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Let this be a warning to everybody with bitcoin in wallets they do no absolutely control, for example, Coinbase - you can and almost certainly will lose them at

Let this be a warning to everybody with bitcoin in wallets they do no absolutely control, for example, Coinbase - you can and almost certainly will lose them at a moment's notice, sooner or later. I feel really sorry for those with funds tied up with MtGox. It was only recently where I used MtGox to store most of my bitcoin and I am lucky to have decided to move them all to paper wallets. This demonstrates one of the biggest issues holding back widespread adoption of bitcoin, the ability of the layperson to securely hold large amounts of bitcoin.

MBCook 13y ago
> Let this be a warning to everybody with bitcoin in wallets they do no absolutely control Is that how this happened? Given that bitcoins are supposed to be owned by addresses that are protected by private key, I wondered why people couldn't "withdrawal" their bitcoins. If Mt. Gox was controlling the private keys (as a hosted wallet service) that makes more sense.
- Karunamon 13y ago
  That's generally how the exchange services work.. you send money from your wallet to one under their control, which credits an "account" you use to make trades.
  - MBCook 13y ago
    Honestly that's a bit creepy. I've started to play around with Dogecoin and decided to see how I could buy $50 or so worth and was horrified at the answers. * Make a physical deposit against an account number we give you at a bank branch * Buy Linden Dollars, swap them for Bitcoin, swap them for Dogecoin * Give people gift card codes * Pay random people via PayPal or Google Wallet The last of those was the least sketchy looking but by and large it creeped me the hell out. The options looked like 50% scamming and 50% money laundering.
    - zanny 13y ago
      Well nobody is going to sign up for you using anything that can chargeback, because they can't get their money back if they give it to you. And a lot of the intermediary payment services like Dwolla stopped working with btc. So if you want doge, either mine it, get sent it from random strangers, or trade it for btc (which is more readily available through services like coinbase).
    - Karunamon 13y ago
      How is this any different than sending cash to Paypal which then creates an account you use to buy things on eBay with? And before you say "more regulation" - Paypal is not a bank and operates as a money transfer service. They can and have frozen people's accounts out before. The reason the methods are so strange is that most other method allow the buyer to do a chargeback and scam the seller.
- oscilloscope 13y ago
  Yep. At the exchanges, you're basically buying Bitcoin credits when you send them Bitcoin. You can trade these credits for dollar credits. On a functioning exchange, you can withdraw these credits one-to-one for Bitcoin or dollars to a wallet or bank account you control. In the future there will potentially be decentralized exchanges where a Bitcoin transaction can be a component of an exchange transaction and there is no third-party involved. But not today.
  - dsuth 13y ago
    I was under the impression that the whole point of Bitcoin was that it was a decentralised currency, and your coins lived in your wallet. What is the value of actually entrusting your coins to 3rd party where they're outside of your control? Just the ability to exchange them for USD? Why would you keep coins with them on a long-term basis?
    - logicchains 13y ago
      Presumably under the assumption that an exchange such as Mt Gox would be able to keep the coins safer than they themselves could, which now doesn't seem like a particularly sound assumption to make.
      - tinco 13y ago
        I can confirm, this was my line of thought. After the first hack, and the seemingly professionalisation of MtGox, especially compared to the other exchanges. In a proper BTC exchange, most of the Bitcoin are in cold storage, which means they can't be stolen even if the exchange was hacked. The hot wallet would represent the variability in the exchanges BTC holdings and would be very small, so that in case of theft it could be either insured or covered. That to me sounds like it's safer than any scheme I can come up with, without losing the mobility of the BTC. Of course, if this document is true, it means MtGox did absolutely no accountancy on their cold wallets for the past 3 years.. that's just plain crazy :(
        13y ago
- smtddr 13y ago
  When you have coins on an online exchange, it's not as if those coins literally sit there untouched. Your balance is just a number in a database. Similarly, if you deposit $100 USD(5 physical 20 dollar bills) in a bank those physical bills don't just sit there waiting for you. They can be given to anyone during the course of the business. You just get "100" added to some database row somewhere. When you want that $100 back, the Bank has to reach into its funds and pay you.

MBCook 13y ago

> Let this be a warning to everybody with bitcoin in wallets they do no absolutely control Is that how this happened? Given that bitcoins are supposed to be owned by addresses that are protected by private key, I wondered why people couldn't "withdrawal" their bitcoins. If Mt. Gox was controlling the private keys (as a hosted wallet service) that makes more sense.

Karunamon 13y ago
That's generally how the exchange services work.. you send money from your wallet to one under their control, which credits an "account" you use to make trades.
- MBCook 13y ago
  Honestly that's a bit creepy. I've started to play around with Dogecoin and decided to see how I could buy $50 or so worth and was horrified at the answers. * Make a physical deposit against an account number we give you at a bank branch * Buy Linden Dollars, swap them for Bitcoin, swap them for Dogecoin * Give people gift card codes * Pay random people via PayPal or Google Wallet The last of those was the least sketchy looking but by and large it creeped me the hell out. The options looked like 50% scamming and 50% money laundering.
  - zanny 13y ago
    Well nobody is going to sign up for you using anything that can chargeback, because they can't get their money back if they give it to you. And a lot of the intermediary payment services like Dwolla stopped working with btc. So if you want doge, either mine it, get sent it from random strangers, or trade it for btc (which is more readily available through services like coinbase).
  - Karunamon 13y ago
    How is this any different than sending cash to Paypal which then creates an account you use to buy things on eBay with? And before you say "more regulation" - Paypal is not a bank and operates as a money transfer service. They can and have frozen people's accounts out before. The reason the methods are so strange is that most other method allow the buyer to do a chargeback and scam the seller.
oscilloscope 13y ago
Yep. At the exchanges, you're basically buying Bitcoin credits when you send them Bitcoin. You can trade these credits for dollar credits. On a functioning exchange, you can withdraw these credits one-to-one for Bitcoin or dollars to a wallet or bank account you control. In the future there will potentially be decentralized exchanges where a Bitcoin transaction can be a component of an exchange transaction and there is no third-party involved. But not today.
- dsuth 13y ago
  I was under the impression that the whole point of Bitcoin was that it was a decentralised currency, and your coins lived in your wallet. What is the value of actually entrusting your coins to 3rd party where they're outside of your control? Just the ability to exchange them for USD? Why would you keep coins with them on a long-term basis?
  - logicchains 13y ago
    Presumably under the assumption that an exchange such as Mt Gox would be able to keep the coins safer than they themselves could, which now doesn't seem like a particularly sound assumption to make.
    - tinco 13y ago
      I can confirm, this was my line of thought. After the first hack, and the seemingly professionalisation of MtGox, especially compared to the other exchanges. In a proper BTC exchange, most of the Bitcoin are in cold storage, which means they can't be stolen even if the exchange was hacked. The hot wallet would represent the variability in the exchanges BTC holdings and would be very small, so that in case of theft it could be either insured or covered. That to me sounds like it's safer than any scheme I can come up with, without losing the mobility of the BTC. Of course, if this document is true, it means MtGox did absolutely no accountancy on their cold wallets for the past 3 years.. that's just plain crazy :(
      - 13y ago
smtddr 13y ago
When you have coins on an online exchange, it's not as if those coins literally sit there untouched. Your balance is just a number in a database. Similarly, if you deposit $100 USD(5 physical 20 dollar bills) in a bank those physical bills don't just sit there waiting for you. They can be given to anyone during the course of the business. You just get "100" added to some database row somewhere. When you want that $100 back, the Bank has to reach into its funds and pay you.