Bitcoin ebbs and flows

Wanna see where the bitcoin horde is going?  Fiatleak has a real-time tracker of bitcoin transaction flows.  Not exactly an anonymous currency. (update: this tracker seems to be inoperative.  Perhaps it has the bitcoin curse, and is offline for good.  I am leaving it up for now … just because)

fiatleak_sm

Bitcoins are certainly not without their problems.  A biggie is theft, as Bitcoins worth millions have been pilfered from user accounts, who then have no legal recourse.  Bummer.

More problematic to my mind is that, in the big scheme of things, Bitcoins are tightly held, which suggests they are highly prone to market manipulation.  One study estimates half of bitcoins are owned by a mere 927 people.

Finally, the whole Bitcoin mining thing leaves me wondering how close-ended and secure it really is.  Proponents would have you believe that there are a finite number of Bitcoins that can be created, and that they cannot be forged due to the complexity of a foolproof algorithm.  Umm, yeah, right, foolproof.  In the Web 3.0 age of total insecurity.  With the NSA and dozens of lookalikes in governments around the world, how long will it be before the mining algorithm is cracked.  I think digital currency will end up like everything else digital, cracked, hacked and insecure.

Additional reference:

  • A list of more than 200 crypto-currencies and their current market value
  • Think your BitCoins are safe?  Think again.  Silk Road 2’s $2M BitCoin cache was plundered using a vulnerability in the Bitcoin protocol known as “transaction malleability” to repeatedly withdraw coins from an account until it was empty.
  • “Pony” botnet steals Bitcoins from owners’ computers. Botnets are collections of infected computers that take orders from central “command and control” servers. The botnets steal data from compromised PCs and can also deliver other types of malware that force them to perform tasks.  This is at least the third type of fraud to surface involving digital currencies. Criminals have previously hacked into marketplaces where digital currencies are traded by exploiting security flaws in those sites, then stealing those currencies. Cyber criminals have also developed botnets that force enslaved computers to create, or “mine”, digital currencies, which the botnet operator then claim as their own.  A representative for the Bitcoin Foundation, a trade group that promotes adoption of the virtual currency, advised bitcoin users to store their currency offline in a secure location to prevent cyber criminals from stealing them.
  • Mt. Gox, the largest Bitcoin exchange for most of the virtual coin’s existence, has filed for bankruptcy after months of technological problems and what appeared to have been a major theft.  The company appears to have lost 744,000 Bitcoins in a theft that had gone unnoticed for about 2 years. That would be about 6 percent of the 12.4 million Bitcoins in circulation, and $350 million at current prices.  Hackers had been exploiting a bug in Mt. Gox’s bitcoin wallet for two years, and even removed bitcoins from supposedly secure “cold” wallets that had been stored offline. Typically, cold wallets are disconnected from the internet and cannot be emptied by online attackers. However, according to a leaked document, the “cold storage has been wiped out due to a leak in the hot wallet.”  Speaking to reporters at Tokyo District Court Friday after the bankruptcy filing, Mt. Gox owner Mark Karpelès said, “I apologize for causing trouble,” so I guess everything is ok.  Here also is a Wired article on the Mt Gox story.  Finally, South Park has something to say about this, the classic “… and its gone.”
  • Another Bitcoin exchange bites the dust after hack and theft of 896 bitcoints, worth about $600k.  I wonder if this is an effort by “the establishment” to undermine confidence in virtual currency.  If so, it is probably working.
  • Singapore-based Bitcoin exchange platform First Meta’s 28 year old CEO, Autumn Radtke, committed suicide, or was suicided.
  • Some excellent sleuthing by The Willy Report suggests Bitcoin (BTC) was being gamed by someone inside MtGox. In addition to driving up the price of bitcoins, the perpetrator likely made off with millions of dollars in bitcoins.  The fraud seems to have been perpetrated through a bot that that was placed on the MtGox servers.  The bot bled off bitcoins by making systematic “purchases” of small amounts of bitcoins every few minutes, even when the MtGox networks were down.  Many of the purchases were done without paying for the bitcoins, and many seem to have been purchased at lower than market prices.  In addition to the pilfering, it was manipulating the price upwards.  What a scam!
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