14 ms·

Bitcoin's $137k Jackpot

299 points by cynthiar 10y ago

hughes 10y ago
This reminds me of a similar error from 2005[1] where a trader mistook the "price" and "quantity" fields of the trading software. Instead of selling 1 share for 610,000 yen, 610,000 shares were sold for 1 yen. The mistake cost around $225 million. [1] http://www.foxnews.com/story/2005/12/09/typing-error-causes-225m-loss-at-tokyo-stock-exchange.html http://www.foxnews.com/story/2005/12/09/typing-error-causes-...
- Cyph0n 10y ago
  Damn that's huge. You'd assume that the software checks the dollar amount and asks for a confirmation, or better yet permission from a higher up, if it exceeds some value.
  - joering2 10y ago
    it does ask for confirmation. As OP wrote - it was an error, NOT a mistake.
    - Cyph0n 10y ago
      I don't see what you're getting at. The trader switched price with quantity - it was a human mistake. If the software had brought up a warning with something like "you are selling each share for less than 610000 +- 10000, please confirm", this could have been avoided.
    - randyrand 10y ago
      What a silly semantic argument to make. It was an error and a mistake. In fact, error is a synonym for mistake: https://www.google.com/search?q=mistake&oq=mistake&aqs=chrome..69i57j69i60l2&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=mistake&oq=mistake&aqs=chrom...
    - madeofpalk 10y ago
      He actually said both :) But I don't understand the difference in this situation.
  - Houshalter 10y ago
    The problem with confirmation is it trains the human to always press "yes". You need a system that only activates if something really unusual or wrong.
    - gertef 10y ago
      unusual, like paying 1 billion times over recent prices?
      - nxzero 10y ago
        A billion times over market price, funny; who in their right mind would even pay 20x over market price in any meaningful amount without requiring some sort of control?
        salgernon 10y ago
        See also rm -rf
      - Houshalter 10y ago
        Yes of course. I'm just saying that usually these systems are badly designed, and recognizing errors correctly is a surprisingly hard problem. In the medical world, many people have been killed by mistakes in prescriptions, despite everything going through computers and multiple humans checking it. The problem was that the machines were too sensitive to mistakes and trained the humans to ignore warnings. They also didn't distinguish mild warnings from extreme warnings. E.g. a prescription being 2x larger than recommended, or 100x larger than recommended, which are very different situations. A well designed interface might have different shades of red for different levels of severity. To give an indication if something is really wrong.
        speeder 10y ago
        My mother use computers all day, and also hates them and think they are illogical. In a way she is correct, I saw her many times freaking out at a dialog box and calling me to "fix it", and it was just some absolutely useless "warning", but I also saw her many times clicking "ok" on a important message without reading and then wondering why things broke.
  - jameshart 10y ago
    The transaction value is the same either way - 610,000 Yen.
    - Matthias247 10y ago
      But it should be able to check the current share value and then display a warning that this would be massive loss.
      - pbhjpbhj 10y ago
        It's more nuanced than that though isn't it - you can sell shares at a loss to push the market so you can buy and profit off the rebound (ie go short)? Kinda like losing your queen in chess in order to check-mate your opponent.
        Rexxar 10y ago
        This is market manipulation and it's illegal nearly everywhere.
  - patio11 10y ago
    It got flagged multiple times and, each time, someone at the Tokyo Stock Exchange came to the conclusion that they didn't have the authority to countermand the order. The regulator was livid about this in the report.
  - KMag 10y ago
    2005 was ages ago in terms of financial markets. It was before the housing crash and other financial crises (notably in Greece). It was before the flash crash and other notable electronic trading incidents. Many world equity markets now have daily up/daily down limits a certain percentage above and below the previous day's closing price. Others will pause trading for a short period of time if short-term price moves are abnormally large. Many equities markets only allow direct connections to the market from brokerages licensed by the country's financial regulators. These days, brokerages often implement their own sanity checks on many order flows. Joe's Live Bait and Stock Trading generally isn't connecting directly to any equity trading venue. I'm curious what the effect would be of a market switching to second-price blind auctions every 5 minutes if a stock moves up or down 5% on the day. There are academic papers showing theoretical stability advantages of second-price auctions. Trading at the second-highest bid when the market is down more than 5% and at the second-lowest ask when the market is up should help to attract one-sided liquidity in the direction of market stability.
- samstave 10y ago
  That reminds me of the time when, in 1989, I was playing trade wars, on a bbs out of San Jose; I was attempting to corner the market on wheat in the galaxy as I had pretty much all of it... I smoked pot and instead of buying all the available wheat, I sold all I had. Ruined my monopoly on wheat....
- artursapek 10y ago
  A famous trader known as BNF really capitalized on this incident. http://www.bloomberg.com/news/articles/2014-09-25/mystery-man-moving-japan-made-more-than-1-million-trades http://www.bloomberg.com/news/articles/2014-09-25/mystery-ma...
- XaspR8d 10y ago
  > Worse still, the number of shares in Mizuho's order was 41 times the number of J-Com's outstanding shares, but the Tokyo Stock Exchange processed the order anyway. There are a lot of simultaneous errors going on here...
  - kordless 10y ago
    Features, not errors.
  - fiatmoney 10y ago
    Stock exchanges really cannot be expected to track numbers of outstanding shares. One puts in a bid or an ask, indicating that one is willing to purchase or sell the given number at the given price, and an order type, indicating the manner to fulfil (fill-or-kill, limit to a certain price, take whatever outstanding offers are necessary...). This is more than enough nuance for a professional product like a stock exchange that needs to operate at microsecond cadence. If you want to validate whether an order makes sense or is a "good idea", the place to do it on the client.
    - derefr 10y ago
      Coming from a perspective of competitive multiplayer game networking, that seems insane. You can't trust the client. An ideal stock exchange, I'd think, would include the same sort of logic as a payment processor: blocking any orders that seem to be "not the sort of order this client would make", to prevent e.g. orders being executed by people who have illegitimately gained access to the account. Of course, these type of algorithms typically take far more than microseconds to run—but that's fine, as long as they take the same time for everyone.
      - hueving 10y ago
        A stock exchange isn't responsible for tracking how much outstanding stock there is. The purpose of an exchange is just to match orders, not to determine if they are insane. Expecting otherwise would be like expecting eBay to determine that your buy it now price is too low or that you don't have enough inventory on hand to fulfill your listings.
- DanBC 10y ago
  There's even a name for this - "Fat finger error". https://en.wikipedia.org/wiki/Fat-finger_error https://en.wikipedia.org/wiki/Fat-finger_error
  - artursapek 10y ago
    I think fat finger is more like adding too many zeros, or hitting the wrong numbers on the keyboard. This incident was a UI confusion; entering correct values in the wrong inputs.
    - jackgavigan 10y ago
      "Fat finger" has become a generic term that would encompass this type of error.
taesu 10y ago
I'd definitely keep that amount if I won it through mining. It's really hard swapping `amount` to `fee`, in coding, so I bet that this was a human mistake on sending btc, not coding mistake...
- cjbprime 10y ago
  I heard that the web interface on the exchange they used has fee and amount fields next to each other and with identical widgets (but different labels), so it's extremely easy to see how a human would make that mistake there.
- dghughes 10y ago
  Well aren't you an opportunistic prick.
  - jbmorgado 10y ago
    The correct working - in bitcoin culture - is "libertarian".
  - dang 10y ago
    This comment breaks the HN guidelines. Please (re)-read them and post civilly and substantively—or not at all—from now on. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newswelcome.html https://news.ycombinator.com/newswelcome.html
    - dghughes 10y ago
      True, I do apologize but seeing such evil makes me mad. And the user I was commenting to has removed their comment making it look even worse.
      - dang 10y ago
        I'm sure we all understand the feeling you describe and how irritating it is. I certainly do. But the essence of civility (or at least the hardest part of it) is containing that irritation and not letting it determine one's reaction. This is a work in progress for all of us, work that is necessary to make HN the kind of place we want it to be.
ryan-c 10y ago
> Remember that time when you tried to transfer your life savings from one bank account to another for a small fee, but swapped the fee field with the total transfer amount field, and ended up losing all your life savings? Of course you don't. There are safeguards to catch and prevent these kinds of errors. > > But this is a common occurrence in Bitcoin-land. This mistake is difficult, if not impossible, to make with standard Bitcoin software. The fee field is usually pre-filled and somewhat tricky to change, and newer versions of bitcoin-core will block transactions like this as obviously wrong. It should also be noted the bitcoin fees are implicit in transactions - a transaction will have some amount of funds going in, and some amount going out, and anything left over is the fee. Usually these types of mistakes actually happen when someone manually crafts a transaction and forgets that they need to make a change output for themselves. It is obviously still possible to create transactions like this, but it currently requires using advanced interfaces and deliberately bypassing safety measures.
- barkbro 10y ago
  The author(s) theory is that the mistake was made by a bitcoin laundering script.
- optforfon 10y ago
  I'm surprised that this even happens. It's so involved to make a transaction yourself. It's not like leaving your keys on the kitchen counter. It's more like building a house and forgetting to add a door
  - aws_ls 10y ago
    Basically, any client which can speak the protocol can send transactions. Normal human consumers use it via clients like multbit-hd (on Desktop) or any of the online wallets, which of course don't allow this mistake to happen, as they calculate the fee for you (online wallets add their commission as well). But as the article says, likely it happened via a script. But its a very costly mistake. I hope we know the real cause of it. Overall, I like the depth the article has gone into. But I don't agree with this sentence: the kind of script that swaps arguments by mistake may be the kind of script that does not write its keys out to a database, so the private keys may be long gone I think the article got it wrong. How can the private key be lost (and also logged to DB!)? The 291+ btc would have come from some public key. If that that public key has got more btc attached to it, then the owner surely still has the private key. Also even if its zero value now. The wallet (public-key) from which the money came, would still exist, and private key still there somewhere. So the miner can return the extra BTC to the same public key. Am I missing something?
thevibesman 10y ago
Thanks for the post, I enjoyed the read (haven't read much about bitcoin laundering). One small nitpick: > My payment is going to be with newly mined coins, the Bitcoin equivalent of fresh, crisp dollar bills straight from the Mint. Coins are minted, bills are printed, so only coins come from the U.S. Mint. Paper bank notes and stamps come straight from the Bureau of Engraving and Printing (way less fun to say though!).
- andirk 10y ago
  Also, you wouldn't want money coming straight from the Bureau because I'm sure the serial numbers would be so incredibly easy to track. For example, your bills have sequential serial numbers, or are clearly from the same batch. Better to have them straight from the Panama Papers.
  - thevibesman 10y ago
    > Better to have them straight from the Panama Papers. Haha, great point!
Bedon292 10y ago
Obviously I am missing something on this. How do you direct the transaction fee to a specific miner? I thought it just went out there for anyone to process. If you can, why don't people just direct all their transaction fees at their own mining operation or a friend they trust?
- woah 10y ago
  I think it goes to whoever gets the block it's in
- farmdve 10y ago
  Well, if the entity issuing the TX was colluding with a miner, they'd craft the TX and the miner would add it to their mempool without announcing it to the rest of the network. Then when and if this miner finds a block, it would include this transaction.
- natrius 10y ago
  Hand the signed transaction to that miner instead of broadcasting it to the network. It'll only get mined whenever that miner successfully mines a block.
- throwaway7767 10y ago
  Instead of sending the transaction out on the p2p network for any miner to include, you just send it privately to the specific miner you want to mine it. Nobody else knows about it, so they can't include it in their blocks. The problem (and the reason this really isn't a useful money-laundering method) is that people watch incoming transactions and blocks, and if a block is mined including a transaction that was not seen previously, it's a strong indication that there's collusion going on.
- sp332 10y ago
  Usually transactions are published on the network and anyone can choose to include them. But a miner can add transactions that no other miner knows about. Usually you don't want to do it because it takes a long and random amount of time for the transaction to go through (you have to wait for that specific miner to win a block). But if you're mining it yourself or in collusion with a specific miner, that's a tradeoff you can make.
mrpopo 10y ago
You can see a half-dozen of "mega-fees" on this graph[0]. The public nature of bitcoin transactions is very interesting. [0] https://blockchain.info/charts/transaction-fees?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address= https://blockchain.info/charts/transaction-fees?timespan=all...
placeybordeaux 10y ago
Pretty bad article, but I couldn't find any better. Looks like a solid chunk of the money traces pretty cleanly back to tradeBTC. I'd really like to find a good tool for exploring the graph of transactions. Most of the funding of the account that lost all the money have a similar pattern where a couple BTC is peeled off at each step and the majority goes forward in the chain till it all pools at 1QgTYzMYqStzZBQx8gguYaJQMjFRbagbh and gets spent. I wonder if thats just what TradeBTC transactions look like.
LAMike 10y ago
Some people say it was an act of money laundering by the pool that mined it.
LAMike 10y ago
Some people say it was an act of money laundering by the pool that mined it.
xigency 10y ago
Sort of unrelated but, "According to my calculation, a single Bitcoin transaction uses roughly enough electricity to power 1.57 American households for a day." http://motherboard.vice.com/read/bitcoin-is-unsustainable http://motherboard.vice.com/read/bitcoin-is-unsustainable I find this interesting thinking about Bitcoin as a currency. The first cryptographic currency example that I had read, from a cryptography book, didn't involve active power. I'm really surprised that Bitcoin has been able to gain this much popularity with its design. Does this explain how you might be able to lose a household-sized amount of money in a transaction on this network? I don't know, but I think that the blockchain idea might not be the ideal for digital currencies.
- shemnon42 10y ago
  Those older examples suffered from the "double spend problem" where you could spend the digital currency twice (or more). Kind of like cheque fraud. The Proof of Work part of bitcoin (the part that consumes all that electricity) creates a consensus record so that if double spends are performed, only one of them will stick. Now double spends are a "feature" called "replace by fee." Preventing double spends is worth millions to investors, so that's why it continues.
  - xigency 10y ago
    Yes, and maybe that was the main obstacle to implementation. Reading some of the original literature, and glossing over the textbook, it seems like many of the issues involved with double spending and counterfeiters are _eventually_ resolved with someone going to jail, rather than being able to resolve the financial payments in order. A naïve solution - which might save some energy - what about using signed timestamps from an adequate authority? Here is the article from 1991 for those interested in the original idea: http://link.springer.com/chapter/10.1007%2F3-540-46766-1_27 http://link.springer.com/chapter/10.1007%2F3-540-46766-1_27
    - WizzleKake 10y ago
      Part of the point of bitcoin is that it is decentralized.
ChuckMcM 10y ago
"exogeneous enforcement mechanisms." -- Chortle, I really need one of those :-). I had not been aware of how the miners could launder bitcoin, that seems like a pretty big hole you can drive a lot of bitcoin through.
- maxerickson 10y ago
  The award is recorded and they owe taxes on it. Which probably still leaves room for laundering. But it doesn't really obscure the flow of value all that much, unless they are all doing it and doing it for about the same price.
theandrewbailey 10y ago
> Remember that time when you tried to transfer your life savings from one bank account to another for a small fee, but swapped the fee field with the total transfer amount field, and ended up losing all your life savings? Of course you don't. Of course I don't. I know banks can have terrible design, but I've never seen a 'fee' field on any transfer form. (maybe because I use credit unions?) That bank might as well tell everyone 'please let us eat even more of your money on top of the bogus fees we already charge you'. And don't real banks have regulations preventing mess ups like these?
vonklaus 10y ago
Is MML(miner money laundering) a viable concept? I thought that the transaction blocks were randomly distributed so it would be hard for a launderer to "target" a miner they trust. If someone has a bit more technical insight about whether this makes sense, or is viable I would be interested. I would also contend that even if it was trivially easy to do, it would probably make more sense to just route transactions to various wallets and then to some exchanges and into other currencies, ect. I don't know if the miner thing makes sense
- maxerickson 10y ago
  Presumably the high fee transaction could be withheld from the network until the block was mined. I don't know if that is possible, but if it is it would ensure that a given miner was getting those fees.
  - placeybordeaux 10y ago
    There is no reason why you need to transmit any transactions. In fact your best chance of executing a double spend is similar, these kind of attacks are called finney attacks. http://bitcoin.stackexchange.com/questions/4942/what-is-a-finney-attack http://bitcoin.stackexchange.com/questions/4942/what-is-a-fi...
  - wcoenen 10y ago
    It is indeed possible to withold a transaction while trying to mine it into a block But this still doesn't provide 100% certainty that you will collect the transaction fee. You risk that other miners try to orphan the block once it is published (i.e. ignore it and build on the previous one instead) in order to put the transaction in their own block.
    - CydeWeys 10y ago
      Any miner that would want to steal a block fee would have to mine two blocks in succession before the rest of the network gets another one. It's possible, but quite unlikely, and if you don't pull it off you've thrown away a lot of hashing cycles. The only way to make it probable is to control a majority of the network hashrate, but in that case, there are much larger problems afoot (i.e. a 51% attack). It does place an upper bound on the total amount of BTC that can be laundered through transaction fees on a single block, though. I won't do the math right now but it's some multiple of the block reward fee that depends on what percentage of the network hash rate you control. Fortunately (?) for the would-be launderer, the average pool is mining a good deal more than one block per day, so you just spread your laundering across a series of blocks.
maxerickson 10y ago
Wouldn't the MML leave lots of traces in the blockchain, a miner collecting unusually high fees over time?
- MichaelGG 10y ago
  I don't think it'd even be that hard. Unless new mined blocks are untraceable (as in, it's impossible to see which fees went to which new coins), then it provides no covering at all. It's the same as sending small amounts from one address to another.
  - maxerickson 10y ago
    There aren't coins as such. The address the fee goes to is given in the block.
    - MichaelGG 10y ago
      Exactly. So this accomplishes absolutely nothing. Your identity from address A flows right through to the "fee address".
      - eternauta3k 10y ago
        The person with dirty money is paid with the reward of other blocks, not the one with his transaction.
drostie 10y ago
Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key K1 and put X2 in public key K2, with X1 - X2 going to the miner." That is, BitCoins themselves, as I understand them, are just points in a big distributed videogame: they do not represent actual packets of data which are individually 'minted' in mining and stored on your computer until you spend them. If that's correct, then there's no distinction if you tumble-via-miners versus tumble-via-tumblers -- either way the coins are 'freshly minted'; there's simply no other sort of coin. The only real thing that you seem to be able to do here is to tumble via both the tumblers and the miners, which might create some binary tree of complexity if someone tries to "follow the money" -- but that doesn't seem to be what the author is saying. Is there legitimately something in each coin which makes it easier to follow a given bitcoin via tumbling than through miner-money-laundering, or are they really just the same thing performed through different channels, with a much slower rate of success for the MML tumbling?
- mwilcox 10y ago
  Yes tumbling is much more secure if your goal is to anonymise your money. MML is much more easily traceable as you just look at the guy who mined the block and send the authorities to go and speak with him. Especially if the large mining operations are well known. The usefulness to a launderer seems more the simplicity of exchanging a large amount of coins for fiat currency in a single transaction, rather than going through an exchange or sending lots of complex small transactions through a mixer and figuring out how to exchange all of that back without going through an exchange w/ KYC
  - CydeWeys 10y ago
    > MML is much more easily traceable as you just look at the guy who mined the block and send the authorities to go and speak with him. Well that's easier said than done. There are a large number of blocks for which the miner is not known. The only reason the miner is known for as many blocks as it is is because several of the largest mining pools tag every block that they mine as a form of accountability to their miners (and of course bragging rights).
known 10y ago
Is Bitcoin suffering from https://en.wikipedia.org/wiki/Pareto_principle https://en.wikipedia.org/wiki/Pareto_principle
tdebroc 10y ago
Intersting explanation: http://bitcoin.stackexchange.com/questions/35986/are-the-huge-transaction-fees-mostly-mistakes-or-some-other-market-indicator http://bitcoin.stackexchange.com/questions/35986/are-the-hug...
seanalltogether 10y ago
Wouldn't sending a transaction directly to the miner be more reliable then trying to hide it in the fee? If the goal is to hide your money in the high volume of BTC that a big name miner processes per day, why not just send it straight to their wallet? From an investigators perspective there is no difference between the two scenarios. 1. Miner A has received 500 BTC from Suspect B over the past year and may be laundering it. 2. Miner A has processed 500 BTC in transaction fees from Suspect B over the past year and may be laundering it.

299 points by cynthiar 10y ago

This reminds me of a similar error from 2005[1] where a trader mistook the "price" and "quantity" fields of the trading software. Instead of selling 1 share for 610,000 yen, 610,000 shares were sold for 1 yen. The mistake cost around $225 million. [1] http://www.foxnews.com/story/2005/12/09/typing-error-causes-225m-loss-at-tokyo-stock-exchange.html http://www.foxnews.com/story/2005/12/09/typing-error-causes-...

Cyph0n 10y ago
Damn that's huge. You'd assume that the software checks the dollar amount and asks for a confirmation, or better yet permission from a higher up, if it exceeds some value.
- joering2 10y ago
  it does ask for confirmation. As OP wrote - it was an error, NOT a mistake.
  - Cyph0n 10y ago
    I don't see what you're getting at. The trader switched price with quantity - it was a human mistake. If the software had brought up a warning with something like "you are selling each share for less than 610000 +- 10000, please confirm", this could have been avoided.
  - randyrand 10y ago
    What a silly semantic argument to make. It was an error and a mistake. In fact, error is a synonym for mistake: https://www.google.com/search?q=mistake&oq=mistake&aqs=chrome..69i57j69i60l2&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=mistake&oq=mistake&aqs=chrom...
  - madeofpalk 10y ago
    He actually said both :) But I don't understand the difference in this situation.
- Houshalter 10y ago
  The problem with confirmation is it trains the human to always press "yes". You need a system that only activates if something really unusual or wrong.
  - gertef 10y ago
    unusual, like paying 1 billion times over recent prices?
    - nxzero 10y ago
      A billion times over market price, funny; who in their right mind would even pay 20x over market price in any meaningful amount without requiring some sort of control?
      - salgernon 10y ago
        See also rm -rf
    - Houshalter 10y ago
      Yes of course. I'm just saying that usually these systems are badly designed, and recognizing errors correctly is a surprisingly hard problem. In the medical world, many people have been killed by mistakes in prescriptions, despite everything going through computers and multiple humans checking it. The problem was that the machines were too sensitive to mistakes and trained the humans to ignore warnings. They also didn't distinguish mild warnings from extreme warnings. E.g. a prescription being 2x larger than recommended, or 100x larger than recommended, which are very different situations. A well designed interface might have different shades of red for different levels of severity. To give an indication if something is really wrong.
      - speeder 10y ago
        My mother use computers all day, and also hates them and think they are illogical. In a way she is correct, I saw her many times freaking out at a dialog box and calling me to "fix it", and it was just some absolutely useless "warning", but I also saw her many times clicking "ok" on a important message without reading and then wondering why things broke.
- jameshart 10y ago
  The transaction value is the same either way - 610,000 Yen.
  - Matthias247 10y ago
    But it should be able to check the current share value and then display a warning that this would be massive loss.
    - pbhjpbhj 10y ago
      It's more nuanced than that though isn't it - you can sell shares at a loss to push the market so you can buy and profit off the rebound (ie go short)? Kinda like losing your queen in chess in order to check-mate your opponent.
      - Rexxar 10y ago
        This is market manipulation and it's illegal nearly everywhere.
- patio11 10y ago
  It got flagged multiple times and, each time, someone at the Tokyo Stock Exchange came to the conclusion that they didn't have the authority to countermand the order. The regulator was livid about this in the report.
- KMag 10y ago
  2005 was ages ago in terms of financial markets. It was before the housing crash and other financial crises (notably in Greece). It was before the flash crash and other notable electronic trading incidents. Many world equity markets now have daily up/daily down limits a certain percentage above and below the previous day's closing price. Others will pause trading for a short period of time if short-term price moves are abnormally large. Many equities markets only allow direct connections to the market from brokerages licensed by the country's financial regulators. These days, brokerages often implement their own sanity checks on many order flows. Joe's Live Bait and Stock Trading generally isn't connecting directly to any equity trading venue. I'm curious what the effect would be of a market switching to second-price blind auctions every 5 minutes if a stock moves up or down 5% on the day. There are academic papers showing theoretical stability advantages of second-price auctions. Trading at the second-highest bid when the market is down more than 5% and at the second-lowest ask when the market is up should help to attract one-sided liquidity in the direction of market stability.
samstave 10y ago
That reminds me of the time when, in 1989, I was playing trade wars, on a bbs out of San Jose; I was attempting to corner the market on wheat in the galaxy as I had pretty much all of it... I smoked pot and instead of buying all the available wheat, I sold all I had. Ruined my monopoly on wheat....
artursapek 10y ago
A famous trader known as BNF really capitalized on this incident. http://www.bloomberg.com/news/articles/2014-09-25/mystery-man-moving-japan-made-more-than-1-million-trades http://www.bloomberg.com/news/articles/2014-09-25/mystery-ma...
XaspR8d 10y ago
> Worse still, the number of shares in Mizuho's order was 41 times the number of J-Com's outstanding shares, but the Tokyo Stock Exchange processed the order anyway. There are a lot of simultaneous errors going on here...
- kordless 10y ago
  Features, not errors.
- fiatmoney 10y ago
  Stock exchanges really cannot be expected to track numbers of outstanding shares. One puts in a bid or an ask, indicating that one is willing to purchase or sell the given number at the given price, and an order type, indicating the manner to fulfil (fill-or-kill, limit to a certain price, take whatever outstanding offers are necessary...). This is more than enough nuance for a professional product like a stock exchange that needs to operate at microsecond cadence. If you want to validate whether an order makes sense or is a "good idea", the place to do it on the client.
  - derefr 10y ago
    Coming from a perspective of competitive multiplayer game networking, that seems insane. You can't trust the client. An ideal stock exchange, I'd think, would include the same sort of logic as a payment processor: blocking any orders that seem to be "not the sort of order this client would make", to prevent e.g. orders being executed by people who have illegitimately gained access to the account. Of course, these type of algorithms typically take far more than microseconds to run—but that's fine, as long as they take the same time for everyone.
    - hueving 10y ago
      A stock exchange isn't responsible for tracking how much outstanding stock there is. The purpose of an exchange is just to match orders, not to determine if they are insane. Expecting otherwise would be like expecting eBay to determine that your buy it now price is too low or that you don't have enough inventory on hand to fulfill your listings.
DanBC 10y ago
There's even a name for this - "Fat finger error". https://en.wikipedia.org/wiki/Fat-finger_error https://en.wikipedia.org/wiki/Fat-finger_error
- artursapek 10y ago
  I think fat finger is more like adding too many zeros, or hitting the wrong numbers on the keyboard. This incident was a UI confusion; entering correct values in the wrong inputs.
  - jackgavigan 10y ago
    "Fat finger" has become a generic term that would encompass this type of error.

taesu 10y ago

I'd definitely keep that amount if I won it through mining. It's really hard swapping `amount` to `fee`, in coding, so I bet that this was a human mistake on sending btc, not coding mistake...

cjbprime 10y ago
I heard that the web interface on the exchange they used has fee and amount fields next to each other and with identical widgets (but different labels), so it's extremely easy to see how a human would make that mistake there.
dghughes 10y ago
Well aren't you an opportunistic prick.
- jbmorgado 10y ago
  The correct working - in bitcoin culture - is "libertarian".
- dang 10y ago
  This comment breaks the HN guidelines. Please (re)-read them and post civilly and substantively—or not at all—from now on. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newswelcome.html https://news.ycombinator.com/newswelcome.html
  - dghughes 10y ago
    True, I do apologize but seeing such evil makes me mad. And the user I was commenting to has removed their comment making it look even worse.
    - dang 10y ago
      I'm sure we all understand the feeling you describe and how irritating it is. I certainly do. But the essence of civility (or at least the hardest part of it) is containing that irritation and not letting it determine one's reaction. This is a work in progress for all of us, work that is necessary to make HN the kind of place we want it to be.

ryan-c 10y ago

> Remember that time when you tried to transfer your life savings from one bank account to another for a small fee, but swapped the fee field with the total transfer amount field, and ended up losing all your life savings? Of course you don't. There are safeguards to catch and prevent these kinds of errors. > > But this is a common occurrence in Bitcoin-land. This mistake is difficult, if not impossible, to make with standard Bitcoin software. The fee field is usually pre-filled and somewhat tricky to change, and newer versions of bitcoin-core will block transactions like this as obviously wrong. It should also be noted the bitcoin fees are implicit in transactions - a transaction will have some amount of funds going in, and some amount going out, and anything left over is the fee. Usually these types of mistakes actually happen when someone manually crafts a transaction and forgets that they need to make a change output for themselves. It is obviously still possible to create transactions like this, but it currently requires using advanced interfaces and deliberately bypassing safety measures.

barkbro 10y ago
The author(s) theory is that the mistake was made by a bitcoin laundering script.
optforfon 10y ago
I'm surprised that this even happens. It's so involved to make a transaction yourself. It's not like leaving your keys on the kitchen counter. It's more like building a house and forgetting to add a door
- aws_ls 10y ago
  Basically, any client which can speak the protocol can send transactions. Normal human consumers use it via clients like multbit-hd (on Desktop) or any of the online wallets, which of course don't allow this mistake to happen, as they calculate the fee for you (online wallets add their commission as well). But as the article says, likely it happened via a script. But its a very costly mistake. I hope we know the real cause of it. Overall, I like the depth the article has gone into. But I don't agree with this sentence: the kind of script that swaps arguments by mistake may be the kind of script that does not write its keys out to a database, so the private keys may be long gone I think the article got it wrong. How can the private key be lost (and also logged to DB!)? The 291+ btc would have come from some public key. If that that public key has got more btc attached to it, then the owner surely still has the private key. Also even if its zero value now. The wallet (public-key) from which the money came, would still exist, and private key still there somewhere. So the miner can return the extra BTC to the same public key. Am I missing something?

thevibesman 10y ago

Thanks for the post, I enjoyed the read (haven't read much about bitcoin laundering). One small nitpick: > My payment is going to be with newly mined coins, the Bitcoin equivalent of fresh, crisp dollar bills straight from the Mint. Coins are minted, bills are printed, so only coins come from the U.S. Mint. Paper bank notes and stamps come straight from the Bureau of Engraving and Printing (way less fun to say though!).

andirk 10y ago
Also, you wouldn't want money coming straight from the Bureau because I'm sure the serial numbers would be so incredibly easy to track. For example, your bills have sequential serial numbers, or are clearly from the same batch. Better to have them straight from the Panama Papers.
- thevibesman 10y ago
  > Better to have them straight from the Panama Papers. Haha, great point!

Bedon292 10y ago

Obviously I am missing something on this. How do you direct the transaction fee to a specific miner? I thought it just went out there for anyone to process. If you can, why don't people just direct all their transaction fees at their own mining operation or a friend they trust?

woah 10y ago
I think it goes to whoever gets the block it's in
farmdve 10y ago
Well, if the entity issuing the TX was colluding with a miner, they'd craft the TX and the miner would add it to their mempool without announcing it to the rest of the network. Then when and if this miner finds a block, it would include this transaction.
natrius 10y ago
Hand the signed transaction to that miner instead of broadcasting it to the network. It'll only get mined whenever that miner successfully mines a block.
throwaway7767 10y ago
Instead of sending the transaction out on the p2p network for any miner to include, you just send it privately to the specific miner you want to mine it. Nobody else knows about it, so they can't include it in their blocks. The problem (and the reason this really isn't a useful money-laundering method) is that people watch incoming transactions and blocks, and if a block is mined including a transaction that was not seen previously, it's a strong indication that there's collusion going on.
sp332 10y ago
Usually transactions are published on the network and anyone can choose to include them. But a miner can add transactions that no other miner knows about. Usually you don't want to do it because it takes a long and random amount of time for the transaction to go through (you have to wait for that specific miner to win a block). But if you're mining it yourself or in collusion with a specific miner, that's a tradeoff you can make.

mrpopo 10y ago

You can see a half-dozen of "mega-fees" on this graph[0]. The public nature of bitcoin transactions is very interesting. [0] https://blockchain.info/charts/transaction-fees?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address= https://blockchain.info/charts/transaction-fees?timespan=all...

placeybordeaux 10y ago

Pretty bad article, but I couldn't find any better. Looks like a solid chunk of the money traces pretty cleanly back to tradeBTC. I'd really like to find a good tool for exploring the graph of transactions. Most of the funding of the account that lost all the money have a similar pattern where a couple BTC is peeled off at each step and the majority goes forward in the chain till it all pools at 1QgTYzMYqStzZBQx8gguYaJQMjFRbagbh and gets spent. I wonder if thats just what TradeBTC transactions look like.

LAMike 10y ago

Some people say it was an act of money laundering by the pool that mined it.

LAMike 10y ago

Some people say it was an act of money laundering by the pool that mined it.

xigency 10y ago

Sort of unrelated but, "According to my calculation, a single Bitcoin transaction uses roughly enough electricity to power 1.57 American households for a day." http://motherboard.vice.com/read/bitcoin-is-unsustainable http://motherboard.vice.com/read/bitcoin-is-unsustainable I find this interesting thinking about Bitcoin as a currency. The first cryptographic currency example that I had read, from a cryptography book, didn't involve active power. I'm really surprised that Bitcoin has been able to gain this much popularity with its design. Does this explain how you might be able to lose a household-sized amount of money in a transaction on this network? I don't know, but I think that the blockchain idea might not be the ideal for digital currencies.

shemnon42 10y ago
Those older examples suffered from the "double spend problem" where you could spend the digital currency twice (or more). Kind of like cheque fraud. The Proof of Work part of bitcoin (the part that consumes all that electricity) creates a consensus record so that if double spends are performed, only one of them will stick. Now double spends are a "feature" called "replace by fee." Preventing double spends is worth millions to investors, so that's why it continues.
- xigency 10y ago
  Yes, and maybe that was the main obstacle to implementation. Reading some of the original literature, and glossing over the textbook, it seems like many of the issues involved with double spending and counterfeiters are _eventually_ resolved with someone going to jail, rather than being able to resolve the financial payments in order. A naïve solution - which might save some energy - what about using signed timestamps from an adequate authority? Here is the article from 1991 for those interested in the original idea: http://link.springer.com/chapter/10.1007%2F3-540-46766-1_27 http://link.springer.com/chapter/10.1007%2F3-540-46766-1_27
  - WizzleKake 10y ago
    Part of the point of bitcoin is that it is decentralized.

ChuckMcM 10y ago

"exogeneous enforcement mechanisms." -- Chortle, I really need one of those :-). I had not been aware of how the miners could launder bitcoin, that seems like a pretty big hole you can drive a lot of bitcoin through.

maxerickson 10y ago
The award is recorded and they owe taxes on it. Which probably still leaves room for laundering. But it doesn't really obscure the flow of value all that much, unless they are all doing it and doing it for about the same price.

theandrewbailey 10y ago

> Remember that time when you tried to transfer your life savings from one bank account to another for a small fee, but swapped the fee field with the total transfer amount field, and ended up losing all your life savings? Of course you don't. Of course I don't. I know banks can have terrible design, but I've never seen a 'fee' field on any transfer form. (maybe because I use credit unions?) That bank might as well tell everyone 'please let us eat even more of your money on top of the bogus fees we already charge you'. And don't real banks have regulations preventing mess ups like these?

vonklaus 10y ago

Is MML(miner money laundering) a viable concept? I thought that the transaction blocks were randomly distributed so it would be hard for a launderer to "target" a miner they trust. If someone has a bit more technical insight about whether this makes sense, or is viable I would be interested. I would also contend that even if it was trivially easy to do, it would probably make more sense to just route transactions to various wallets and then to some exchanges and into other currencies, ect. I don't know if the miner thing makes sense

maxerickson 10y ago
Presumably the high fee transaction could be withheld from the network until the block was mined. I don't know if that is possible, but if it is it would ensure that a given miner was getting those fees.
- placeybordeaux 10y ago
  There is no reason why you need to transmit any transactions. In fact your best chance of executing a double spend is similar, these kind of attacks are called finney attacks. http://bitcoin.stackexchange.com/questions/4942/what-is-a-finney-attack http://bitcoin.stackexchange.com/questions/4942/what-is-a-fi...
- wcoenen 10y ago
  It is indeed possible to withold a transaction while trying to mine it into a block But this still doesn't provide 100% certainty that you will collect the transaction fee. You risk that other miners try to orphan the block once it is published (i.e. ignore it and build on the previous one instead) in order to put the transaction in their own block.
  - CydeWeys 10y ago
    Any miner that would want to steal a block fee would have to mine two blocks in succession before the rest of the network gets another one. It's possible, but quite unlikely, and if you don't pull it off you've thrown away a lot of hashing cycles. The only way to make it probable is to control a majority of the network hashrate, but in that case, there are much larger problems afoot (i.e. a 51% attack). It does place an upper bound on the total amount of BTC that can be laundered through transaction fees on a single block, though. I won't do the math right now but it's some multiple of the block reward fee that depends on what percentage of the network hash rate you control. Fortunately (?) for the would-be launderer, the average pool is mining a good deal more than one block per day, so you just spread your laundering across a series of blocks.

maxerickson 10y ago

Wouldn't the MML leave lots of traces in the blockchain, a miner collecting unusually high fees over time?

MichaelGG 10y ago
I don't think it'd even be that hard. Unless new mined blocks are untraceable (as in, it's impossible to see which fees went to which new coins), then it provides no covering at all. It's the same as sending small amounts from one address to another.
- maxerickson 10y ago
  There aren't coins as such. The address the fee goes to is given in the block.
  - MichaelGG 10y ago
    Exactly. So this accomplishes absolutely nothing. Your identity from address A flows right through to the "fee address".
    - eternauta3k 10y ago
      The person with dirty money is paid with the reward of other blocks, not the one with his transaction.

drostie 10y ago

Can someone else confirm to me that I'm not crazy and the central distinction of this article is totally bogus? Reasoning: BitCoin isn't, to my knowledge, a scheme where some private identifier is stored inside each "coin" whose ownership is revealed with a zero-knowledge proof; it's simply one where you have public and private keys and use those private keys to sign transactions saying "Take X1 out of my public key K1 and put X2 in public key K2, with X1 - X2 going to the miner." That is, BitCoins themselves, as I understand them, are just points in a big distributed videogame: they do not represent actual packets of data which are individually 'minted' in mining and stored on your computer until you spend them. If that's correct, then there's no distinction if you tumble-via-miners versus tumble-via-tumblers -- either way the coins are 'freshly minted'; there's simply no other sort of coin. The only real thing that you seem to be able to do here is to tumble via both the tumblers and the miners, which might create some binary tree of complexity if someone tries to "follow the money" -- but that doesn't seem to be what the author is saying. Is there legitimately something in each coin which makes it easier to follow a given bitcoin via tumbling than through miner-money-laundering, or are they really just the same thing performed through different channels, with a much slower rate of success for the MML tumbling?

mwilcox 10y ago
Yes tumbling is much more secure if your goal is to anonymise your money. MML is much more easily traceable as you just look at the guy who mined the block and send the authorities to go and speak with him. Especially if the large mining operations are well known. The usefulness to a launderer seems more the simplicity of exchanging a large amount of coins for fiat currency in a single transaction, rather than going through an exchange or sending lots of complex small transactions through a mixer and figuring out how to exchange all of that back without going through an exchange w/ KYC
- CydeWeys 10y ago
  > MML is much more easily traceable as you just look at the guy who mined the block and send the authorities to go and speak with him. Well that's easier said than done. There are a large number of blocks for which the miner is not known. The only reason the miner is known for as many blocks as it is is because several of the largest mining pools tag every block that they mine as a form of accountability to their miners (and of course bragging rights).

known 10y ago

Is Bitcoin suffering from https://en.wikipedia.org/wiki/Pareto_principle https://en.wikipedia.org/wiki/Pareto_principle

tdebroc 10y ago

Intersting explanation: http://bitcoin.stackexchange.com/questions/35986/are-the-huge-transaction-fees-mostly-mistakes-or-some-other-market-indicator http://bitcoin.stackexchange.com/questions/35986/are-the-hug...

seanalltogether 10y ago

Wouldn't sending a transaction directly to the miner be more reliable then trying to hide it in the fee? If the goal is to hide your money in the high volume of BTC that a big name miner processes per day, why not just send it straight to their wallet? From an investigators perspective there is no difference between the two scenarios. 1. Miner A has received 500 BTC from Suspect B over the past year and may be laundering it. 2. Miner A has processed 500 BTC in transaction fees from Suspect B over the past year and may be laundering it.