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Alleged Bitcoin Scam Leaves Millions Missing
First time accepted submitter OutOnARock writes Yahoo Finance is reporting on the latest Bitcoin scam, this time from Hong Kong. "Investors in a Hong Kong-based Bitcoin trading company fear they have fallen victim to a scam after it closed down, a lawmaker said Monday, adding losses could total HK$3 billion ($387 million). Leung Yiu-chung said his office recently received reports from dozens of investors in Hong Kong who paid a total of HK$40 million ($5.16 million) into the scheme run online by MyCoin, but the total loss may be vastly more. 'The number of cases is increasing. These two days I received calls about more than 30 cases. We estimate more than 3,000 people and HK$3 billion are involved,' he told AFP."
>Bitcoin is like regular bank accounts where most of the moeny is in virtual ones and zeros.
No. Nope. Not. Bitcoin is like a banking system without a bank, where your friends and relatives keep slips of paper saying (anonymously) who is owed what on a dollar bill by dollar bill basis. When you want to use your money, it becomes hard to get anyone to actually give you cash for it. People are trying to find ways to change a few of those slips of paper without you knowing.
The whole thing is a nightmare. These scams will continue until people get burned enough to walk away.
Wallets get cracked fairly routinely; but (to the best of my knowledge) only by virtue of being stored on systems that are compromised by some other means. The bitcoin mechanism alone is pretty solid; but that means very little if you can get access to the wallet by attacking the user's system at some other level and then just reading them off the filesystem.
For whatever reason, whoever did the core work on bitcoins appears to have been pretty good; but the quality and competence of most of the surrounding activity and infrastructure are somewhere between 'crap' and 'are you sure that this isn't a parody?'
If you transfer bitcoins to some other organization, then THEY have the bitcoins, not you. If you just want to give money to someone else, there are easier ways to do that than by using bitcoin :-).
it seems to me that if you want to use bitcoins, then you should keep the bitcoins in YOUR OWN wallet and under your OWN control until you want to spend them. Don't hand your bitcoins to a so-called "bank", a "trading company", or anyone else unless you purpose is to GIVE THEM the money. I don't know how successful bitcoins will be in the long term, but if they succeed it will be because people seriously protect the bitcoins.
- David A. Wheeler (see my Secure Programming HOWTO)
The tricky bit is that being deflationary and being a useful medium of exchange are somewhat at odds with one another.
.com-made-good executive's living room.
To be a useful exchange medium, it has to be fairly easy(and not too costly) to sell things in exchange for it and buy things in exchange for it, ideally with enough liquidity that you'll never experience inconvenience and low enough short and medium term value fluctuation that just carrying some around in case you want to buy something does not become a substantial risk.
If however, most of the interested parties are looking to squirrel it away under their mattresses and wait for deflation to make them rich, you'll have an easy enough time selling any bitcoins you already have; but the ease of obtaining more, and the price you'll pay to do so, will be heavily dominated by the speculative waiting for the stuff to become more valuable. If it becomes too prevalent, that sort of hoarding activity will simultaneously reduce the rate of deflation(since wallets held by amateurs, or actively used in risky connected environments, are the ones that get lost much more often than the ones being held in cold storage by specialists) and help ensure that while bitcoins may become rarer, they are less likely to become more valuable in the process: the world is full of stuff that is getting rarer over time(basically anything 'antique' or 'collectable'). Most of it is virtually worthless, outside of any scrap value or the relatively low buying power of enthusiasts of obscure PEZ dispensers or whatever. Without continued activity using bitcoins as an exchange medium, there is nothing preventing the world's entire supply from dwindling to the status of an obscure techie relic of the early 21st century, maybe worth a few hundred thousand(if the entire set is available, in good condition) to decorate some