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Chaos and Hackers Stalk Investors on Cryptocurrency Exchanges (reuters.com)
From a report: Dan Wasyluk discovered the hard way that trading cryptocurrencies such as bitcoin happens in an online Wild West where sheriffs are largely absent. Wasyluk and his colleagues raised bitcoins for a new tech venture and lodged them in escrow at a company running a cryptocurrency exchange called Moolah. Just months later the exchange collapsed; the man behind it is now awaiting trial in Britain on fraud and money-laundering charges. He has pleaded not guilty. Wasyluk's project lost 750 bitcoins, currently worth about $3 million, and he believes he stands little chance of recovering any money. [...] Cryptocurrencies were supposed to offer a secure, digital way to conduct financial transactions, but they have been dogged by doubts. Concerns have largely focused on their astronomical gains in value and the likelihood of painful price crashes. Equally perilous, though, are the exchanges where virtual currencies are bought, sold and stored. These exchanges, which match buyers and sellers and sometimes hold traders' funds, have become magnets for fraud and mires of technological dysfunction, a Reuters examination shows, posing an underappreciated risk to anyone who trades digital coins. Huge sums are at stake.
"and lodged them in escrow at a company running a cryptocurrency exchange called Moolah"
So they stuck them in a unregulated bank from some guy no one has heard of and the bank was robbed. Blame the currency! If they would have kept them in their own wallet, not some guys basement, they would have been fine.
>Can't you do everything from your digital wallet on your computer, except convert to real cash ?
In theory. However, any anonymous trading between the crypto and something else (even another crypto) will require a trusted middleman. Of course, the middlemen in the crypto space are pretty much never trustworthy.
> Sorry, I never got on the cryptocurrency bandwagon.
Buy scratch-and-win tickets at your corner store or gas bar. On average, you'll do better and still get the same rush from gambling in hopes of getting filthy rich for little effort. All the rest is overly complicated window dressing.
I've never heard of Moolah, which is the first red flag in entrusting a $3million pile of digital cash to them.
The whole point of BTC is to cut out middlemen. Like cash, you hand a wad over to someone and they can do whatever they want with it. Why would you give your wad of cash to someone? What the fuck do you think is going to happen if that guy runs off with your cash?
If you want to hand over a wad of digital cash to someone, use a bank like a normal person. Put your BTC in cold storage in a safety deposit box. This is asset security 101. The fact that these people managing millions of $ in assets don't know the first thing about securing cash is both laughable and sad.
I hate all this constant stream of FUD in regard to crypto currencies. Fiat money can be stolen as well and it happens all the time, yet /. rarely if ever features such articles.
Every passing week brings at least five news pieces featuring five new prominent economists/advisors/CFO/etc. who all declare that Bitcoin is either a bubble or a Ponzi scheme.
We've all heard that Bitcoin is a fraud at least a thousand times already. Now leave it alone please. People who trade bitcoins or invest in bitcoins perfectly understand their risks. It's true that bitcoin's worth is basically zero unless the market agrees that it has a different price. The market has decided that it costs ~$4200 at the moment. It's true that Bitcoin might become worthless tomorrow. If you think otherwise you need to get a shot of common sense.
Can't you do everything from your digital wallet on your computer, except convert to real cash ?
Pretty much, if you run a full node on your own system the only way to lose your money would be if your system got compromised.
Which is why you don't run the bitcoin wallet software on your regular computer. You take an old obsolete computer, install Linux on it, install the wallet software on it, and use that machine only for:
(1) Linux software updates.
(2) Bitcoin software updates.
(3) Running the bitcoin software.
(4) Bitcoin transfers.
(5) Copying the bitcoin wallet to USB sticks for backups.