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Youbit Shuts Down Cryptocurrency Exchange After Second Hack, Files For Bankruptcy (bbc.com)
phalse phace writes: After experiencing another hack, South Korean crypto-currency exchange Youbit has closed their doors and is filing for bankruptcy. BBC reports: "Youbit, which lets people buy and sell bitcoins and other virtual currencies, has filed for bankruptcy after losing 17% of its assets in the cyber-attack. It did not disclose how much the assets were worth at the time of the attack. In April, Youbit, formerly called Yapizon, lost 4,000 bitcoins now worth $73 million to cyberthieves. South Korea's Internet and Security Agency (Kisa) which investigates net crime, said it had started an enquiry into how the thieves gained access to the exchange's core systems. Kisa blamed the earlier attack on Youbit on cyber-spies working for North Korea. Separate, more recent, attacks on the Bithumb and Coinis exchanges, have also been blamed on the regime. No information has been released about who might have been behind the latest Youbit attack. In a statement, Youbit said that customers would get back about 75% of the value of the crypto-currency they have lodged with the exchange."
tl;dr, Bitcoin is only useful for money laundering? Oh and fleecing rubes.
From the onset, I wanted to like the idea of a non-governmental currency that had a cash-like anonymity, even though a lot of informed folks likened it to a Ponzi scheme.
Beginning with the Mt. Gox debacle though, this now rather routine loss of millions by an exchange is where I lost faith in the Bitcoin as an investment option and an alternative to government issued fiat currency.
This is why we can't have nice things
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
I have now seen multiple stories of crypto-currencies getting stolen or exchanges hacked. Then I read about how blockchain is supposed to be the end all, be all, of transaction security. Aren't these things connected at some level?
Yes, it is telling you this kind of cryptocurrency doesn't really work.
The most basic function of a "currency" is to settle payments, but transaction rate actually achievable (at least with the existing the Bitcoin) is so damn low that you simply cannot complete a transaction in reasonable amount of time, such as less than a minute.
So, to actually do transactions effectively, people have to store their Bitcoins in exchanges, so any transaction within the exchange will simply result in a change of record in the exchange's accounting system, completely bypassing the use of blockchain transaction.
Now, let that sink in for a moment.
A supposed "currency" cannot support the most basic transaction of its users, to the extend people have to setup exchanges so they can transact that "currency" effectively. Is that not a big enough flashing sign saying Bitcoin simply doesn't work as a currency at all?
And the people betting on Bitcoin continuing to rise? Just think about it, as the price of a Bitcoin rise to $50K, $100K, $1M, etc. Won't it eventually make more financial sense for every exchange to simply sell their coins and disappear? If they didn't get hacked first.
Think about, if you were operating such an exchange, wouldn't YOU start secretly selling the Bitcoins you kept for your users, and just wait for the perfect moment to disappear with the money?
Or if you are lucky, you might get hacked (so you blame all loses to the hacker) and declare bankruptcy (while hiding the money), or Bitcoin might just crash tomorrow so you can buy back all the coins with a tiny fraction of the money you took, then close off the exchange fair and square.
Think through this, and then realize how much of a fool you need to be to bet on making money buying Bitcoins.
Oliver.