Hacked Bitcoin Financial Site Had No Backups 331
An anonymous reader writes "A fortnight ago the Bitcoin financial website Bitcoinica was hacked and the hacker stole $87,000 worth of Bitcoins. At the time the owner promised that all users would have their Bitcoins and US dollars returned in full, but one of the site developers has just confirmed that they have no database backups and are having difficulty figuring out what everyone's account balance should actually be. A failure of epic proportions for a site holding such large amounts of money."
Let me be first to say... (Score:1, Insightful)
HA!
This is what happens when you deal with an unregulated currency supply. Nevermind all those people trying to make a quick buck, or the ones who were hoping to achieve "legitimacy." Bitcoin has made //. several times now, almost always at its users' expense. I can only imagine the magnitude of ripoffs going on behind the scenes.
If you haven't come to this conclusion yourself by now, let me spell it out for you: If you don't need to buy drugs or guns, stay the fuck away from BC. The money to be made has aready been made. It's now just a facebook-like gamble.
Re:Ha! (Score:5, Insightful)
Cash doesn't need backups.
Close. Cash is the equivalent of no backups. Having your money in a regulated, underwritten by government, bank is having your money well backed up. An unregulated industry like bitcoin (as illustrated in TFA) is the worst of both worlds.
Re:Honestly... (Score:5, Insightful)
If the attacker deleted your backup, you didn't actually have a backup.
Re:Ha! (Score:5, Insightful)
Until the government decides to steal that money from you: "Freezing your assets" because they suspect you of some crime, "garnishing" or "levying" your bank account because you didn't "voluntarily" pay their taxes, and so on. And then of course, the government can just decide to print more money at will, stealing wealth from everyone, through inflation.
The risk of theft or loss with government-backed banks is the same; the thieves are just more organized. And if you consider inflation, the slow, persistent, and inexorable theft of your banked USDs is all but certain.
Re:Honestly... (Score:2, Insightful)
I may be wrong, but is it not a standard procedure to rsync files to one backup location that is not directly accessible from the original data and then have a backup of the backup in an offsite location? The backup-backup should contain a pool of data that is no longer on the original drive but is kept for such purposes as this. I may be missing some piece of the puzzle here, but in the scenarios I have been involved in this was the setup and has greatly restricted the ability to lose ANY data. Of course we dealt with small businesses and may not have been subjected to such a large attack.
When you're running a fraud, the last thing you want is secured backups held by a third party. Most of the money is probably in Swiss or Cayman accounts held by Bitcoins owners and nobody can prove they are owed money.
Irony (Score:5, Insightful)
Meanwhile, the EUR is imploding due to abject irresponsibility on the part of its government backers, banks, and investors, and the USD is probably not far behind. I wonder how long off until we see wheelbarrows full of euros and dollars being used to feed woodstoves rather than as currency. The growing sovereign debt crises and $700T (yes, that's a "T") derivatives market going tits-up are going to make BTC's problems look like a joke.
Yet I see comment after comment of how irresponsible and amateurish BTC is, and how we should only trust regulated, state-backed currencies. Yeah.
Re:Honestly... (Score:4, Insightful)
Backups are things that aren't connected to your system –they protect you against rm -rf /*, viruses, attackers and all kind of other things. What you're referring to is redundancy, not backup.
This story is completely overblown (Score:5, Insightful)
This story about the woes of Bitcoinica is grossly overblown. The amount of money is comparatively very small, and the Bitcoin network itself is nothing to do with this theft and is sound.
To put some perspective on the Bitcoinica incidents, in 2008, the estimated UK bank fraud level was £52.5 million; that is 990.28441 times the amount of this Bitcoin theft:
http://www.themoneystop.co.uk/042009/online-banking-fraud-is-on-the-rise-in-the-uk.html [themoneystop.co.uk]
There are people on many sides who want Bitcoin to fail, and who will do anything to stop it from growing. The banks hate it, because it will disintermediate and replace their business. The Statists dont like it because it will defund their socialist dreams. The gold bugs loathe it because it is not gold. Keynesian journalists bristle at the fact that the money supply in Bitcoin is limited, and dream of seeing it destroyed.
None of these people will matter in the end, and they do not understand Bitcoin.
Bitcoin will continue to grow, and events like this will winnow out the weak services and strengthen the existing ones. Each theft, disaster and problem are iterations that add to the unpublished "how to run a safe Bitcoin service" manual. Bitcoin and the services that will grow up around it cannot be stopped, just like Bittorrent cannot be stopped, and the latter is responsible for 53.3% of upstream traffic:
http://torrentfreak.com/bittorrent-still-dominates-global-internet-traffic-101026/ [torrentfreak.com]
It doesn't take much to see how important Bitcoin is going to become once the core public facing interfaces are solidified, refined and reliable. Bitcoinica is not Bitcoin, and neither are any of the services that are built on it. Bitcoin is a protocol. Events like this are nothing more than a bump in the road, and a vanishingly small one at that.
Re:This story is completely overblown (Score:1, Insightful)
You are delusional.
Re:rsync (Score:4, Insightful)
Blacks are a net drain on society.
And you, sir, are an unacceptable drain on the Earth's supply of breathable air.
Re:Where's the professional paranoia? (Score:3, Insightful)
First of all, Bitcoinica is not Bitcoin. It is a broker of Bitcoin futures contracts. And one that is unaudited, poorly-backed, unregulated, and run by a 17 year old Singaporean student.
So, those who were paying any attention at all know that using Bitcoinica was always a highly risky proposition. Making such a thing work flawlessly was never guaranteed to even be possible, let alone without bumps along the way, even though Zhou Tong did a relatively stellar job in my opinion, all things considered.
But lastly, those who were paying close attention should have seen that Zhou Tong made a fatal error after the Rackspace hack, in courting regulation and accepting VC money. It seems like this was done in order to save face and achieve a degree of approval for what was, clearly, a marginalized (yet successful) business model. I'm not privy to the details, so perhaps there was no real choice. But the downfall of Bitcoinica was only a matter of time once that happened. And I said so at the time.
No Backups?!?? (Score:4, Insightful)
It isn't the amount, it's the sheer amateurishness of the operation and the subsequent loss of trust.
Banks, exchanges, and other monetary systems, including currencies themselves, can only function when there exists an implied trust that the system will continue to function, and do so reliably. A loss of that trust is what causes bank runs, hyperinflation, and economic collapses.
Bitcoin has destroyed that trust. They're toast.
Re:This story is completely overblown (Score:4, Insightful)
The banks hate it, because it will disintermediate and replace their business.
No. It will not... ever. Your mistake is in assuming that what people will value, and how they will treat the things they value, is always based on reason. If history teaches us anything, it is that people are often far from reasonable. So no matter how much bitcoin has going for it, when viewed dispassionately, it is not shiny and tangible. The fact that the shiny things, and more importantly, the things that people build and do for each other are far more tangible, and that those things would steadily become worth fewer bitcoins per unit rather than more, is guaranteed to keep it nothing more than another geek fad.
Re:Honestly... (Score:5, Insightful)
Bingo!
It sounds like the people running the place are I.T. morons.
Rsync to second server, both servers then have offline backup that is cycled to a safe onsite AND offsite. THAT is a backup, not what most idiot business owners think a backup is.
I recently had this discussion with our CEO. "We dont need to spend $12,500 on a backup system...."
Me: so all our data is worth less than $12,500? if we lost ot all right now it would not matter at all to the business?
CEO: No, we would be devistated and out of business!
Me: so the whole business is only worth $12,500??!? Why are you keeping this from everyone that we are about to go under!
CEO: No! No! We are doing fine, well over $10million in sales last quarter...
Me: and you are unwilling to spend $12,500 to protect that money....... Really.....
CEO: go and order the backup server and tape Drive robot.
Re:Honestly... (Score:4, Insightful)
" The cost of not being prepared is ..."
That IT manager having to use the following words for the rest of his career.....
"Welcome to burger king, can I take your order?"
Sadly that will not happen. The IT manager will get promoted after he blames it on the IT guy that for years was asking why they dont have real backups.
Re:Let me be first to say... (Score:5, Insightful)
"Bitcoins are not currently money. They're more like arcade tokens, really. No value outside the venues honoring them.
Currency, on the other hand..."
Feel free to try and use North Korean currency in the United state or europe to buy something.
Currency has NO VALUE outside the venues honoring them.
Re:Let me be first to say... (Score:3, Insightful)
Re:Ha! (Score:5, Insightful)
Cash (or "money") is not a store of value, it's a lubricant for exchange. A monetary system without inflation (small, predictable) encourages people to store wealth in "money", as opposed to investing it in productive uses. Monetary systems with a small amount of inflation will encourage investment of wealth to earn a return at least as good as the inflation being experienced. Which is why virtually every economy on the planet left the gold standard; the economies with "inflatable" currencies will outperform those without.
Re:This story is completely overblown (Score:5, Insightful)
I don't think Bitcoin will work in the long run. The main reason is that it's designed to be limited to a fixed amount. This leads to three problems:
1) And financial transaction that requires interest is a problem. Anything from a business loan to a mortgage is basically impossible in a fixed money supply.
2) Assuming the economy grows, there would be deflation, which will mean people try to hoard their bitcoins instead of spending them. This in turn increases the deflation.
3) Related to the first two points: One person can over time become the owner of all bitcoins if this person has a sizeable initial stack of bitcoins, and lends them out at interest, and keeps spending well below the gained interest, you end up gaining a larger and larger share of the total bitcoin supply.
These effects feed into each other, enforcing the effects and if kept unchecked will lead to a situation where a few players own the vast majority of the bitcoin supply. The pool of bitcoins not in their hands will dwindle as more and more of it is paid as interest to the large lenders, given continuous deflation and ultimately concludes in a credit crunch of epic proportions.
A successful bitcoin is a setup for a major economic disaster, a failed bitcoin can be ignored. I choose the second option because I think the first one would create problems much bigger than the economy has now.
Re:this, ladies and gents... (Score:5, Insightful)
Right. Because we regulate traditional banks, they're never hacked or robbed.
Oh wait...
Re:Ha! (Score:4, Insightful)
When money is printed, and the velocity of money and the quantity of all available goods and services remains constant, your money is worth less. FTFY.
Re:Let me be first to say... (Score:4, Insightful)
Nonsense. Bitcoins are a currency.
Although, I imagine that your idea of currency is tied to the number of merchants that accept it, with some idea of critical mass. Hence, if / when 700 million people are engaging in various transactions using BitCoins, you will think of it as a currency.
Re:rsync (Score:5, Insightful)
Your statement assumes the previous AC deserves rational argument in return. The problem is doing so gives too much importance to something that has actual negative intellectual value.
âoeTo argue with a man who has renounced the use and authority of reason is like administering medicine to the dead.â - Thomas Paine
--
BMO
Re:Ha! (Score:4, Insightful)
It's not "all other things," it's growth of goods and services and velocity of money. And these things are never "held equal" in a real economy; Q consistently increases globally but is highly variable locally in time and space, depending on wether or not an economy is in recession, and V depends on a lot of factors, like confidence, inflation expectations, market depth, economic development...