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Bitcoin exchange Youbit shuts after second hack attack
- AndrewDucker 9y agoAt some point Bitcoin exchanges will have to realise that they need to be as secure as a bank is. For exactly the same reason. And that this is expensive.
- philfrasty 9y agoyou mean like only allowing 6-digit passwords without symbols?
- throwawayReply 9y agoIf the consequence of my account being compromised is the bank adjusting the numbers in the ledger back then the bank are welcome to enforce such rules. If a bank said that customers were responsible for the money stored in the bank and that the bank could not undo transactions (from the POV of the genuine client) then we'd be demanding much stronger banking passwords.
- bfuller 9y agoThe exchanges can just change a couple numbers in their database and reverse the hack... r-right?
- throwawayReply 9y agoYes, if people accept fractional reserve banking for bitcoin. I'd actually assume that's how most exchanges operate under the hood but many people who buy into bitcoin for ideological reasons won't accept that. A consequence of making that formal is that the total owned amount of bitcoin would be more than 21m, because the hacker would own bitcoin and the users would own bitcoin on the exchange. As long as there isn't a bank run, that discrepancy would not be a problem, but it would deflate the currency, also seen as unacceptable to bitcoin purists. edit: access -> accept.
- notyourday 9y agoOh, rubbish. Bitcoin is fundamentally incompatible with sanity and a rule of law ( which is what is needed for regulation ). If I were to start a bitcoin exchange ( and myself and those that I know have way more technical abilities to actually pull it off ) and apply sane KYC and risk mitigation strategies, the crypto-nutcases would be screaming like banshees that the exchange is not acting in a "spirit" of bitcoin which is: 1) Allow anyone to launder money/coins 2) Ask no questions 3) Make all transactions irreversible (i.e. do not follow 'in the name of' ledger ) 4) Demand no validated tax information (i.e. leverage power of the government to make players play by the rules )
- nikanj 9y agoActually getting tens-hundreds of millions out of the traditional banking system is _hard_. Transactions can always be reversed, and you'll never pull out millions in cash without some serious questions asked.
- matt4077 9y agoThat policy may appear unwise, but to judge banks' security, there is enough evidence available without resorting to any such theoretical model of what's secure and what's not. And that evidence is pretty clear. I do not remember any hacking incidents resulting in large-scale losses to consumer, so they seem to be doing something right.
- mikeash 9y agoSix-digit passwords are fairly secure when combined with strict limits on the number of attempts allowed, how much money can be withdrawn in one day, and heuristic fraud detection.
- adrianN 9y agoBut is there any good reason to forbid users from choosing longer, more secure passwords while still limiting the number of attempts and doing heuristic fraud detection? You know, other than that sixty year old legacy system that stores your passwords in clear text and doesn't support any other format than six digits?
- mikeash 9y agoThat seems like a pretty good reason already.
- user5994461 9y agoCard terminals only have numbers. Not planning to ship them with a full keyboard. That's a good reason to only take numbers.
- Anarch157a 9y agoNot to mention that Indo-Arabic digits are almost universal, other characters are not. Picture a chinese or armenian with a password that uses characters from their respective alphabets trying to type it on each other's ATMs.
- osteele 9y agoThis would be a significant vulnerability if bank customers were sophisticated at security, and if those passwords were the only input into their fraud detection systems.
- bottled_poe 9y agoIf only these securities (I mean assets, not cyber) were backed by the government... you know... kinda like bank deposits. (Cue the pitchforks)
- westiseast 9y agoMaybe we should start letting the exchanges gamble with our bitcoins?
- matt4077 9y agoThere's nothing stopping them right now, except the uselessness of Bitcoin for anything but stuffing it under a virtual mattress.
- gst 9y ago> Maybe we should start letting the exchanges gamble with our bitcoins? Why do you assume that's not already happening: https://bitcointalk.org/index.php?topic=5441.msg1413156#msg1413156 https://bitcointalk.org/index.php?topic=5441.msg1413156#msg1...
- BearGoesChirp 9y agoAs long as users don't care about security, the exchanges won't care as well. Once users care enough, then the exchanges will. I think crypto exchanges are demonstrating a flaw in our society's approach to security where people have been conditioned into seeing hacks as inevitable and being taught to expect to live with the outcome and have ways to dampen the impact (credit monitoring, credit cards that detect and auto block fake transactions, etc.). The problem is that, at least for now, there is no dampening impact with crytocurrency. One hack and you lose everything, with nothing to reduce damage.
- volent 9y agoCashing out is a great way to reduce damage as a user. Don't hold coins/fiat you're not willing to lose in an exchange.
- gst 9y ago> One hack and you lose everything, with nothing to reduce damage. Exchanges can mitigate this by storing the majority of their funds in multisig cold wallets. Users can mitigate attacks against exchanges by never sending all of their coins to an exchange. For cashing out I recommend to 1) send a small number of coins to the exchange 2) wait until those converted USD arrive in the bank account 3) go back to step one.
- vincnetas 9y agoExactly what this exchange has done : "The exchange added that the hackers did not manage to steal all the digital cash it held because a lot was lodged in a "cold wallet" - a secure store used to hold the assets that were not being traded."
- nikanj 9y agoSo far, it seems like a decent enough business idea to start an exchange, wait for the wallets to warm up nicely, then get "hacked".
- tCfD 9y agoIn the crypto space this practice is so common it has earned it's own name, the "exit scam"
- tinus_hn 9y agoIt’s kind of difficult to do something with the bitcoins because it’s immediately visible.
- syntaticSugar 9y agoThe perks of being an exchange is you get access to many streams. Things are already broken up on little pieces for you. You act as a Tumblr
- richardknop 9y agoYou can mix the stolen coins. Change them to many different coins, shuffle them around in and out of different tokens. In the end, move everything back to BTC and sell on localbitcoins in some offshore country like Hong Kong or Macau (and spread this around too not to raise suspicion, so travel around different countries and sell couple BTC on every stop, open local bank account, deposit money, rinse and repeat).
- zht 9y agoit's not actually that easy to open a local bank account everywhere is it
- disconnected 9y agoIs anyone seriously tracking where these "stolen" coins from these past several hacks are going? This is like saying that open source software is more secure than closed source software because the code is public and auditable. Sure it is auditable, but nobody is doing it. And then shellshock happens.
- eganist 9y ago> At some point Bitcoin exchanges will have to realise that they need to be ~as secure as a bank is~ orders of magnitude more secure than a bank. For exactly the same reason. Fixed that for you. Banks can accept risks to liquidity pretty readily because cash is centrally controlled. Considering that cryptocurrencies are hyper-liquid and are unrecoverable short of a hard fork in the event of a catastrophic event (e.g. with eth after the DAO hack), exchanges need to have measures in place which would be unheard-of at most other firms.
- candiodari 9y agoThis is right. Lax security practices at a bank are "more acceptable" because stupidity can be partially compensated for. Stealing money from banks, even if you have the ability to spend it for years is very risky, can be turned back (for losses of banks and governments, not, of course, when normal people get hacked/scammed/...) If we are to have currencies beyond the reach of laws and courts (which seems to be the point of bitcoin and the like), we will need actually capable organizations. I wonder what countries and governments will do ? Because we all know that they won't actually have good security practices. https://en.wikipedia.org/wiki/Bangladesh_Bank_robbery https://en.wikipedia.org/wiki/Bangladesh_Bank_robbery
- lucozade 9y ago> Banks can accept risks to liquidity pretty readily Depends on the size of the liquidity crunch. It's not exactly unknown to bring a financial institution to its knees for lack of liquidity. > cryptocurrencies are hyper-liquid How so? > unrecoverable short of a hard fork Which is the usual way of dealing with this. I can't think of any cryptocurrencies that are decentralised enough that a small quorum of people can't effect a substantial change. > exchanges need to have measures in place which would be unheard-of at most other firms What are they doing that's more than financial institutions? Startups selling coffee or whatever, sure.
- FLUX-YOU 9y agoWonder what mechanism we'll use to enforce that. Oh right, regulation.
- cotillion 9y agoEven in a complete compromise of banks systems you are not going to be able to run off with all their money. You need to get your transactions into the batches somehow. And the batch needs to still pass all automated checks. Then you need to stay under the limits set for the bank on the correspondent account at the other bank / clearing house. Banks know this and really don't have nearly good enough security practices for running a bitcoin exchange..
- equalarrow 9y agoNo, this cannot be fixed. Simply because these are decentralized assets/tokens/etc being corralled ina centralized manner. Square peg in round hole. Bank security is still not secure, regardless of what we think today. The only viable solution to this is to go DEX (distributed exchange) only. You control to keys, wallet and swap directly with other peers. Bitshares and others facilitate this already and it’s only a matter of time before the tools get easier and enough exchanges get hacked that people wise up.
- EthanHeilman 9y agoBanks aren't particularly secure. I would guess that most banks are significantly less secure than most cryptocurrency exchanges. In fact I suspect that if you ran a cryptocurrency exchange with the level of security offered by a bank the exchange would be hacked in short order. The big difference here is that if a hacker transfers large sums out of a bank, the bank can just reverse those charges, whereas with a cryptocurrency exchange those funds are gone for good (for a solution to this problem see Covenant-based vaults [0]). Not only does draining a bank require serious investments in criminal organization and rare knowledge it also leaves a pretty big evidence trail. [0]: https://link.springer.com/chapter/10.1007/978-3-662-53357-4_9 https://link.springer.com/chapter/10.1007/978-3-662-53357-4_...
- matt_wulfeck 9y agoExactly, banks aren’t “trustless”, which means they can work together to reverse these types of hacks. When the Bangladesh central banks was hacked through an incredibly insecure backdoor and 2 Billion was stolen, the hackers ended up with only 100 million, and only through shady other financial institutions. Who knows if they’ll end up with anything since that money will be hounded through the financial system. Trust has an important place when dealing with such large sums of money, sorry to say it cryptoheads.
- adamnemecek 9y agoConfused it with yobit for a second.
- dagaci 9y agoAlmost all crypto operate by requiring only one actor authorise create a valid transaction. You loose your one-single-point-of-failure-private-key and its over, what's needed is a more sophisticated system at the protocol level which requires secondary authorisation.
- sah2ed 9y agoSounds like you just invented the "pre-authorize hold" used by the credit card networks.
- SEMW 9y agohttps://en.bitcoin.it/wiki/Multisignature https://en.bitcoin.it/wiki/Multisignature
- KitDuncan 9y agoBack when I held bitcoin this is what I did. I had two ledger nanos holding a private key and one private key managed by an online wallet, that shut down since. It was a really comfortable way of accessing my coins and it felt quite secure.
- 1ba9115454 9y agoIf I was building an exchange for crypto here's what I would do. 1. Encrypt you users private keys client side with a password only they know. Now I just hold encrypted keys my side. 2. When the user wishes to make an exchange I would create the transaction client side let them sign it and do the exchange. This way funds are now encrypted by default at rest and if compromise occurs the thief gets encrypted private keys only. Hopefully the users chose passwords secure enough to avoid compromise. It's not perfect, but can we finally move away from the hot wallet model. p.s. If you want to build this, and require advice and backing let me know.
- notyourday 9y agoThat does not solve exchange take over and transaction reversibility/clawback until the settlement X days in the future which is basic tenet of risk mitigation. The reason you cannot electronically rob Ameritrade is because NOTHING can be done immediately outside Ameritrade. Since the settlement is at least T+3 there's no such thing as "Obtain control in 30 seconds and be out of there 3 minutes later with the loot"
- dangero 9y agoNobody seems to get this point in the crypto world right now. Instant transactions ADD RISK. I suspect evolved cryptocurrencies will support intentional delays. My conpsny is working on something like this for Ethereum.
- thisisit 9y agothis is exactly the reason Coinbase has been delaying transactions but somehow people think it's a bad thing and keeping them away from their money.
- notyourday 9y agoDelay for risk mitigation on exchanges are known. You transaction will settle on a 3rd business day. After a wire is authorized by a broker (i.e. passed authentication and the person making a request is authorized to make it and the margin is satisfied and there's no block on the fed level), it will be posted by your bank on the same fed business day if the wire is authorized before fed cut off time. Coinbase is a VC-funded shady co if it does not operate based on strict and known confines. Banks and brokers spell out the confines (new account rules/withdrawal rules/funds availability rules) at the opening of a new account.
- alborzmassah 9y agoShould I be worried about having my cryptocurrency assets on an exchange?
- raverbashing 9y agoYes Unless your local security is worse than that of an exchange
- odonnellryan 9y agoYes. Ideally, only money you should have on the exchange is stuff that you are moving around often. If you're trading you don't have a choice, but if you're just holding why not use a wallet you setup?
- deleted 9y ago[deleted]
- rafiki6 9y agoHmm, I wonder if a centrally trusted third party could have prevented something like this? Maybe, just maybe, anonymous currency systems (i.e. cash and all equivalents), just aren't inherently secure so there's no real point in replicating them? Just maybe...