How bizarre. There seem to be two layers to this fiasco. In principle, any kind of valuable proprietary information could be lost through such idiocy. But it seems to be that fact that bitcoin hot wallets are so vulnerable that motivated the idiotic “so secure nobody can get to it” setup. Have other cryptocurrencies addressed this vulnerability?
That article says that “she said the cold wallet stored $180 million in Canadian dollars”, but that seems doubtful- there were probably just bitcoins and what not.
That someone’s important corporate laptop cannot be accessed without his password is normal and by design, but entrusting full and exclusive control of your business’s critical digital assets to one guy who, at any moment, could steal them or get hit by a bus makes little sense.
It’s not a vulnerability; that is also by design. You cannot decrypt the secret message without the private key. If you need to share control of the secret information then you can certainly do so cryptographically (this is a general thing that has nothing to do with currency specifically).
If only there was some sort of central agency that establish industry best practices for secure control of these things,l by digital exchanges, and enforce them by something, call them, oh I don’t know - laws, maybe?
And possibly even have the digital exchanges contribute to a deposit insurance system of some sort, to compensate innocent customers who could otherwise get wiped out by theft or gross negligence by the cryptocurrency holders?
Too pie-in-the-sky and unworkable, I guess.
Help me understand, please.
They stored the bitcoins off-line, because they were afraid if they were on-line, they’d get hacked.
Right, but to store off-line, doesn’t that mean it all has to be in one off-line computer? If you have something that holds over $100,000,000 in other people’s money, you need to take extraordinary security steps to protect it.
It’s not just like making sure there’s one other person who knows the password. You have to protect that physical doo-dad (laptop or whatever) as if it’s worth $100,000,000.
You can’t just treat it like a home laptop. If your house burns; if you have it in your car and get in a serious accident; if you just accidentally lose it; there’s so many ways it could be destroyed.
It should be in a bank vault somewhere, to protect your customers’ assets. If you don’t do that, you’re grossly negligent.
??? I meant the vulnerability of hot wallets to hacking.
A simple way (not necessarily the best way, but much better than what they apparently did) to do it would be to have, say, 5 trustees, and accessing the off-line assets requires any 3 of them to act in concert.
If one of them dies, or goes rogue, or just has a hardware failure or their laptop stolen, that is no problem as long as a majority is still available to regenerate the shared secret.
Sorry; I misunderstood. If a “hot wallet” means an automated on-line trading program has access to it, that does seem like a single point of vulnerability to hackers. What do traditional currency trading platforms do to mitigate such risk? Besides obvious things like separating the system exposed to the Internet from the system that submits irreversible transactions to settle accounts.
Yep. It was the equivalent of setting up “Grandpa’s Bank” and holding cash in the tool shed out back. In other words: dumb.
Or, alternatively, that is just the story being told and the assets are available to whoever took them (and possibly killed the founder???).
So who are the trustees? Is there transparency, so the people who are entrusting their bitcoins to them know who had control of their assets? Are they bonded, in case three if decide to make off with the $100,000,000?
Technical question: would they need to be able to access this off-line storage thing on a daily basis, to provide service to their clients?
I can’t answer that question, but if you are interested, this article describes how Coinbase handles these same issues. In summary, they have redundancy for off line servers as well as encrypted hardcopy backups of keys stored in safe deposit boxes etc.
I strongly suspect that the death of the founder is part of a scam and the founder is not dead he just ran off with people’s money.
But the fact that there are lots of exchanges used by people to process crypto currency transactions and store their cyrpto currencies means that crypto currencies are not solving any issues with current money. The main point of crypto currencies is to allow people to exchange money without the need for things like banks or credit card companies. But currently crypto currencies don’t work for that so exchanges have popped up to replace banks and credit card companies.
For that matter, why was anyone storing wealth in bitcoins controlled by someone else? The whole point of bitcoin is that you can store them yourself, without having to trust anyone else. If you’re going to make use of a third party financial institution, why not just use a regular bank?
The idea isnt to “store wealth”- the idea is to invest in Bitcoins and take advantage of the market fluctuations.
Getting back to the very first posts, I’m not seeing the argument for lower transaction costs for bitcoin.
To use it, you need to have a certain degree of computer literacy and computer equipment. That’s not the case with cash or debit cards.
And, at some point, if you want to convert your bitcoin into something that non-bitcoiners will accept (i.e. - pretty much all of the economy), you need some sort of conversion mechanism, which is not needed for cash or debit cards.
If someone owes me $1,000 and says “will you take hundreds or twenties?”, it’s easy-peasy - I’ll take Queenies or Robert L. without question.
If someone offers to pay me in bitcoins, my answer is “whut?” I don’t think I’m out of the ordinary on this point.
Well, OK, then, investing, or speculating, or whatever you want to call it. But you can do any of those things without having to trust someone else to hold the bitcoins for you. You’re basically giving your money to some random guy on the Internet, just because he pinky-swears that he’ll give it back to you when you ask. Why would anyone be surprised when he doesn’t?
Hmm. So it seems like a secure, stable currency that’s relatively immune to hacks, widely accepted, stable in value, and doesn’t have the “grandpa’s dead!” problem would be something like…the US dollar? Or the Euro?
The whole conversation proves that bitcoin is really just a speculative investment.
You pretty much have to use a Bitcoin exchange in order to buy & sell large amounts of Bitcoins, while speculating.
It’s a little like a stock exchange. While it is possible to sell a share or two without going thru a exchange or broker, you pretty much need one .
The Bank of International Settlementshas a amusing graphic, which the Alpha Ville blog of the Financial Times has published that indeed makes these points, that the blockchain structure is solution looking for a problem… (that is it unless you are of the paranoid libertarian point-of-view that is ideologically favoring no central coordination for its own paranoid sake, the conceptual system is one structurally ineffecient).
