pseudoanonymous sociopath on the internet your money to "hold" for you. WHY? WHY? WHY?

Nobody would ever think, "Hey! I've got $500 in my pocket, better give it to the first creep that I find in an alley!"

Using a shady, tor-based business to broker a transaction is risky, but it only risks the single transaction (or the consequences for making transactions in contraband). Putting your funds on deposit with a shady, tor-based business (or a Japanese trading card exchange) is dumb in ways that must boggle even the Princes of Nigeria.

Re:A fool and their money...

[Anonymous Coward]

These losses illustrate perfectly the stupidity of giving some pseudoanonymous sociopath on the internet your money to "hold" for you. WHY? WHY? WHY?

There was nothing else before this. Silk Road 1.0 was so succesful, it heralded an era that no one ever saw before and only those that were around during it's time can understand what a free society truely looks like (except for those that have been to Burning Man). Silk Road 2.0 is an attempt to provide that same experience, except it's not. Nothing like the original days when DPR2 was in charge. With MultiSig, decentralized escrow coming into play, we are ready to enter that new era. Beyond the black market of Silk Road, decentralized exchanges and cryptocoin as an IPO vehicle, we shall either experience a shift in wealth ownership to the more libertian-minded (c/o 2012 and beyond) or further explotation by the 1%.

TL;DR: you may have seen dogecoins on reddit, as well as bitcoin, karmacoin and potcoins. Don't discount the worth of these tools, we are at the crossroads of a change of power. Hated the way the world has progressed in the previous 50 years? As proven with SilkRoad, cryptocurrency has the clout to change that.

Re:A fool and their money...

[iroll]

TL;DR: you didn't read what I wrote, and responded to something you made up.

With a broker or an exchange, you only have risk associated with the transaction. You put money in, bitcoins come out. You put bitcoins in, money comes out. Or, alternatively, you put bitcoins in, special brownies come out. The risk is all associated with that transaction.

With a deposit, you're basically putting money in and crossing your fingers.

In the above-ground market, there are lots of rules to try and mitigate the risk, which is why the vast majority of us will go our whole lives without losing a deposit in a normal financial institution. When you put your money on deposit with DogeBank, you have none of that mitigation.