I don't know much about Bitcoin, but I found this thread absolutely riveting. Thanks to RLP for posting the original story here! This is the first comment in the linked thread, a plea from the victim:
I just got hacked - any help is welcome!
June 13, 2011, 08:47:05 pm #1
Hi everyone. I am totally devastated today. I just woke up to see a very large chunk of my bitcoin balance gone to the following address:
Transaction date: 6/13/2011 12:52 (EST)
I feel like killing myself now. This get me so f'ing pissed off. If only the wallet file was encrypted on the HD. I do feel like this is my fault somehow for not moving that money to a separate non windows computer. I backed up my wallet.dat file religiously and encrypted it but that does not do me much good when someone or some trojan or something has direct access to my computer somehow.
The transaction sent belongs rightfully to this address: 1J18yk7D353z3gRVcdbS7PV5Q8h5w6oWWG
Block explorer is down so I cannot even see where the funds went.
I tried restoring an earler backup of my wallet but naturally that does not work because the transaction has already been validated.
Needles to say I feel like I have lost faith in bitcoin.
Anyone have any ideas what I can do besides just jump off a bridge?!
To summarize, this guy had 25,000 Bitcoins stolen from him around noon on Monday. At that time, Bitcoins were trading for around $20 each, so he lost almost $500,000 worth of Bitcoins!
I'm just learning some of the technicalities of Bitcoins now, so please correct me in the comments if I get anything wrong. I imagine this will make for a lively discussion!
It seems Bitcoins have been quite a trade recently, running from less than half a penny up to $30, back down to $10, and up again to $20. Here's the chart:
Click to enlarge
This guy that was hacked did not buy his Bitcoins. He earned or "mined" them by working on the system from his home computer. They used to be something like 260 Bitcoins = $1. On Feb. 9, 2011 they reached parity with the dollar. Today 260 Bitcoins = $5,000. So someone who earned $100 worth of Bitcoins "mining" last year could have $500,000 this year, with a peak just a week ago at $800,000. These guys, like our victim above, call themselves "early adopters." I suppose that is in contrast to someone who would pay $20 for a Bitcoin today being a "late adopter?" If this sounds a bit like a pyramid to you, you are not alone.
Bitcoin appears to have achieved something remarkable, a digital unbacked currency that is truly untethered to any institution. These Bitcoins exist only as digits on your computer, yet they can be taken (stolen) as if they were a physical item, with no recourse. If I would have money stolen from an online account with my credit card company, bank or even PayPal, I could have that transaction reversed within a reasonable amount of time. But with Bitcoin, transactions are final and irreversible unless the receiver voluntarily chooses to give them back.
But it gets even weirder. We can all take a look at these stolen Bitcoins online, right now! They are sitting right here! Just scroll down to the 25,023.93 transaction. There's your thief, and there's the loot! And there's nothing you can do about it!
In a sense, it seems, Bitcoins have something in common with physical gold coins. Once they're stolen, they're as good as gone.
One of the debates on the Bitcoin thread linked at the top is whether it is more likely this theft went down in cyberspace or, as they call the real world, in "meatspace." In other words, there are two ways this heist could have been carried out. This kid apparently had all his Bitcoins sitting in one "wallet.dat" file on his computer. It might have been taken by a hacker who could be anywhere in the world, China, Russia, wherever. Or it could have been taken by someone he knows IRL (in real life), who knew that he had a $500,000 windfall hoarded on his hard drive, and somehow gained physical access to his computer.
The attractive qualities of Bitcoins are that they are private, anonymous, discreet, they are outside of the banking and fiat system, they exist in a limited and verifiable quantity and they cannot be counterfeited or printed by a central bank or government. In other words, they have many of the same qualities as physical gold except the physicality. And just like Bitcoins, your physical gold coins can be stolen. And once they're stolen, they're gone. No central authority to get them back for you. But at the same time, with physical gold you only have to worry about "meatspace." What do you think? Is this a +1 for gold?
In all fairness, another analogy I should point out is that one of the criticisms of Bitcoin is that the "early adopters" come out way ahead. Just like our victim above (up until Monday at noon). And this is not too far off from what some say about Freegold. So I ask you, is it the same? Here's what one article says about it:
One of the hot button issues around Bitcoin is in the way it disperses early-stage currency. The system of mining, because it decreases rewards over time until it stops altogether, means early adopters come out ahead — way ahead, in a situation where large percentages of the total number of Bitcoins ever to be made end up in the hands of the first miners.
Some take it a step further and claim that the ideological rationale given for Bitcoin is just a smokescreen for its true purpose as a get-rich-quick scheme for those founders and early adopters. These people claim that those driving Bitcoin right now are working to build a currency to a point where it has a reasonably strong economy so that they can cash out and leave it hanging.
So what do you think of Bitcoin? Is it a good idea? Is it the next big thing? Are you going to rush out and buy some? Would it be a good transactional currency alongside Freegold?
Do you think Bitcoin is competing for the role of primary medium of exchange against currencies like the dollar and the euro? Or is it actually competing with the secondary media of exchange for the focal point prize? Or is it trying to be both, at the same time? Or is it really just Bernie Madoff dressed up as an Anarcho-Capitalist?
And what about the great Bitcoin heist of 2011? If you were still hoarding half a million in Bitcoins after reading that thread, would you continue to sit on them? Please tell me your thoughts. I know Bron is interested in this subject as well. Maybe he'll show up with a comment or two.