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Bitcoin Thefts Surge, DDoS Hackers Take Millions

samzenpus posted about 8 months ago | from the all-your-bitcoin-are-belong-to-us dept.

Bitcoin 305

CowboyRobot writes "In November, Denmark-based Bitcoin Internet Payment System suffered a DDoS attack. Unfortunately for users of the company's free online wallets for storing bitcoins, the DDoS attack was merely a smokescreen for a digital heist that quickly drained numerous wallets, netting the attackers a reported 1,295 bitcoins — worth nearly $1 million — and leaving wallet users with little chance that they'd ever see their money again. Given the potential spoils from a successful online heist, related attacks are becoming more common. But not all bitcoin heists have been executed via hack attacks or malware. For example, a China-based bitcoin exchange called GBL launched in May. Almost 1,000 people used the service to deposit bitcoins worth about $4.1 million. But the exchange was revealed to be an elaborate scam after whoever launched the site shut it down on October 26 and absconded with the funds. The warnings are all the same: 'Don't trust any online wallet', 'Find alternative storage solutions as soon as possible', and 'You don't have to keep your Bitcoins online with someone else. You can store your Bitcoins yourself, encrypted and offline.'"

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305 comments

oh noooooes! (-1)

Anonymous Coward | about 8 months ago | (#45570293)

Somebody stole me 1s and 0s!

A limited number of Bitcoins (5, Insightful)

fustakrakich (1673220) | about 8 months ago | (#45570297)

Pretty soon they'll all be stolen, kinda like land

Re:A limited number of Bitcoins (4, Insightful)

kthreadd (1558445) | about 8 months ago | (#45570303)

Then someone will invent a new currency and the cycle repeat itself.

Re:A limited number of Bitcoins (5, Insightful)

Anonymous Coward | about 8 months ago | (#45570443)

a reported 1,295 bitcoins — worth nearly $1 million

No they aren't really worth that much. Sure, you can extract $1 million from the market now, but if everyone does that the prices will fall to zero, the liquidity is pathetic compared to the $15 billion capitalization. And the only reason people don't run to crash the market is because they hope they will be able to earn even more in the future - a.k.a "The Greater Fool Game".

Re:A limited number of Bitcoins (-1)

Anonymous Coward | about 8 months ago | (#45570667)

a reported 1,295 bitcoins — worth nearly $1 million

No they aren't really worth that much. Sure, you can extract $1 million from the market now, but if everyone does that the prices will fall to zero, the liquidity is pathetic compared to the $15 billion capitalization. And the only reason people don't run to crash the market is because they hope they will be able to earn even more in the future - a.k.a "The Greater Fool Game".

So your 3rd sentence proves your 2nd sentence wrong. They could easily sell all 1295 bitcoins and pocket $1 million due to buyers betting on the greater fool game.

Re:A limited number of Bitcoins (0)

Anonymous Coward | about 8 months ago | (#45570813)

So your 3rd sentence proves your 2nd sentence wrong. They could easily sell all 1295 bitcoins and pocket $1 million due to buyers betting on the greater fool game.

When most of the news about bitcoin is about how easy it is to lose, even the fools will start to take notice.

Re:A limited number of Bitcoins (5, Funny)

PopeRatzo (965947) | about 8 months ago | (#45570873)

They could easily sell all 1295 bitcoins and pocket $1 million due to buyers betting on the greater fool game.

It depends. Will someone have the $1mil to buy them all? If they start selling in smaller lots, the value will go down with each transaction.

The only difference between bitcoins and tulips is that at least you could smell the tulips.

Re:A limited number of Bitcoins (4, Insightful)

daninaustin (985354) | about 8 months ago | (#45571039)

$1 million isn't all that much now. There are multiple exchanges processing 80k+ bitcoins per day.

Re:A limited number of Bitcoins (4, Informative)

Bram Stolk (24781) | about 8 months ago | (#45571075)

The effect of selling is less than you think.
mtgox is not the biggest exchange, but it can easily do a $1M exchange without affecting price in a too dramatic way.

The nice thing is that their bid book is open for every one to see, so you can predict what happens to price at large orders.
See: http://mtgoxlive.com/orders [mtgoxlive.com]
At the time of writing, a $1M sell or buy would move the mtgox exchange price 5% in either direction.

If you sell in the largest exchange in the world, which I understand is in China, it would move the market less than this.

Re:A limited number of Bitcoins (3, Insightful)

daninaustin (985354) | about 8 months ago | (#45571025)

If you can sell them for $1 million, then by definition they are worth $1 million.

Re:A limited number of Bitcoins (1)

Anonymous Coward | about 8 months ago | (#45571129)

If you can sell them for $1 million, then by definition they are worth $1 million.

Sure, but the point is that there is not that much 'depth' behind the very high bids and offers on the exchanges. Any substantial sale would quickly fill all of the bids and make the prices 'gap' downwards. The average price you could actually move 1,000 bitcoins for might be substantially less than the current price of ~$1,000. The bids around that price might well be real and not fraudulent but their total size is not necessarily economically meaningful. On the other hand you can trade tens of billions a day or more between the major currencies and not move the market significantly.

Re:A limited number of Bitcoins (1)

Ralph Wiggam (22354) | about 8 months ago | (#45571185)

Sure, you can extract $1 million from the market now, but if everyone does that the prices will fall to zero, the liquidity is pathetic compared to the $15 billion capitalization. And the only reason people don't run to crash the market is because they hope they will be able to earn even more in the future - a.k.a "The Greater Fool Game".

How is that different from the stock market?

Already done (2, Insightful)

DrYak (748999) | about 8 months ago | (#45570447)

Then someone will invent a new currency and the cycle repeat itself.

It has already been done. And far more than once [coinmarketcap.com] .

Re:A limited number of Bitcoins (1)

master5o1 (1068594) | about 8 months ago | (#45570587)

Then someone will invent a new currency and the cycle repeat itself.

With blackjack, and hookers...

Re: A limited number of Bitcoins (1)

zevans (101778) | about 8 months ago | (#45570805)

FOR black ops! And hookers!

Re:A limited number of Bitcoins (0)

Anonymous Coward | about 8 months ago | (#45570829)

In fact, forget about the new currency and the blackjack. Ahh, screw the whole thing.

Re:A limited number of Bitcoins (1)

luther349 (645380) | about 8 months ago | (#45570979)

you mean naimecoin and lightcoin. lol.

These idiots deserve it (-1)

Anonymous Coward | about 8 months ago | (#45570301)

Seriously...

Something I've been ruminating about all day (4, Interesting)

astralagos (740055) | about 8 months ago | (#45570325)

Somebody more familiar with bitcoin can answer this for me, undoubtedly, but based on my limited understanding, if the wallet file is lost or destroyed, the coins within it are effectively gone, correct? If so, then at some point there's an expected loss over time (fraction of the population who don't back up their wallet, expected size of wallet, drive failure rate), and at some point that's going to intersect with the size at which the pool expands, so that the total supply of bitcoins over time actually decreases. Theoretically, we'd hit some point where bitcoins are just being destroyed through loss. The situation will be exacerbated with thefts and personal storage.

Re:Something I've been ruminating about all day (5, Informative)

rasmusbr (2186518) | about 8 months ago | (#45570347)

Somebody more familiar with bitcoin can answer this for me, undoubtedly, but based on my limited understanding, if the wallet file is lost or destroyed, the coins within it are effectively gone, correct? If so, then at some point there's an expected loss over time (fraction of the population who don't back up their wallet, expected size of wallet, drive failure rate), and at some point that's going to intersect with the size at which the pool expands, so that the total supply of bitcoins over time actually decreases. Theoretically, we'd hit some point where bitcoins are just being destroyed through loss. The situation will be exacerbated with thefts and personal storage.

Yep, that's correct. Bitcoin is designed to be ridiculously scarce in the long run.

Re:Something I've been ruminating about all day (4, Funny)

Anonymous Coward | about 8 months ago | (#45570409)

obligatory xkcd

Extrapolating
http://xkcd.com/605/

Without knowing rate of loss vs rate of pool expansion there is no way to theoretically mark a point where bitcoin loss>bitcoin gain. Theft still leaves bitcoins in the system, so no real loss there (to the system). I can see a clever developer/maker creating a usb/sd bitcoin wallet. Keep the assets stored off the computer, in a safe place and no risk of government seisure.

Re:Something I've been ruminating about all day (4, Informative)

Anonymous Coward | about 8 months ago | (#45570643)

We don't need to know the rate of pool expansion. We already know that there is an upper limit to the number of available coins. When that limit is reached we will only lose bitcoins due to the exact reasons the GP raised.

So your "obligatory xkcd" is not appropriate at all. Back to your drawing board.

Re:Something I've been ruminating about all day (0)

Anonymous Coward | about 8 months ago | (#45570645)

Loss is theoretically unbounded, whereas gain has a theoretical maximum.

If there's a way to reclaim lost bitcoins (crack the encryption), then you can get a stability point.

If there's not, then deflation is inevitable, although it could be at a glacial rate compared to population changes (lowering the population of users would tend to inflate the currency, and vice-versa).

Re:Something I've been ruminating about all day (1)

LocalH (28506) | about 8 months ago | (#45571099)

Keep the assets stored off the computer, in a safe place and no risk of government seisure.

Yeah, like cash that is stored outside of a bank, in a safe place, has no risk of government seizure...

Re:Something I've been ruminating about all day (3, Interesting)

petermgreen (876956) | about 8 months ago | (#45571157)

The rate of production is laregely known and is not significantly affected* by changes in mining power.

The rate of loss is a trickier one, it is not possible for an analysist to tell the difference between a permanently bitcoins (one where all copies of the private key have been destroyed), temporally lost bitcoins (where the private key still exists and may be found but the owner has forgotten where it's stored or is having difficulty remembering the passphrase or whatever), and hoarded bitcoins (where the owner knows how to access the bitcoins but has decided not to do anything with them).

* Short term fluctuations can happen since the difficultry takes time to adjust.

Re:Something I've been ruminating about all day (4, Interesting)

shaitand (626655) | about 8 months ago | (#45570437)

Of course. That's why bitcoin divides to trillions of units. The idea that trade will involve smaller and smaller units. For instance when the price hit $1000 for a BTC it made more sense to think of Bitmils .001 than Bitcoins for transactions because a bitmil was essentially a dollar.

Re:Something I've been ruminating about all day (2)

viperidaenz (2515578) | about 8 months ago | (#45570631)

So if I hoard my bitcoins, I'll make lots of money.
Why would I ever want to sell them? They'll be worth more tomorrow.

Re:Something I've been ruminating about all day (4, Insightful)

fastest fascist (1086001) | about 8 months ago | (#45570899)

They *might* be worth more tomorrow. There's no guarantee of that. You will, however, definitely need to eat regularly. Usually spending money is involved in that.

Look at it this way, computers get better all the time. If you wait a while, you can get better value for your money. Somehow, people still buy computers all the time.

Re:Something I've been ruminating about all day (0)

Anonymous Coward | about 8 months ago | (#45570483)

The protocol is designed to gradually throttle the creation of bitcoins, so will only produce a total of 21 million. Yes, slow deflation after the mining rewards end. But each of those bitcoins can be subdivided into ten million pieces. Nobody is going to "run out of bitcoins".

Re:Something I've been ruminating about all day (3, Interesting)

Jack9 (11421) | about 8 months ago | (#45570673)

> But each of those bitcoins can be subdivided into ten million pieces

100 million. Not that it makes a big difference right now.
https://en.bitcoin.it/wiki/Myths [bitcoin.it]

Re:Something I've been ruminating about all day (0)

Anonymous Coward | about 8 months ago | (#45570567)

That is true. However, it is not really a problem in the long run unless every last bitcoin is lost. You can divide bitcoin in infinity and trade with micro-bitcoins or pico-botcoins instead. So at first though this seems like an issue but I argue it isn't.

Regards,
Tagide
dotbit.me

Re:Something I've been ruminating about all day (3, Interesting)

Athrac (931987) | about 8 months ago | (#45570947)

That is true. However, it is not really a problem in the long run unless every last bitcoin is lost. You can divide bitcoin in infinity and trade with micro-bitcoins or pico-botcoins instead. So at first though this seems like an issue but I argue it isn't.

You can't divide it infinitely. The smallest unit ("satoshi") is 10^-8 bitcoins, so in total, there will only be 2.1*10^15 units of money. For reference, the total M1 money supply in the world is equivalent to about $25 trillion, or 2.5*10^15 dollar cents. If bitcoin becomes a major world currency and we assume a currency loss rate of couple of percent per year, it's gonna become a problem within couple of decades.

There could of course be a change in the protocol so that let's say any bitcoins not used in 50 years could be remined. But it's something that requires acceptance from majority of miners.

Mostly, yes (4, Interesting)

DrYak (748999) | about 8 months ago | (#45570835)

As a small addendum to what rasmusbr has already said:

if the wallet file is lost or destroyed, the coins within it are effectively gone, correct?

The short answer is yes. The long answer is a little bit more complicated.
If hacker still has copy of the wallet.dat file, the coin could still be stolen (in theory the file can optionnally be encrypted. In practice we all know how good humans are at picking good passwords).

key pairs in a wallet can also be generated using passphrases (so called brain wallet).
in theory the owner is the only one to know the passphrases generating the key pair and thus the only one able to use the private key.
in practice, again, we all know how good humans are at that task
(and before you ask: yes someone has decided to make a keypair using xkcd's "correct horse battery staple" comic).

worst citizens are the web services. they use their own wallet to process coin. you sent an amount to them, and then they process on your behalf. (some even allow you to upload key pairs). You have to trust that they are honnest people. You have also to trust their security measures that their key don't get stolen.

So out of all the various "lost" coins, some are possibly going to re-appear due to poor password strategies, or due to less scrupulous online companie which will decide to re-purpose un-claimed bitcoin account, or outright scam people into giving them coins and then running away with them.

no, this time it will be different (1)

turkeydance (1266624) | about 8 months ago | (#45570329)

ok. like how?

Savings Accounts (3, Insightful)

lgw (121541) | about 8 months ago | (#45570331)

Ever wonder why banks can pay less than inflation for savings accounts and still get customers? Government insurance against the bank getting robbed / going broke / just absconding with the cash lets them provide a service that's worth a small cost.

In a way, Bitcoin is a bet that the risk of the government itself being the ones to take your money exceeds the risk that individuals will do so. History shows plenty of risk both ways, but I could certainly see the value in banks offering Eurobitcoin [wikipedia.org] accounts.

Re:Savings Accounts (1)

viperidaenz (2515578) | about 8 months ago | (#45570507)

Less than inflation is still > 0.
If you stick your cash in your mattress, you get 0%.

Re:Savings Accounts (4, Interesting)

lgw (121541) | about 8 months ago | (#45570679)

There are many other choices than "savings account" or "mattress". There are a wide variety of bond investments, bond ETFs and mutual funds, money market accounts, and so on. But you pay a lot for safety, and you also pay for the convenience of liquidity, trading in very small amounts, and retail convenience.

The Internet has nearly removed those last two concerns, however. If you educate yourself on the risks of bonds (both inflation and default risks), which is no harder than educating yourself about how bitcoin works, it's easy to match inflation with funds with daily liquidity, ability to move small amounts, and really quite small risk. But if you want that government backing against default risk, you're going to lose vs inflation - you have to pay for that insurance.

Re:Savings Accounts (4, Interesting)

Anonymous Coward | about 8 months ago | (#45570895)

In the UK you can save with the government and cut out the middle man. The UK government owns a bank named the National Savings Bank (actually they own several banks, but this is the only one that offers savings accounts to regular people) which offers a middling interest rate and various long-term bonds. When you "invest" in the government's bank instead of it lending the money to somebody else like a regular bank it just spends it on government projects. The money to pay you back later comes from taxation. So in effect it allows the government to borrow from the ordinary consumer at a better rate than they'd get from a foreign bank, and it lets the consumer save with a 100% trustworthy bank.

Anyway, for long term savings the National Savings Bank will give you points over inflation. They will promise to track better than the rate of inflation in interest. They can do this because they are, after all, the government, if they can't make it worthwhile to borrow money at points over inflation they definitely shouldn't be borrowing from foreign banks! Of course "worthwhile" gets to be over a long view when you're a government. Money spent today ensuring a five year old is healthy and well educated pays off twenty, forty, sixty years down the line.

(You might say, what if the government can't pay it back? Maybe the tax base collapses, or the country is invaded or something. But in this case the country will default, EVERYBODY in the UK gets screwed if that happens, regardless of whether they use the government owned bank).

Re:Savings Accounts (0)

Anonymous Coward | about 8 months ago | (#45570901)

Not in terms of actual value since it won't buy as much as if it had increased at the rate of inflation, but you're still right that mattress money will devalue faster.

4.1 million since may?? (0)

Anonymous Coward | about 8 months ago | (#45570333)

I'm in the wrong business :/

Bitcoin hype over? (2, Insightful)

globaljustin (574257) | about 8 months ago | (#45570335)

Are we seeing the Zenith of Bitcoin? Is it all downhill from here?

I'm not anti-Bitcoin philosophically, but I have worked in academic level IT & networking so I know what's going on...

The problem is exchanging Bitcoin for real currency...there is no accountability for the value exchange. Mt. Gox? Seriously? How do you even pronounce it? "mount Gox"? "M. T. Gox"? Who do you call if you have a problem? Bank Of America even has a brick and mortar location at least...

These aren't trivial issues.

In order for Bitcoin to work, people have to believe it is a trustworthy place to abstract and store economic value.

People have to **USE** Bitcoin or Bitcoin dies...until you can directly exchange Bitcoin to currency this will just be an elaborate hoax.

Re:Bitcoin hype over? (4, Insightful)

SuperKendall (25149) | about 8 months ago | (#45570371)

but I have worked in academic level IT & networking so I know what's going on...

Only at the level of how you store it, not in any aspects of how it works as a currency.

The problem is exchanging Bitcoin for real currency

But in theory you don't need to do that often, the idea is that it is a currency you can accept and use for payments.

It's a bit tricky for me to convert USD into some other currency also, but since I don't do so very often it doesn't matter.

As more places accept BitC for payment that concern becomes much less an issue.

dreamworld (1, Interesting)

globaljustin (574257) | about 8 months ago | (#45570481)

The problem is exchanging Bitcoin for real currency

in theory you don't need to do that often

in theory...

when I only need to pay my bills "in theory" then you might have made a productive statement...

I know **all about** how Bitcoin works, not just how you store it. I have a business that sells online and have considered accepting Bitcoin. I researched it through and through.

**that** combined with my other skills & the fact that I have common sense means that I'm a fool to accept Bitcoin at these exchange rates ***UNLESS I CAN SEE IT PLACED IN MY $$$ BANK ACCOUNT IN REAL TIME***

I typed that all bold b/c you irrational fanbois need to re-read it and think aobut it over and over b/c it is the core of what makes anything have value in this economy.

If a customer buys one of my products, WooCommerce (grumble...) can show me in real time the path of the money to my bank, then I can check my business bank account and see those $$dollars added to my bank account...then i can withraw that cash right at the ATM and buy ****anything****

Until bitcoin can do that it's just a game for hackers...

Re:dreamworld (1)

Anonymous Coward | about 8 months ago | (#45570573)

There is a solution for people in your position, they will take a cut though.
https://bitpay.com/

Re:dreamworld (2)

dex22 (239643) | about 8 months ago | (#45570687)

And a credit/debit card processor or bank won't do that? :)

Re:dreamworld (2, Informative)

Ambvai (1106941) | about 8 months ago | (#45570577)

Interestingly enough, a lot of the small/medium businesses I work with that do business internationally have the exact same concerns with international currencies. (Dollar, Yen, Euro, Pound are accepted as safe... but even a currency as significant as Renminbi makes some people skittish.)

The Real World (4, Insightful)

SuperKendall (25149) | about 8 months ago | (#45570593)

***UNLESS I CAN SEE IT PLACED IN MY $$$ BANK ACCOUNT IN REAL TIME***

Which goes to show you are missing the point of using it as a currency. A real currency is something you hold onto, not exchange at first opportunity.

You only think you need to do that because you think the exchange rate of BitC against some other currency is too high. Why? Are you SURE about that? Because lots of people were saying the same thing all along, at much lower values. What if BitC doubles in value again? Then you would have been an idiot to exchange it away.

I'm not even a huge BitC proponent, I have only a tiny amount myself. But I can see that worry about the value of BitC against other currencies seems overblown, and there is a constant track-record of underestimating BitC, with every action that is supposed to bring the hammer down on exchange rates (like the closure of Silk Road) having the opposite effect instead. And I see real merchants slowly adopting payment using this currency. If there are enough real objects I can use BitC to buy then I am insulated from swings in value, and it makes more sense to hold than to get rid of right away.

Re:The Real World (1, Insightful)

globaljustin (574257) | about 8 months ago | (#45570685)

hey thanks for the comment...

because you think the exchange rate of BitC against some other currency is too high. Why? Are you SURE about that? Because lots of people were saying the same thing all along, at much lower values. What if BitC doubles in value again? Then you would have been an idiot to exchange it away.

I wanted to address this part specifically b/c there's some important distinctions.

I don't "think" the exchange rate of BTC is "too high"....I know this.

I know because I don't know. What I mean is, the ammount of uncertainty in BTC is much, much higher than in dollars. Uncertainty in every way. From it's relative value to its ability to be exchanged w/o electronics. There is just too much uncertainty.

The **CORE** of that uncertainty is the number of BTC awarded per transaction mined.

That number is set arbitrarily...by unknown actors.

You tacitly acknowledge this, I just want to draw attention to how important this is...you make BTC by mining BTC....when you mine BTC you compete by using an algorythm to find a number for a transaction...the number of BTC awarded to who finds the proper number/transaction is arbitrary.

I'm not saying I wouldn't be messing around w/ BTC if I was like, an independent day trader or wealthy or w/e but that's not really at issue here.

Re:The Real World (3, Interesting)

SuperKendall (25149) | about 8 months ago | (#45570729)

I know because I don't know. What I mean is, the ammount of uncertainty in BTC is much, much higher than in dollars.

Really? I actually don't know that at all. In fact the value of USD could go haywire in a lot of ways, in case you hadn't noticed the price of metals like gold and platinum has skyrocketed, meaning a lot of other people think so too.

Just because the USD HAS been more stable, does not mean it has to continue to do so.

The **CORE** of that uncertainty is the number of BTC awarded per transaction mined.

Not sure I follow that statement, in a transaction you get a specific amount of BitC from someone else. When mining you get a specific amount of BitC per block. Where is the uncertainty in ether aspect? The only uncertainty is how much other currency someone is willing to give you for BitC. But as more people want and use it, the more the value will rise.

the number of BTC awarded to who finds the proper number/transaction is arbitrary.

Again, how is this arbitrary? I do mine (slowly) and it seems no arbitrary at all.

Re:The Real World (1)

Registered Coward v2 (447531) | about 8 months ago | (#45571029)

I know because I don't know. What I mean is, the ammount of uncertainty in BTC is much, much higher than in dollars.

Really? I actually don't know that at all. In fact the value of USD could go haywire in a lot of ways, in case you hadn't noticed the price of metals like gold and platinum has skyrocketed, meaning a lot of other people think so too.

Actually, gold is way off its Sep 11 peak (down by about a third) and trading roughly where it was a little more than 3 years ago. Anybody who bought over the last few years and held it has pretty much taken a beating. I would not be surprised to see many of the "We buy gold" places close shop as they lose money on the price drop between purchase and sale or start offering way below spot for purchases. One jeweler I know has slow chis purchase simply because he didn't want the downside risk.

Re:The Real World (2)

fastest fascist (1086001) | about 8 months ago | (#45571017)

One of the least uncertain aspects of Bitcoin is the number of BTC awarded per block mined. That is dictated by the protocol. The code is open source so you can check if you're willing and able.

Basically, though, the block reward gets halved every 210,000 blocks. That's happened once so far, and no-one pulled any switch to do it. Everyone running a Bitcoin node or miner simply runs code that has the same requirements to accept a block as valid. Some miner could have modified their software to produce 50-coin blocks even after block 210,000, but that would be pointless if other peers in the network weren't running software with the same modification.

You also stated block creation must be faster than one per 10 minutes on average now. It's possible that's temporarily true, but the network retargets the difficulty of finding a block to maintain the balance at 10 minutes per block. This is done by comparing the time it took to calculate the previous 2016 blocks, starting from the previous difficulty retarget, to the expected time of two weeks. If it's less, or more, the difficulty required for a block to be valid is adjusted to compensate, making it harder or easier to find a block. All the information needed to do this retargeting is publicly available.
You may want to have a look at: https://en.bitcoin.it/wiki/Difficulty [bitcoin.it]

In brief, there are no mystery hands behind the curtains pulling strings to make things happen. You're right that many of the basic choices were arbitrary - the maximum of just short of 21,000,000 BTC and the block creation time being obvious examples. The rules are, however, transparent, and in order to change any of them you'd have to modify the core software and convince people to start using your modified version. That wouldn't be very easy, since it would create a competing currency forking off the Bitcoin blockchain. Anyone holding Bitcoins would likely be pretty wary of such modifications, because the effects on the value of BTC could be deleterious.

Re:The Real World (1)

Registered Coward v2 (447531) | about 8 months ago | (#45570989)

***UNLESS I CAN SEE IT PLACED IN MY $$$ BANK ACCOUNT IN REAL TIME***

Which goes to show you are missing the point of using it as a currency. A real currency is something you hold onto, not exchange at first opportunity.

You hold onto a real currency because you are confident it will retain its value over time. As a result, there is no pressing need to get rid of it because what costs a dollar today will probably cost the same tomorrow. When the value of currency is uncertain, such as the hyper inflation some countries experienced or when governments limit liquidity, people generally dump the currency as fat as they can.

You only think you need to do that because you think the exchange rate of BitC against some other currency is too high. Why? Are you SURE about that? Because lots of people were saying the same thing all along, at much lower values. What if BitC doubles in value again? Then you would have been an idiot to exchange it away.

What you are describing is not a currency but an investment. People buy it because they think it will increase in value and hold on to it; not because they can use it to buy stuff. Th problem is Bitcoins are thinly traded and not very liquid. If you decide you want to dump a million dollars worth it is not as easy as putting in a market order for a stock and knowing you can sell it because market makers keep the market liquid.

As with currency, investments require a degree of trust in the system. Scams such as occurred in China or the recent thefts damage that trust and will ultimately drive people form the market, making Bitcoin even less liquid.

That's not tos ay Bitcoin can't succeed or find its niche long term; just that there are serious issues it needs to address before it will become a real, viable currency.

Re:dreamworld (1)

dex22 (239643) | about 8 months ago | (#45570675)

This is exactly what BitPay does. They calculate the BTC price of your $ item, collect the BTC, convert that immediately at a known rate to $ and put it in your account.

Re:dreamworld (1)

Billly Gates (198444) | about 8 months ago | (#45571087)

How reliable are they? Who are they? Are they Russian mob owned etc?

Re: Just starting (2)

Billly Gates (198444) | about 8 months ago | (#45570383)

Now since CNN and real Wall Street brokers are getting into the act I expect the value to go skyhigh! It went up 1000% in just 12 months.

Even if you think that is non sense Tulip bubble mania all over again you can't ignore the fact that this got some Wall Street investors attention. With supercomputers and high trading algorithms you can bet they will automate the process and prevent it from crashing. Remember if you have a super computer you can make money too by shorting the bitcoin.

You make free money the more volatile it is. This is much more profitable than the dow jones. At this point I doubt it will go away anytime soon.

control (1)

globaljustin (574257) | about 8 months ago | (#45570501)

who decides how many BTC you get for mining a transaction?

remember how it halved not too long ago? who made that call? **kind of a big deal**

Re:control (1)

Billly Gates (198444) | about 8 months ago | (#45570531)

Easy you short them when they fall in value by a computer program and you get a bump while the other guy waits for the value to fall.

Or since since bitcoins vanish over time the value goes up unlike housing so economic wise the value has to go no where else but up due to its design as the law of supply vs demand kicks in.

Re:control (2)

Ambvai (1106941) | about 8 months ago | (#45570621)

"The reward for solving a block is automatically adjusted so that roughly every four years of operation of the Bitcoin network, half the amount of bitcoins created in the prior 4 years are created. 10,500,000 bitcoins were created in the first 4 (approx.) years from January 2009 to November 2012. Every four years thereafter this amount halves, so it will be 5,250,000 over years 4-8, 2,625,000 over years 8-12, and so on. Thus the total number of bitcoins in existence will never exceed 21,000,000. Blocks are mined every 10 minutes, on average, and for the first four years (210,000 blocks) each block included 50 new bitcoins. As the amount of processing power directed at mining changes, the difficulty of creating new bitcoins changes. This difficulty factor is calculated every 2016 blocks and is based upon the time taken to generate the previous 2016 blocks"

still arbitrary (1)

globaljustin (574257) | about 8 months ago | (#45570731)

right...getting technical...but my core critcism still applies...thanks for getting that text btw...its the text from the BTC wiki if I'm not mistaken...something quasi-official.

So, true, **according to this random block of text** with no source...the "reward for solving a block" is automatically adjusted.

We can't verify that, but lets assume it's true.

**how** is it automatically adjusted????

this paragraph was written with assumptions that are no longer true, requiring more explanation.

BTC mining has increased more than anyone anticipated with the +$1,000.00 valuation. That means that when this says,

"Blocks are mined every 10 minutes on average"

That average is completely blown out...(we can't verify this but logically it must be much larger now)

Also, the 'difficulty factory' is arbitrary....2016 blocks is not part of the alleged "automatically adjusted reward for solving blocks" yet it directly affects it.

Again...you presented **no citations or source**...I am trying so I gave the benefit of the doubt...

Still, none of the factors that comprise the "automatically adjusted" part of the block creation are publicly known and are, at any rate, based on a much smaller scale than is at work today.

bottom line: it's still arbitrary!

Re:still arbitrary (1)

Billly Gates (198444) | about 8 months ago | (#45570883)

It uses a block chain network for each transactio with everyone else. When you mine you add blocks to the chain so mathematically it is controlled. You cant mine or transact without the control of the block network

still: still arbitrary (1)

globaljustin (574257) | about 8 months ago | (#45571155)

yes...and that is set at 2016 blocks by whom?

I know when you mine you add blocks to the chain....but it is not just "mathematically it is controlled"...it is allocated by a rule...a rule that is not made public or checkable...you are **assuming**

a couple Stanford undergrads could have the abilityo to change how the system finds the next transaction to process...that varies by alot of unsated factors

the block network has arbitrary controls

Re:control (1)

shentino (1139071) | about 8 months ago | (#45570761)

Supply and demand.

You look for the cheapest miners, and they in turn give their priority to the transactions with the highest margins. If you're impatient or you are stingy, you'll get outbid by transactions with higher margins jumping ahead of you in line.

Re: Just starting (0)

Anonymous Coward | about 8 months ago | (#45570723)

How do you go short on bitcoins? Details please.

Re: Just starting (1)

tompaulco (629533) | about 8 months ago | (#45570991)

How do you go short on bitcoins? Details please.

Same as shorting a stock, or anything else. You have to do it through a brokerage of some sort. They lend you the bitcoins to sell somebody else and the proceeds of the sale go into your account. At some later date, you "cover" your position by buying an equal number to the ones you shorted.
For instance, if you had shorted last year 100 bitcoins at about $8, you would have borrowed said 100 bitcoins from a willing brokerage, and you would have gotten $800. Then a year later, if you decided to cover your position and pay back the 100 bitcoins that you owed the brokerage, you would have to come up with $100,000 to do so. The brokerage also charges you interest on the loan of the 100 bitcoins.
This is a simplistic case. In real life, there would have been a margin call at some point and you would have been forced to cover your position earlier or deposit funds to cover your unrealized loss on the position. In stocks, a lot of time, you can't even short a stock unless you have the cash or other not shorted stocks to cover a certain percentage of loss.
I don't know if any brokers are actually doing this for people. It is probably too dangerous to do this right now, with the price going up so quickly. A brokerage may not even be able to collect on a margin call before the short trader is quickly in the hole for large sums of money.
With shorting stocks, your upside is limited, but your downside is unlimited. This is the opposite of purchasing a stock, where your downside is limited to your investment, but the upside is unlimited.

Re:Bitcoin hype over? (0)

Anonymous Coward | about 8 months ago | (#45570395)

You don't need to exchange Bitcoin into currency to use it. If you can buy things with Bitcoin without any cash being involved at any point you can still use it.

But of course it's mainly speculation right now. Buying things with something that has gone from $13 to $1000 in value within a year is silly. Keeping it and hoping it will rise much higher before flattening out before you spend it is much more clever.

I'm not saying that this will happen, mind you. But *anyone* major accepting Bitcoin for paying is going to keep it alive.

^this (0)

globaljustin (574257) | about 8 months ago | (#45570635)

^this is how I actually feel. I'm using strong language b/c it seems this is the miinority view.

I really don't hate BTC. I think the concept is cool. I totally swear I bought 5 BTC back in late 09 when I was in grad school but I have no clue wtf I did w/ my wallet...

I just want to hear some common sense. The world is watching! This is tech if anything is....and we have gotten the behemoth to stop and scratch.

IDK the solution...IMHO maybe we need to pin BTC to the dollar until a major bank accepts it transactionally.

The mining exchange rate is a major problem to all that...its arbitrary. How much BTC does a miner get per found/completed transaction? Who decides that? If you research it the answer is......um.....Mr. Bitcoin?.....it just 'is decided'......

That's gotta change IMHO

Re:^this (1)

Anonymous Coward | about 8 months ago | (#45571161)

I am sick of reading you post this all over the place. It is decided by the protocol. Those values were decided @ the beginning and coded in. You can read the code. I'm not going to waste my time to find it, but you can if you wish. It's all open source. Read the code and figure it out, but stop writing "ZOMG! Conspiracy! Who decides it? Arbitrary!" Do some research you tard. You sound like fucking Bill Oreilly.

Re:Bitcoin hype over? (0)

Anonymous Coward | about 8 months ago | (#45570737)

You don't need to exchange Bitcoin into currency to use it. If you can buy things with Bitcoin without any cash being involved at any point you can still use it.

And you have the answer there already. It is a very very very big if.

I can't buy food or pay my rent with bitcoins. Neither can I pay my electricity bill nor fiber connection. So if I want to mine coins at home, the coins I get cannot pay for the infrastructure I need (shelter, sustenance, power) to mine and potentially use them.

Sure, if more places accepted bitcoins it would be fine, but the day my local grocery store or my electric company starts accepting bitcoins, that will be the day the government will make sure that they get their cut of the taxes and people will no longer be interested in using bitcoins for the reasons they use them today.

I would like to see a global currency work, but I have very strong doubt that bitcoin is that currency.

Re:Bitcoin hype over? (1)

istartedi (132515) | about 8 months ago | (#45570553)

People have to **USE** Bitcoin or Bitcoin dies..

It "dies" in the sense that it fails as currency. That doesn't necessarily mean that it loses value. Many things have value but are not used as currency.

For example, any given art collection at a major museum is a financial success in terms of wealth preservation; but a failure as currency. Nobody trades fractional Metropolitans. Any sales to or from the museum are converted into currency first. Auctions are conducted in currency, etc.

You might say that comparing bits to art is ridiculous, since one has aesthetic value and can draw tourists and the other doesn't. Art, however, is a matter of taste. All value apart from bare essentials like food, shelter and clothing is somewhat of a collective delusion. There's nothing to bar one BitCoin from beating the Mona Lisa, except taste.

Re:Bitcoin hype over? (0)

Anonymous Coward | about 8 months ago | (#45570757)

I will bet a lot of money that, if BitCoin fails as a currency, it will never beat Mona Lisa.

I would bet a significantly lesser amount of money that BitCoin will fail as a currency.

In fact, I have bet that, by *not* buying in even though I keep seeing it go up and up and figure that if it becomes a worldwide currency it pretty much has to go up a lot further. Though I kind of regret not buying at least a little at single digits when I was considering it for the bubble effect at this point.... If I was prescient enough I could have retired.

Re:Bitcoin hype over? (0)

Anonymous Coward | about 8 months ago | (#45570579)

magic the gathering ox. seriously. they traded magic cards before bitcoins came along.

Re:Bitcoin hype over? (1)

dasacc22 (1830082) | about 8 months ago | (#45570793)

People have to use it?! Of course! and banks aren't part of the equation for decentralized currency. So see, you took a valid issue here, people need to use bitcoin, but left off the important part, "as intended".

Bitcoin is a decentralized currency and people are going to have to learn what that really means and how to use it properly for bitcoin to succeed.

Re:Bitcoin hype over? (2)

Kiuas (1084567) | about 8 months ago | (#45571035)

People have to **USE** Bitcoin or Bitcoin dies...until you can directly exchange Bitcoin to currency this will just be an elaborate hoax.

The ease of exchange is not nearly the only problem with BC. Let me list a few others:

1. Deflation. Because there's a set cap on the total amount of Bitcoins that can ever exist (made worse by the fact that it is possible for coins to disappear permanently, limiting the supply even more), the currency is by nature deflationary (this does not however mean that it cannot go down in value but I'll get to that later). Deflation is of course good for those who use BC for investment/speculative purposes, but very bad for anyone wanting to actually use it for trade. For the consumer, having currency that looks like it will be worth more next week than now does not really encourage spending in any way. Pricing is difficult as hell because of the deflation since you have to keep adjusting prices down because of the deflation (and people have to convert the amounts to standard currencies anway, because saying something is worth "0,02 bitcoins", doesn't really tell you anything unless you go and check how much the current rate is)

2. Useability: let's be honest: what's the one thing people use BC for at the moment in addition to speculating? Paying for suspicious goods or services online. And I know there are other things you can get with bitcoins as well, but the main reasons people exchange their regular currencies for bitcoins is because even though BC is not anonymous (unlike some people think), it's the closest/most used equivalent we currently have for cash in the online world, making it the currency of choice for those who want to order something which they do not want to get caught buying (not just drugs btw, gambling is also a big thing with BC).

Now, these two factors are entwined: currencies only have value because people expect that they will be accepted (ie. retain their value) later on. In the case of bitcoin, the reason the value has shot up as fast as it has, and what makes it so lucrative at the moment for speculators, is the 'quasi-anonymous' nature of it - and services such as silkroad. That is to say, in a completely hypothetical scenario wherein drugs would become legal to buy and sell online using 'old fashioned' currencies the price of the BC would likely plummet fast. Now, while such a scenario seems rather unlikely, it's just meant to show how dependent BC currently is on such sites/services. For reference, this [wikimedia.org] is what happened to the exchange rates of bitcoin when silkroad was closed. Which gets us to the third point:

3. Volatility. Right now BC has been fairly steadily increasing in value, as people have become more interested in it, but there is no guarantee that this situation will continue. In fact, looking at the rather massive increase in value [wsj.net] and comparing it to a classic model of a bubble [thereformedbroker.com] (got the links from a recent BC story and its comments here on /. but unfortunately I no longer remember the original poster) one cannot help but to wonder how long it will keep rising before it eventually comes down. How hard and how fast it will come down is another question, and I'm not saying it will necessarily crash and burn over night but there is no reason to assume the rise will continue indefinitely. If the early adopters start dumping their coins, if more popular BC based sites are shut down by the officials, or if someone develops a new, more anonymous/easier to use 'online cash' type of currency or a number of other things happens BC will lose its value quickly.

You're right, people need to use bitcoin or it dies, but the essential question is: would you be confident in having large sums of money in a form which makes it very hard to predict how much it will be worth in a couple of months, and with which you can buy hardly anything outside certain online products and services, and even in those the only benefit you'll get from using bitcoins compared to regular currencies is that it makes it harder (but not impossible) to trace the purchase to you. Even if stores started accepting BC at large tomorrow, I'd still prefer to do my shopping in Euros because it would be easier, and even though regular currencies are by no means stable either all the time, I have more faith in government backed currencies maintaining their value in the long run than in Bitcoin.

Bitcoin is not a total hoax, because it does have its uses. Nevertheless, looking at the way it is build and its current state, it's closer to a pyramid scheme than an actual working currency model.

Convenient timing (0)

Anonymous Coward | about 8 months ago | (#45570351)

Yes, we all want Bitcoin to keep falling.

No, this being posted on Slashdot right now will probably not make people keep selling to lower the price. Sorry.

Re:Convenient timing (1)

khallow (566160) | about 8 months ago | (#45570411)

Let me guess, you're a "bitshort". I'm here all week.

Mine are safe (4, Funny)

raftpeople (844215) | about 8 months ago | (#45570353)

in the couch

Re:Mine are safe (0)

Anonymous Coward | about 8 months ago | (#45570591)

I keep my Bitcoins safely buried in a Scottish garbage dump!

Idiots (3, Insightful)

wbr1 (2538558) | about 8 months ago | (#45570359)

Keep...your...own...fucking...wallet...

I do. Encrypt and backup your wallet.dat file. When you restore it, even if it is old, you can rescan the block chain and have all your funds. Except for transfers, why hand your entire wallet to someone? Would you do that on the subway, or in walmart?

Re:Idiots .. use a VM (4, Informative)

Billly Gates (198444) | about 8 months ago | (#45570407)

... and use a VM just for that purpose. Since I do IT I have a copy of VMware workstation and will utilize this for just that purpose to play it safe.

I have one for porn and one I am going to make for litecoin trading as bitcoin is too expensive already :-(

Firefox and Chrome with flash can get you just as infected as IE under Windows in this day and age so any browser is bad. A VM is the only way to stay safe sadly.

Re:Idiots .. use a VM (4, Informative)

wbr1 (2538558) | about 8 months ago | (#45570419)

If you are really paranoid, you can use whonix, which puts a vm in a vm, piping everything through tor and preventing just about any leak of IP information or exposure of OS exploits.

Re:Idiots .. use a VM (1)

Billly Gates (198444) | about 8 months ago | (#45570471)

Thanks man!

I work hard for my limited money and something like this is a life saver in case I get a trojaned mining app or a website. This will prevent it from getting through.

I

Re:Idiots .. use a VM (0)

Anonymous Coward | about 8 months ago | (#45570875)

a vm in a vm

Yo dawg I heard you like VMs so I put a VM in your VM so you can VM while you VM.

Re:Idiots .. use a VM (1)

joe_frisch (1366229) | about 8 months ago | (#45570533)

Properly setting up a VM, or in fact doing any proper security or even backups is beyond the abilities of most people. If those sorts of measures are required, bitcoins can't become a universal currency.

Re:Idiots .. use a VM (0)

Anonymous Coward | about 8 months ago | (#45570697)

> If those sorts of measures are required, bitcoins can't become a universal currency.

I agree with the insight in concept, but I don't think maintaining a server would be the defacto way to manage any serious currency. This is the stone age of cryptocurrencies. The fact that bitcoins are often stored this way, now, is an opportunity for another cryptocurrency to address the problem.

Re:Idiots .. use a VM (1)

Billly Gates (198444) | about 8 months ago | (#45571049)

Properly setting up a VM, or in fact doing any proper security or even backups is beyond the abilities of most people. If those sorts of measures are required, bitcoins can't become a universal currency.

This is the attitude of someone who is poor or broke. Those who want to make it find a way to do it and learn. VMs are mentioned for anyone who wants to learn about security and computers. If you are investing your hard earned savings it is prudent. I think even Grandma knows about hackers and how things are not always safe. Before you invest real money you research.

I am still researching wallets and transactions as I type this even though I am in IT. I want to prepare before I take the scary step of using a my bank debit card to buy shit off God knows where. Always prepare.

Re:Idiots (3, Informative)

timeOday (582209) | about 8 months ago | (#45570539)

Actually it is idiots that keep all their savings in their own wallets, or in paper bag in the freezer, or buried in the yard. Whereas normal people do entrust their saving to complete strangers, all the time, in a thing called a "bank." This turns out to be much safer than holding it yourself, thanks to "regulations" enforced by "governments." Kind of impressive if you step back and think about it.

Re:Idiots (1)

EdZ (755139) | about 8 months ago | (#45570559)

Encrypt [...] your wallet.dat

And for goodness sake write down your password somewhere. Or you end up with a wallet full of a handful of bitcoins you acquired ages ago but now can't do anything with.

I'll stick to real money thanks (2)

viperidaenz (2515578) | about 8 months ago | (#45570479)

If someone hacks my bank and steals my money, the bank replaces it.
If someone steals my wallet and takes off with my credit cards, I'm not liable for the transactions.

Re:I'll stick to real money thanks (1)

Anonymous Coward | about 8 months ago | (#45570589)

That is a service you pay for via taxes and bank charges. In a bitcoin economy you could pay an insurance company for the same security at the same or probably lower cost.

Regards,
Tagide
dotbit.me

Re:I'll stick to real money thanks (2)

Billly Gates (198444) | about 8 months ago | (#45571077)

Ok

Where can I sign up for such a security policy? I am willing to to even have them take 5% or more of my earnings for security as I have to share bank account or credit card info to buy and sell and that scares the shit out of me more than losing some bitcoins!!

Re:I'll stick to real money thanks (0)

Anonymous Coward | about 8 months ago | (#45570595)

Unless it's the bank or the government that steals it.

Re:I'll stick to real money thanks (1)

Nyder (754090) | about 8 months ago | (#45570649)

If someone hacks my bank and steals my money, the bank replaces it.
If someone steals my wallet and takes off with my credit cards, I'm not liable for the transactions.

Cept bitcoins aren't credit card, they are money.

So if you had any cash in your wallet, that would be gone and you could NOT replace it, much like bitcoins.

Re:I'll stick to real money thanks (0)

Anonymous Coward | about 8 months ago | (#45570779)

Unlike real coins you'd get to sit back and watch how your money was being spent.

Amateurs at best ... (0)

Anonymous Coward | about 8 months ago | (#45570537)

If you want to see how the pros do it, look back at the recent history
of Lehman Brothers, or Countrywide Mortgage. THAT is how you
steal, and the numbers involved are staggering.

Re:Amateurs at best ... (0)

Anonymous Coward | about 8 months ago | (#45570661)

The Fed can provide elasticity though. It creates new currency, so that deflation doesn't happen. Deflation benefits banks more than borrowers. So eventually you get a system where hoarders rule, and silos of grain rot while others go hungry, because "I got mine Jack, keep your hands off my stack."

uh... (2)

Tom (822) | about 8 months ago | (#45570831)

'You don't have to keep your Bitcoins online with someone else.

In fact, why in all hells would you even think of storing your wallet with someone else??? I'm fairly new to bitcoin, but the thought was so far from my mind that it took me a while to understand what the problem with these kinds of attacks was.

Don't people get it that Bitcoin is money? Storing your wallet on someone elses server is like giving them your money. You do that with a bank, but not with some random Internet site.

Re:uh... (1)

Billly Gates (198444) | about 8 months ago | (#45571063)

Well that or you give out your bank account or credit info on these sites.

I mean you need to buy and sell them with real currency right? Right now I need to find a trustworthy place and that is my weakness. I want to invest but do not trust anyone listening via a man in the middle or the server being compromised or worse having it store my info so the Russian mobfia can have it.

If you have an alternative I want to hear it?

This (0)

Anonymous Coward | about 8 months ago | (#45571113)

Also, how did a value, any value, ever get assigned to a bitcoin? US currency was originally backed by gold, i.e. replaced gold over time (through the ultimate shell game). I don't grasp how bitcoins ever had any value at all. It is like saying Pac Man world records have a monetary value.

A backup question. (1)

Registered Coward v2 (447531) | about 8 months ago | (#45571071)

If I store my wallet offline and create an exact copy, how does someone know which is real? If someone stole one wallet what's to stop transactions from a backup?

gnolololo (0)

Anonymous Coward | about 8 months ago | (#45571111)

Step one - Collect Bitcoin
Step two -
Step three - Profit!

I know, I know, Step two is actually play the hacked card take all their users money. BC is like the fucking wild west right now, not gonna lie it's pretty fun.

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