A epistel history of Bitcoin hacks and frauds, Ars Technica

A epistel history of Bitcoin hacks and frauds, Ars Technica

Bitcoins have bot a succulent target for hackers since 2011.

by Timothy B. Lee – Dec Five, 12:30 pm UTC

There’s a loterijlot of excitement about Bitcoin right now, with the value of the cryptocurrency recently soaring above $11,000—more than Ten times its value at the commence of the year. This has caused many people to wonder if they should be getting involved ter the Bitcoin craze.

But it’s significant to keep te mind that participating te the Bitcoin economy comes with big risks. Overheen the years, the Bitcoin world has bot plagued by hacks, scams, and abusive practices. Users who don’t take adequate precautions can lose everything.

Here wij present a brief history of the Bitcoin world’s most significant scams and hacks. It’s worth noting that all of thesis attacks were against Bitcoin-related services, not the core Bitcoin software. Spil far spil wij know, the Bitcoin network itself is very secure, tho’ of course that’s little convenience if you entrust your bitcoins to a third party that gets hacked.

Also, the list seems to skew toward older incidents. Users seem to have faced greater dangers of hacking and fraud te 2011 and 2012 than they do today.

Still, the dangers toevluchthaven’t gone away by any means. The Bitcoin economy is still lightly regulated, and fraud is a onveranderlijk danger. While it might seem tempting to buy some bitcoins ter hopes they’ll go up te value, the risks are high—perhaps too high for most people. If you do determine to acquire bitcoins, do your research and be careful.

June 2011: Bitcoin user loses $500,000 te bitcoin to hackers

Te early 2011, Bitcoin had bot a tight-knit community of hobbyists. Mining bitcoins wasgoed lighter back then: people could generate thousands of bitcoins using a conventional huis PC.

That’s what allinvain, a user on the Bitcoin Talk forums, claimed to have done, amassing a fortune of 25,000 bitcoins. Bitcoins were worth pennies te 2010, but, by early June 2011, the price of bitcoins had soared to $20, making his bitcoins worth around $500,000.

Then, on June 13, disaster struck for allinvain. “I just woke up to see a very large chunk of my Bitcoin recuento gone,” he wrote. Allinvain believed that someone had hacked into his PC and stolen the bitcoins from his hard drive, transferring them to an account managed by the hackers.

If those coins had not bot stolen—and he’d held on to them until today—they would be worth around $250 million.

August 2011: Wallet service MyBitcoins vanishes from the Web

Bitcoin wallet services suggest to store bitcoins on users’ behalf. Thesis were originally portrayed spil a convenience to the customer, but many of them turned out to be either insecurely run or outright frauds (it can be hard to tell, since the frauds tend to voorkeur they were hacked).

One wallet service that wasgoed popular ter Bitcoin’s early days, for example, wasgoed called MyBitcoin. Te August 2011, the company disappeared from the Web, claiming the webpagina wasgoed hacked.

This and similar practices have made the Bitcoin community suspicious of online wallet services. With no existente regulation, there’s no way for users to verify that a wallet service is reliable.

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An exception to this is client-side Web wallets like the one suggested by Blockchain.informatie. Ter thesis services, customer gegevens is only stored te encrypted form on the server. Gegevens is encrypted on the client side with a customer-provided password. That treatment makes users less débil than traditional wallet services where the service provider has ongezouten control of the bitcoins.

March 2012: Hacked Web host leads to stolen bitcoins

Hackers exploited a vulnerability te the collective online web host Linode to steal at least 46,703 bitcoins—then worth more than $200,000—from several Linode users. That included more than 43,000 bitcoins stolen from Bitcoinica, an early Bitcoin exchange.

Bitcoinica suffered a 2nd hack ter May 2012 that cost the company another Eighteen,000 bitcoins. It wasgoed then taken offline for a security audit. Bitcoinica didn’t get through thesis incidents. Te August 2012, the webpagina wasgoed sued by several users seeking the comeback of $460,000 ter deposits.

One lesson of the Linode ineenstorting is that Bitcoin-related businesses have to be enormously careful when operating on collective hosting providers. Bitcoins are secured by encryption keys. If any third party—either other customers or rogue employees—has access to customer gegevens, they will be able to read the encryption keys and use them to transfer bitcoins away from their owners.

August 2012: Bitcoin Ponzi scheme is shut down

The Bitcoin Savings and Trust wasgoed a classic Ponzi scheme. Customers were lured ter with a promise of high returns—seven procent vanaf week—and fresh customers’ deposits were used to pay profits to previous customers.

The scheme shut down ter August 2012, and a year zometeen the government indicted organizer Tendon Shavers. The government accused him of raising more than 700,000 bitcoins from gullible customers. Te 2014, a judge ordered Shavers to repay victims more than $40 million. The judge found the scheme had cost victims 265,678 bitcoins.

September 2012: More exchanges get hacked, shut down

Te September 2012, a Bitcoin exchange called Bitfloor suffered a catastrophic attack. Attackers stole 24,000 bitcoins, then worth around $250,000. Bitfloor didn’t have $250,000 ter reserves, so the theft effectively made Bitfloor insolvent.

Bitfloor resumed operations a few weeks zometeen, hoping to earn enough ter fees to repay earlier customers. But the effort wasgoed unsuccessful, Bitfloor closed its doors for good ter April 2013, leaving frustrated users ter its wake.

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February 2014: Hackers bring down the world’s then-largest exchange

The Bitcoin world’s thickest financial fiasco wasgoed the collapse of Mt. Gox—then the world’s leading Bitcoin exchange—in 2014. Operated by French-born CEO Mark Karpelès from a headquarters ter Japan, Mt. Gox wasgoed the main way people bought and sold Bitcoins from its foundation te 2010 until February 2014. Then Mt. Gox announced that 850,000 bitcoins had gone missing—likely stolen by hackers, the company said.

At early 2014 prices, those bitcoins were worth around $450 million. Today, they’d be worth $8.Five billion.

Te July, US law enforcement officials announced they had arrested a suspect ter the massive theft. A Russian man named Alexander Vinnik wasgoed the proprietor and technicus of a challenging Bitcoin exchange called BTC-e. The feds allege that he knowingly accepted stolen bitcoins from Mt. Gox and laundered them through his own bitcoin exchange.

The collapse of Mt. Gox left no shortage of angry customers. Ironically, the continued appreciation of Bitcoin’s value means that the bankrupt company could eventually be able to repay its debts te full—with piles of money left overheen. Mt. Gox’s assets and liabilities were frozen while the company worked through the bankruptcy process. The liabilities were frozen te terms of Japanese yen, while the company’s remaining bitcoins have ballooned te value—from around $400 each at the time of the bankruptcy to around $11,000 today.

Obviously, Mt. Gox’s former creditors believe they should be repaid te appreciated bitcoins, but Japanese law might not be on their side.

January : Bitstamp exchange is hacked

Ter January , the popular Bitcoin exchange Bitstamp reported that it had lost around Nineteen,000 bitcoins, then worth about $Five million. The exchange survived the attack and remains a leading Bitcoin exchange today.

August : Another exchange loses 120,000 bitcoins to hackers

Te August , the Bitcoin exchange Bitfinex announced that hackers had stolen $77 million worth of bitcoins. The company foisted thesis costs on to users, forcing them to take a 36-percent reduction ter the value of their deposits.

Bitfinex is still around, but there are big questions about the company’s credibility. Spil the Fresh York Times puts it, Bitfinex is an “opaque operation that provides no information on its webstek about where it is or who operates the company.”

2 comments

  1. I like bitfinex, but they had very high fees for withdraw. That’s sad.

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