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Bitcoin Ponzi Scheme Operator Pleads Guilty To $150M Fraud
JustAnotherOldGuy writes: Bitcoin Savings & Trust founder Trendon Shavers pleaded guilty to fraud over his company's Ponzi scheme, whose victims believed they would earn one percent interest every three days — an annual rate of 3,641 percent. Shavers used new depositors' money to pay the existing depositors, and skimmed enough cream to pay for a car, a $1000 Vegas steak dinner, and plenty of casino gambling. He cost his depositors about $150M and was holding onto $40.7M in Bitcoin when he was arrested. At his peak, he controlled about 7 percent of all Bitcoins in circulation. He netted $164,758 from the scheme. Under a plea deal, Shavers has agreed not to appeal any sentence at or below 41 months in prison. Sentencing before U.S. District Judge Lewis Kaplan is scheduled for Feb. 3. Shavers, who went by "pirateat40" online, was arrested in November, two months after a federal judge in Texas ordered him to pay $40.7 million in a related U.S. Securities and Exchange Commission civil lawsuit.
But I repeat myself.
It's a secure doubly-linked list. As in, once you add your node to the list, it's fixed - it cannot be edited without breaking the blockchain or forcing a majority to agree to the edit (this is where the bitcoin 51% issue comes into play).
Part of the input into the miners is the current hash of the blockchain (thanks to the way hashes work, you can incrementally hash so no one has to hash the entire blockchain every time), and the miners test many nonces to come up with a hash that meets certain requirements (e.g., the hash starts with a bunch of zeros). Once that nonce is found, it ends the current block in the chain and a new one is started, beginning with the hash of the blockchain with the new block. Thus you're hashing and locking in all the previous transactions and other things in the block - you cannot change it without breaking the hash, or having to recomputed new hashes and nonces. So older transactions get more secure as time passes.
That's the magic of blockchain - you cannot edit it without spending huge effort in not only recomputing all the transactions and hashes afterwards, but also convincing a majority of people that your modified blockchain is the correct version.