Bitcoin Exchange Accidentally Allowed Customers To Buy Coins For $0 (cnbc.com)

AmiMoJo writes: "A system glitch at cryptocurrency exchange site Zaif enabled users to obtain digital money for free, with one apparently "purchasing" Bitcoin valued at $20,000,000,000,000 and then attempting to cash in on it..." according to the Japanese newspaper Asahi Shimbun. "The glitch, which lasted for 18 minutes from 5:40 p.m. to 5:58 p.m. on Feb. 16, affected Zaif's price calculation system, enabling customers to buy cryptocurrencies for nothing."

CoinDesk adds that "At least one customer attempted to resell their bitcoin, but the large amount of the cryptocurrency offered soon drew attention even outside the exchange. The firm later cancelled the transactions and corrected the users' balances. However, a source suggests that the correction is still being agreed with one of the seven users who attempted to transfer the free bitcoin away from the Zaif platform."

Comments

Cancelled the transaction?

[fafalone]

The article didn't make this any clearer either, I thought one of the basic principles of bitcoin was that transactions can't be reversed? Did they not immediately transfer to a wallet they controlled? Or did their cash balance go negative and the company is going to ask for/sue for the balance? Anyone know more about this?

Re:Cancelled the transaction?

[thegarbz]

The article didn't make this any clearer either, I thought one of the basic principles of bitcoin was that transactions can't be reversed?

On the blockchain yes. But transactions take a long time to actually get verified in the blockchain which is why on these exchanges when you make a transaction to another customer in the exchange they may not even update it in the blockchain on the same day. It is all just written in Zaif's own ledgers, which they control much like any other bank doing internal accounting.

Hence also they are having problems with a customer who tried to move the bitcoin out of wallets controlled by Zaif.

Re:Cancelled the transaction?

[tomxor]

I thought one of the basic principles of bitcoin was that transactions can't be reversed?

I doubt it really ever took place in the actual bitcoin block chain since the article states they bought bitcoin worth 20 trillion... many times more than the current market cap of bitcoin, making it impossible. It's would be confined to their order system since it was reversible.

Re:Cancelled the transaction?

[TheRealMindChild]

That isn't how it works at all. Your transfers, buys and sells are all "virtual"... internal until you actually withdraw.

Re:Cancelled the transaction?

[jdavidb]

It wasn't a Bitcoin transaction. It's basically a Bitcoin bank/exchange. A bunch of people deposit, they have an account with the exchange that has a certain balance, they can exchange with other users on the exchange and then withdraw.

Re:Cancelled the transaction?

[The New Guy 2.0]

Any transaction can be reversed by an equal and opposite transaction in the future.

Remember the day a bunch of bad prints caused the NYSE/NASDAQ market to go near zero. All of that was reversed and the market moved on...

Re:Cancelled the transaction?

[The New Guy 2.0]

A bank that collects deposits to make loans is an "interest bank"... a bank that relies on transaction and maintenance fees is called a "fee bank".

BitCoin exchanges are acting like fee banks currently.

Re:Cancelled the transaction?

[The New Guy 2.0]

The bug allowed the hacker to buy bitcoins at zero, so he typed in the number he wanted and was suddenly showing his number in the account without any actual trade happening... the exchange then killed all nonsense trades... and nobody was willing to take his bitcoins elsewhere. It's a market malfunction that CNBC/FBN/Bloomberg can have fun with, claiming that bitcoin still isn't safe yet.

Re:Cancelled the transaction?

[MachineShedFred]

This is exactly why stock trades (usually) take 72 hours to clear and settle, so that if there is electronic fuckery going on (unless it's sanctioned electronic fuckery like HFT), it can be rolled back and everyone gets a do-over.

Re:Cancelled the transaction?

[torkus]

You realize virtually no 'normal' people trade on the actual exchange, right? E-trade, etc. are all dark pools and they settle the majority of their trades internally so they never hit the actual open market.

HFT can be rolled back as well.

As to GP - yes, you can roll back a transaction with an opposite one following it. However, whether or not you can do that depends on having access to the wallet private key you need to send from. If someone bought BTC for $0.00 and sent that to a wallet the exchange did not have the private key for, they would have no technical means to force the reversal. You can't own negative BTC so you couldn't 'overdraft' the exchange side wallet even.

This is part of the reason coinbase enforce a lengthy settlement for buying crypto.

Re: Cancelled the transaction?

[slashrio]

I was only partly able to correct the errors introduced by your keyboard.

The bitcoin aint there

[Anonymous Coward]

There isn't even $20 trillion dollars worth of bitcoin in existence. You obviously wont be able to withdraw that to a real wallet. The bitcoin figure displayed on the website couldn't be backed by $20 trillion in real bitcoins.
The exchange seems to have been screwed over by one customer withdrawing some of the bitcoin of the exchange, obviously not $20 trillion. But it seems some amount of real bitcoin was withdrawn.

Re: The bitcoin aint there

[Anonymous Coward]

Tell me, what is a "real" bitcoin? It's all imaginary.

Re: The bitcoin aint there

[DontBeAMoran]

It's as real as the "money" I have in my bank account, i.e. numbers in a computer.

Except my bank could drop that to zero and I wouldn't have any proof of what they owe me, unlike Bitcoin and its blockchain.

Re: The bitcoin aint there

[The New Guy 2.0]

my bank account, i.e. numbers in a computer

Banks have to keep actual bills in a vault, and anything that moves bank-to-bank sends a truck rolling at 3am the next business day. Only Bank of America has problems finding everyone's money in the vaults.

Re: The bitcoin aint there

[burtosis]

Nope, that way it's easier to pull money straight from the aether. It's a simple extension of quantum uncertainty - if you look you could collapse the monetary function such that there is no money at all in there and go bankrupt. Whereas dollars that are snug and comfy and love each other very much in the dark can do something very special - and behold you have created more money!

Re: The bitcoin aint there

[torkus]

my bank account, i.e. numbers in a computer

Banks have to keep actual bills in a vault, and anything that moves bank-to-bank sends a truck rolling at 3am the next business day. Only Bank of America has problems finding everyone's money in the vaults.

You're reading some out of date encyclopedias. Banks keep digital ledgers these days and most certainly do not roll trucks at 3AM to cover transactions (how exactly would international money transfers work for that?)

Just like when people do trades in oil, bullion, etc. No one actually ships you a barrel (or a million) of oil. You 'own' whatever amount that happily sits (or will sit for futures) in the same storage facility it did when the last 5 people 'owned' it ... all mixed together with what other people own.

Beyond that, fractional reserve banking is the norm AND banks can back deposit sheets with assets, not just currency IIRC. It's part of the scam known as 'banking' and your explanation is very out of date.

Re: The bitcoin aint there

[jeremyp]

How adorably naive.

No, banks do not have to have actual bills in a vault. At the moment there are about $1.61 trillion dollars in circulation - that's all the notes and coins. It's only a fraction of the total US money supply.

The bigger question is

[93 Escort Wagon]

Sure, you got your money for nothin'... but did the exchange also let you get your chicks for free?

Re:The bigger question is

[fahrbot-bot]

Sure, you got your money for nothin'... but did the exchange also let you get your chicks for free?

Well... perhaps they got their "checks" for free.

stupidity and greed

[gravewax]

you have an opportunity to steal an unlimited amount quickly.... and you choose 20 trillion dollars. He made the leap to being a thief, FFS use half a brain cell and try something you can get away with like a few million then transfer immediately. he may have had a chance to get away with that. Just a complete moron.

Re:Bitcoin is worth less than zero

[dohzer]

But they're called "coins" for a reason. There must be some kind of copper-nickel alloy involved.

Re:Greed again exposes some?

[The New Guy 2.0]

Think of this in dollar terms...

The glitch caused the bank account of the hacker to raise his balance to something higher than the bank, or all banks combined have. Therefore, he was showing more money than exist at the vaults.

Try to move this money out... wait a second, that's something the trucks/bitcoin codes can't support. Error is detected, and the hacker is caught.

Re:Accidentally priced BC based on intrinsic value

[The New Guy 2.0]

The problem is trying to convert a bitcoin into groceries... Dollar, Euro and Pound all seem to have no trouble being spent.

Re:That sounds about right.

[The New Guy 2.0]

Bitvoins aren't software, they're blobs of data that check out under a specific formula. You can make a bitcoin out of thin air by computing a data blob that hasn't been used yet... but finding one takes more power usage than the bitcoin is worth.