7 ms·

Ottawa Bitcoin exchange defrauded of $100,000 in cyber currency

69 points by rpledge 13y ago

nwh 13y ago
> We have reviewed our security processes and continue to work with our customers to make sure they take advantage of all of our security features. What an absolute joke. They have an unauthenticated hacker direct access, and somehow it's the clients fault.
- natdempk 13y ago
  The best part was that they offered them a credit on their account as compensation. As if they would want to continue their business with a hosting company that allows unauthenticated users to issue commands to their technicians.
  - mikeash 13y ago
    I wonder just how much time they'd get from $100,000 in hosting credit.
    - natdempk 13y ago
      > Grant said the credit was nowhere near sufficient to cover the company’s loss and as a result his firm is contemplating legal action. I doubt it was $100,000 in hosting credit. Probably a free year or two or something relatively meaningless.
      - mikeash 13y ago
        No doubt, but it's amusing to imagine.
  - lhgaghl 13y ago
    This is Rogers you're talking about. The sell you a shitty expensive connection capped at 60GB, and then they hijack your DNS failures to resolve to their shitty ads page, and throttle your traffic depending on the protocol. If you drive down the street in my city you see wireless access points named "Rogers Sucks Ass".
- potatolicious 13y ago
  Not only that, they gave an unauthenticated employee direct access. So your attack vectors are: - Pretend to be the server owner (potentially difficult, though evidently not in this case). - Bribe/threaten any support rep, because apparently they have complete control of any customer's server without any form of verification. What insane customer support system would even let someone have a whiff of private data without verifying that the agent is representing the customer?
  - lsc 13y ago
    >Not only that, they gave an unauthenticated employee direct access. Now, this is kind of an interesting thing. From what I've seen, lower end datacenters, for example, he.net, often have "free remote hands" - their techs are expected to access your servers. If you go higher end to coresite or equinix? the only people in the building are security. (and /maybe/ a power/hvac person) And while they can get into your stuff (the locks on the racks are a joke) they aren't expected to do so; a security person will get fired for jimmying with your stuff. As an aside, from what I've seen, he.net has pretty good access control; they check your ID, and then they take a picture of you, and the login system shows the person who is letting you in a picture of you from the last three times you entered. I don't know how strongly they authenticate remote hands requests. He.net also prevents "tailgating" more effectively than most of the other area datacenters. It's interesting, even within coresite, all the local coresite locations have a fingerprint reader + radio access card access control combo, but at 55 S. market? they don't even try to stop tailgaters, as long as one of you has a badge. at 2972 stender? they put some effort into it, though they aren't as effective as he.net. I think that he.net is more effective at preventing tailgaters precisely because the user doesn't get an access card. You have to ask one of the he.net security folks to open the door for you every time you leave the datacenter floor, which presents a reasonably non-confrontational way for them to verify everyone has been verified. At 2972 stender, they are very apologetic, but they do usually stop you. I have, however, seen people get through without verification during busy times. (the 'man-trap' system is imperfectly enforced, in part because it would clog the place up otherwise.) Of course, these comments are mostly about physical security, and the article was about getting unauthorized remote hands. I didn't use the remote hands much at all at he.net, so I don't know.
Aqueous 13y ago
Everything seems like obviously Rogers' fault up until this: "“It’s completely ridiculous,” said Grant. “All they did was go on the chat session and say, ‘Hi, I’m James Grant and I have a server with you’ and the data centre said, ‘Yes you do, what can we do for you?" If Rogers is like many ISPs, where you can chat with a representative but only after you've logged into their online portal, this seems to suggest that the attacker had already passed through authentication into Grant's account on Rogers, which is why they did not do additional verification. I agree that additional verification, in a form not required in the initial login, should be done at the beginning of the chat, before taking any user-requested action. But the article doesn't specify how the hacker in question obtained access to Grant's Rogers account to begin with. Until we know that we can't fully ascertain the extent of Rogers' liability here.
- mikeash 13y ago
  Don't most companies let you do a live chat without logging in first? One of the things you might want to handle with a live chat with tech support is "I can't log in", so it would be odd to restrict it to logged in users. For this particular situation, I just went to rogers.com, "Contact Us", and followed the links to a live chat. Never asked me to log in, although it did ask me for contact info and I stopped at that point. I don't know if that gets me access to the servers, but once you're in a company in any capacity you may be able to socially engineer yourself pretty far.
  - Aqueous 13y ago
    Given how much physical security the article says they have, I seriously doubt that Rogers would take action on any server through the anonymous, public-facing live chat. It is possible, of course, but I wish the article would clear that up.
    - fifty50chance 13y ago
      That's why it's so incredulous and negligent. Not a single verification and Rogers bypassed every security measure in place.
deleted 13y ago
[deleted]
viraptor 13y ago
It looks like it's time to use full disc encryption even in datacenters now. (there are scripts available to startup ssh and allow remote password input before mounting root) The problem is that it does require manual intervention on reboot and may not be very useful for 100s of machines.
- PeterisP 13y ago
  Do you need FDE for that? It would be feasible to encrypt just the BTC keys; the server can reboot automatically but needs repeated authorization in order to access the BTC.
  - viraptor 13y ago
    I believe only FDE would help in that case. Otherwise anyone having access to the rescue mode could just replace the binaries on the server to send you the key (and all the bitcoins) after it was used. Actually even right now I hope the server has been rebuilt from scratch along with grub and everything. If they just restored the server as it was left, for all we know they could be running a rootkit or a hacked version of bitcoin daemon.
- wyager 13y ago
  I feel like that has a very limited scope of usefulness. Datacenter machines are on 99.9% of the time, and generally speaking, thieves don't go through the trouble of stealing hard drives from datacenters.
  - rainforest 13y ago
    In this case the wallet was stolen from the machine after it was rebooted into single user mode. With FDE the machine wouldn't have been usable when it was rebooted so the attack wouldn't have worked.
  - viraptor 13y ago
    Did you read the article? The server was rebooted into rescue mode and data has been read directly off the disk. You don't need to steal the drive to execute that.
jordigh 13y ago
Before people start commenting on how bitcoin needs this or that or predict the doom of bitcoin, read the article: this has nothing to do with bitcoin's security. The attack was perpetrated in the most inane social engineering way, and actually, the bitcoin exchange was smart enough to not put all of its bitcoins in the same basket, so 100,000 CAD worth of bitcoin is not a death blow to this exchange.
- sharpneli 13y ago
  Most of real world fraud is exactly this kind of stuff. Bitcoin solves a problem which is not actually a problem in real world. And leaves the problems which actually are problems unsolved. Don't get me wrong. The proof of work ledger is a cool idea. However using it as a currency in this kind of implementation with complete disregard to anything else doesn't work in the long term.
  - jordigh 13y ago
    The decentralised check against double-spending is bitcoin's only solution. And it's quite a genius solution, in a way. Bitcoin is not the first cryptocurrency, but it's the first decentralised one. Other than that, bitcoin behaves more like cash than like banks or credit cards. You can build banks and credit cards around bitcoin, and you should, but bitcoin itself is just like cash, and that's all it should be. It doesn't need to solve other problems that as you say have already been solved by systems like two-factor authentication and the like. This particular attack is more like thieves walking into a bank and claiming to be a person and then being able to get cash from the bank's safe (an analogy that also fits nicely with the relatively small amount of money they were able to steal). It is not like being able to rack up fraudulent charges on a credit card.
  - wyager 13y ago
    >Bitcoin solves a problem which is not actually a problem in real world. Well, it solves more than one problem, and a few of them are certainly real-world. >However using it as a currency in this kind of implementation with complete disregard to anything else doesn't work in the long term. Would you care to expand on what you mean by "complete disregard to anything else"? I mean, clearly this is hyperbole, but I'm curious what you are referencing specifically.
icpmacdo 13y ago
“Rogers Data Centres provides the highest level of security in the Canadian data centre industry. Its security protocol is operationally certified and in accordance with industry best practices. We have reviewed our security processes and continue to work with our customers to make sure they take advantage of all of our security features.” Sounds like the normal BS that Rogers pulls.
googletron 13y ago
I bought bitcoins with these guys, very nice guys shame this happened. shoutout ottawa.
Jtsummers 13y ago
This doesn't absolve Rogers of responsibility for this, but the incident occurred right as the data center was being acquired. Depending on how far along the transition was (per [1] it doesn't seem like it would have been very far) it could be that this was an issue with Granite Networks' security protocols and not Rogers'. [1] http://www.thewhir.com/web-hosting-news/canadian-telecom-rogers-acquires-granite-networks-pivot-data-centers http://www.thewhir.com/web-hosting-news/canadian-telecom-rog...
- mikeash 13y ago
  Could also be the exact opposite. It's mildly suspicious that this happened so soon after the acquisition. It's probably a coincidence, but it smells at least a little bit like Rogers hooked up their own support system without proper training.
servowire 13y ago
Ouch, lesson learned: Put that hot-wallet in an encrypted filesystem so that SingleUser mode hacks don't work. You would have to manually mount the partition after every boot though.
gesman 13y ago
Wow. And I work in this building right above Granite Networks!
onion2k 13y ago
Keeping 194 BTC in a hot wallet on your server is essentially the same as trusting $100,000 in cash to the minimum wage security guard at your bank. You'd certainly hope that the bank has procedures that he's going to follow correctly, but $100,000 is a lot to risk so perhaps a little extra security would be a good idea. Mind you, you'd also rightly expect the bank to cover the loss if the guard just hands it over to a stranger.
- shawabawa3 13y ago
  I don't know the size of the exchange, but it's reasonable that they would have enough bitcoins in the hot wallet to process withdrawals on an "unlucky" day - that is a day where significantly more people withdraw than deposit. That could easily be 150BTC for even a small exchange. (the article says 150 were stolen, not 194) considering going up a level in security basically means hosting your own servers, it's probably worth the risk as long as you assume your hosting provider doesn't give strangers root access to your box
ig1 13y ago
"Basically, we were in a race to develop new anti-fraud techniques and they were in a race to develop new ways to steal money. The by-product of it was all our competitors got wiped out because as the Russian mobsters got better and better, they got better and better at destroying all of our competitors." - Max Levchin on the history of Paypal. Those who don't learn from history are doomed to repeat it.
- sillysaurus3 13y ago
  The quote was so interesting that I went and found the source: http://ecorner.stanford.edu/1028.ect http://ecorner.stanford.edu/1028.ect Now there's this gem: "it was basically became clear that we either figure out how to beat the fraudsters or the fraudsters will take us under. And the company more or less refocused itself as a research entity towards figuring out innovative technological ways of destroying fraud in the Internet. And that alone could be the subject of an entire class or a series of classes so I will completely skip over all the cool technology we developed. Some of you might have seen stuff in the news, words like EOR or ELIA, all these tools that we've built. They're as cool as they sound. I could never tell you about them because they're very secret and they're still in use. But maybe if you want to hang out afterwards, I can tell you a little bit. But they're really cool and we did really figured out how to kill fraud. ... The submerged part of PayPal is this massive and very, very numerically-driven risk management system which allows us to instantaneously tell when you're moving money to someone else, with a very high degree of certainty whether the money you're moving is yours or you got it illegally and we might be on the hook later on to help the authorities investigate or retrieve the money, et cetera, et cetera." I simply must know. I'll never find out how Paypal killed fraud unless I ask HN right now, and I've got to know. So, with apologies for branching into a completely unrelated topic: What magic did Paypal invent in order to do all of those amazing things described above? How'd they kill fraud? What are the details of how the technology works? Is it still a closely guarded secret? Do they use some advanced statistical mathematics to detect fraud, or do they bruteforce the detection by providing massive quantities of data to the otherwise-dumb detector algorithm? What fascinates me is that they've come up with a way to detect fraud automatically, with no human input. There are false positives, which everyone here has probably had some terrible experiences with, but... Still, how did they train a computer to detect and freeze the very sophisticated and very subtle covert techniques of Russian mobster money launderers? Any info would be very much appreciated, especially citations / references for further reading on this topic.
UweSchmidt 13y ago
In my opinion the two main problems with Bitcon are the complexity and the libertarian philosophy around it. Currently the first problem is being exploited. People struggle with how to keep a bunch of long numbers safe and wrestle with vague abstractions - hot wallet, cold wallet. People should know better, but they don't, why? Because it's complicated. People will probably keep losing money for a while because of that, until everyone gets a handle on things. But then there's a much bigger unsolved question though: How will the libertarian thing work out? In Bitcoin threads the phrase "IF A MAJORITY OF THE MINERS [decides to screw up everyone]" appears occasionally, usually tempered by "...but being all rational, they won't!" I predict that there will be at least one serious attempt at that during the next 12 months. If the first boom has subsided a bit, and fewer new people seem start with bitcoin, it would be time for a collusion of people who are able and willing to try out that angle. And please take "predict" not as gloating, but rather as a warning. Are you sure you understand bitcoin well? If not, why not get out now?
- jordigh 13y ago
  > two main problems with Bitcon are the complexity Agreed, we need to build better software around the bitcoin protocol, with a cleaner UI. People are working on this problem. (haha, "bitcon", I bet that's gonna turn into an insulting dysphemism soon). > and the libertarian philosophy around it. There isn't any inherent philosophy in the protocol. You can use bitcoins with a tinfoil hat firmly planted on your head, or you can use bitcoins to build centralised banking again if you want to. It's just a tool.
  - enraged_camel 13y ago
    >>There isn't any inherent philosophy in the protocol. You can use bitcoins with a tinfoil hat firmly planted on your head, or you can use bitcoins to build centralised banking again if you want to. It's just a tool. It's a deflationary currency that enables decentralized commerce. I think that in and of itself speaks volumes about the philosophy behind it.
    - jordigh 13y ago
ChuckMcM 13y ago
Ouch, there is a reason banks usually have leases that don't give the landlord any access to their buildings. If you're hosting a system that has more than a few thousand dollars of nominally liquid assets around you really really have to start with a secure computing environment. That means locked buildingings where only you have the key, and security audits (cameras, key cards, biometrics, as much as you can get) and ideally additional insurance provided so you can charge failures on the part of the colo against their insurance up to the amount of assets you keep at risk. What is the current ratio of exchangees that lost customer money to ones that haven't? It feels like it is close to 100%. That can be very damaging to the long term success of btc.
tokenadult 13y ago
A while ago I wrote that perhaps the greatest contribution the Bitcoin experiment will make to humankind is to teach you and me and our neighbors more about the realities of economics. And later I added that the Bitcoin experiment will also contribute to greater understanding of attack surfaces and online crime. Many of the ideas about how to mine Bitcoins, store Bitcoins, and trade with Bitcoins as a medium of exchange illustrate both the strengths and weaknesses of any other medium of exchange in a world full of human beings. Seeing the discussion of Bitcoins here on Hacker News reminds me of early online discussions in the 1990s of online payment systems such as PayPal, and the arguments beforehand that PayPal wouldn't have to invest a lot of time and effort (as it eventually did) building defenses against theft and fraud. If a weakness in a system is attached to a lot of money, the way to bet is to bet that someone will go looking for that weakness, even if you haven't thought of it.

69 points by rpledge 13y ago

nwh 13y ago

> We have reviewed our security processes and continue to work with our customers to make sure they take advantage of all of our security features. What an absolute joke. They have an unauthenticated hacker direct access, and somehow it's the clients fault.

natdempk 13y ago
The best part was that they offered them a credit on their account as compensation. As if they would want to continue their business with a hosting company that allows unauthenticated users to issue commands to their technicians.
- mikeash 13y ago
  I wonder just how much time they'd get from $100,000 in hosting credit.
  - natdempk 13y ago
    > Grant said the credit was nowhere near sufficient to cover the company’s loss and as a result his firm is contemplating legal action. I doubt it was $100,000 in hosting credit. Probably a free year or two or something relatively meaningless.
    - mikeash 13y ago
      No doubt, but it's amusing to imagine.
- lhgaghl 13y ago
  This is Rogers you're talking about. The sell you a shitty expensive connection capped at 60GB, and then they hijack your DNS failures to resolve to their shitty ads page, and throttle your traffic depending on the protocol. If you drive down the street in my city you see wireless access points named "Rogers Sucks Ass".
potatolicious 13y ago
Not only that, they gave an unauthenticated employee direct access. So your attack vectors are: - Pretend to be the server owner (potentially difficult, though evidently not in this case). - Bribe/threaten any support rep, because apparently they have complete control of any customer's server without any form of verification. What insane customer support system would even let someone have a whiff of private data without verifying that the agent is representing the customer?
- lsc 13y ago
  >Not only that, they gave an unauthenticated employee direct access. Now, this is kind of an interesting thing. From what I've seen, lower end datacenters, for example, he.net, often have "free remote hands" - their techs are expected to access your servers. If you go higher end to coresite or equinix? the only people in the building are security. (and /maybe/ a power/hvac person) And while they can get into your stuff (the locks on the racks are a joke) they aren't expected to do so; a security person will get fired for jimmying with your stuff. As an aside, from what I've seen, he.net has pretty good access control; they check your ID, and then they take a picture of you, and the login system shows the person who is letting you in a picture of you from the last three times you entered. I don't know how strongly they authenticate remote hands requests. He.net also prevents "tailgating" more effectively than most of the other area datacenters. It's interesting, even within coresite, all the local coresite locations have a fingerprint reader + radio access card access control combo, but at 55 S. market? they don't even try to stop tailgaters, as long as one of you has a badge. at 2972 stender? they put some effort into it, though they aren't as effective as he.net. I think that he.net is more effective at preventing tailgaters precisely because the user doesn't get an access card. You have to ask one of the he.net security folks to open the door for you every time you leave the datacenter floor, which presents a reasonably non-confrontational way for them to verify everyone has been verified. At 2972 stender, they are very apologetic, but they do usually stop you. I have, however, seen people get through without verification during busy times. (the 'man-trap' system is imperfectly enforced, in part because it would clog the place up otherwise.) Of course, these comments are mostly about physical security, and the article was about getting unauthorized remote hands. I didn't use the remote hands much at all at he.net, so I don't know.

Aqueous 13y ago

Everything seems like obviously Rogers' fault up until this: "“It’s completely ridiculous,” said Grant. “All they did was go on the chat session and say, ‘Hi, I’m James Grant and I have a server with you’ and the data centre said, ‘Yes you do, what can we do for you?" If Rogers is like many ISPs, where you can chat with a representative but only after you've logged into their online portal, this seems to suggest that the attacker had already passed through authentication into Grant's account on Rogers, which is why they did not do additional verification. I agree that additional verification, in a form not required in the initial login, should be done at the beginning of the chat, before taking any user-requested action. But the article doesn't specify how the hacker in question obtained access to Grant's Rogers account to begin with. Until we know that we can't fully ascertain the extent of Rogers' liability here.

mikeash 13y ago
Don't most companies let you do a live chat without logging in first? One of the things you might want to handle with a live chat with tech support is "I can't log in", so it would be odd to restrict it to logged in users. For this particular situation, I just went to rogers.com, "Contact Us", and followed the links to a live chat. Never asked me to log in, although it did ask me for contact info and I stopped at that point. I don't know if that gets me access to the servers, but once you're in a company in any capacity you may be able to socially engineer yourself pretty far.
- Aqueous 13y ago
  Given how much physical security the article says they have, I seriously doubt that Rogers would take action on any server through the anonymous, public-facing live chat. It is possible, of course, but I wish the article would clear that up.
  - fifty50chance 13y ago
    That's why it's so incredulous and negligent. Not a single verification and Rogers bypassed every security measure in place.

deleted 13y ago

[deleted]

viraptor 13y ago

It looks like it's time to use full disc encryption even in datacenters now. (there are scripts available to startup ssh and allow remote password input before mounting root) The problem is that it does require manual intervention on reboot and may not be very useful for 100s of machines.

PeterisP 13y ago
Do you need FDE for that? It would be feasible to encrypt just the BTC keys; the server can reboot automatically but needs repeated authorization in order to access the BTC.
- viraptor 13y ago
  I believe only FDE would help in that case. Otherwise anyone having access to the rescue mode could just replace the binaries on the server to send you the key (and all the bitcoins) after it was used. Actually even right now I hope the server has been rebuilt from scratch along with grub and everything. If they just restored the server as it was left, for all we know they could be running a rootkit or a hacked version of bitcoin daemon.
wyager 13y ago
I feel like that has a very limited scope of usefulness. Datacenter machines are on 99.9% of the time, and generally speaking, thieves don't go through the trouble of stealing hard drives from datacenters.
- rainforest 13y ago
  In this case the wallet was stolen from the machine after it was rebooted into single user mode. With FDE the machine wouldn't have been usable when it was rebooted so the attack wouldn't have worked.
- viraptor 13y ago
  Did you read the article? The server was rebooted into rescue mode and data has been read directly off the disk. You don't need to steal the drive to execute that.

jordigh 13y ago

Before people start commenting on how bitcoin needs this or that or predict the doom of bitcoin, read the article: this has nothing to do with bitcoin's security. The attack was perpetrated in the most inane social engineering way, and actually, the bitcoin exchange was smart enough to not put all of its bitcoins in the same basket, so 100,000 CAD worth of bitcoin is not a death blow to this exchange.

sharpneli 13y ago
Most of real world fraud is exactly this kind of stuff. Bitcoin solves a problem which is not actually a problem in real world. And leaves the problems which actually are problems unsolved. Don't get me wrong. The proof of work ledger is a cool idea. However using it as a currency in this kind of implementation with complete disregard to anything else doesn't work in the long term.
- jordigh 13y ago
  The decentralised check against double-spending is bitcoin's only solution. And it's quite a genius solution, in a way. Bitcoin is not the first cryptocurrency, but it's the first decentralised one. Other than that, bitcoin behaves more like cash than like banks or credit cards. You can build banks and credit cards around bitcoin, and you should, but bitcoin itself is just like cash, and that's all it should be. It doesn't need to solve other problems that as you say have already been solved by systems like two-factor authentication and the like. This particular attack is more like thieves walking into a bank and claiming to be a person and then being able to get cash from the bank's safe (an analogy that also fits nicely with the relatively small amount of money they were able to steal). It is not like being able to rack up fraudulent charges on a credit card.
- wyager 13y ago
  >Bitcoin solves a problem which is not actually a problem in real world. Well, it solves more than one problem, and a few of them are certainly real-world. >However using it as a currency in this kind of implementation with complete disregard to anything else doesn't work in the long term. Would you care to expand on what you mean by "complete disregard to anything else"? I mean, clearly this is hyperbole, but I'm curious what you are referencing specifically.

icpmacdo 13y ago

“Rogers Data Centres provides the highest level of security in the Canadian data centre industry. Its security protocol is operationally certified and in accordance with industry best practices. We have reviewed our security processes and continue to work with our customers to make sure they take advantage of all of our security features.” Sounds like the normal BS that Rogers pulls.

googletron 13y ago

I bought bitcoins with these guys, very nice guys shame this happened. shoutout ottawa.

Jtsummers 13y ago

This doesn't absolve Rogers of responsibility for this, but the incident occurred right as the data center was being acquired. Depending on how far along the transition was (per [1] it doesn't seem like it would have been very far) it could be that this was an issue with Granite Networks' security protocols and not Rogers'. [1] http://www.thewhir.com/web-hosting-news/canadian-telecom-rogers-acquires-granite-networks-pivot-data-centers http://www.thewhir.com/web-hosting-news/canadian-telecom-rog...

mikeash 13y ago
Could also be the exact opposite. It's mildly suspicious that this happened so soon after the acquisition. It's probably a coincidence, but it smells at least a little bit like Rogers hooked up their own support system without proper training.

servowire 13y ago

Ouch, lesson learned: Put that hot-wallet in an encrypted filesystem so that SingleUser mode hacks don't work. You would have to manually mount the partition after every boot though.

gesman 13y ago

Wow. And I work in this building right above Granite Networks!

onion2k 13y ago

Keeping 194 BTC in a hot wallet on your server is essentially the same as trusting $100,000 in cash to the minimum wage security guard at your bank. You'd certainly hope that the bank has procedures that he's going to follow correctly, but $100,000 is a lot to risk so perhaps a little extra security would be a good idea. Mind you, you'd also rightly expect the bank to cover the loss if the guard just hands it over to a stranger.

shawabawa3 13y ago
I don't know the size of the exchange, but it's reasonable that they would have enough bitcoins in the hot wallet to process withdrawals on an "unlucky" day - that is a day where significantly more people withdraw than deposit. That could easily be 150BTC for even a small exchange. (the article says 150 were stolen, not 194) considering going up a level in security basically means hosting your own servers, it's probably worth the risk as long as you assume your hosting provider doesn't give strangers root access to your box

ig1 13y ago

"Basically, we were in a race to develop new anti-fraud techniques and they were in a race to develop new ways to steal money. The by-product of it was all our competitors got wiped out because as the Russian mobsters got better and better, they got better and better at destroying all of our competitors." - Max Levchin on the history of Paypal. Those who don't learn from history are doomed to repeat it.

sillysaurus3 13y ago
The quote was so interesting that I went and found the source: http://ecorner.stanford.edu/1028.ect http://ecorner.stanford.edu/1028.ect Now there's this gem: "it was basically became clear that we either figure out how to beat the fraudsters or the fraudsters will take us under. And the company more or less refocused itself as a research entity towards figuring out innovative technological ways of destroying fraud in the Internet. And that alone could be the subject of an entire class or a series of classes so I will completely skip over all the cool technology we developed. Some of you might have seen stuff in the news, words like EOR or ELIA, all these tools that we've built. They're as cool as they sound. I could never tell you about them because they're very secret and they're still in use. But maybe if you want to hang out afterwards, I can tell you a little bit. But they're really cool and we did really figured out how to kill fraud. ... The submerged part of PayPal is this massive and very, very numerically-driven risk management system which allows us to instantaneously tell when you're moving money to someone else, with a very high degree of certainty whether the money you're moving is yours or you got it illegally and we might be on the hook later on to help the authorities investigate or retrieve the money, et cetera, et cetera." I simply must know. I'll never find out how Paypal killed fraud unless I ask HN right now, and I've got to know. So, with apologies for branching into a completely unrelated topic: What magic did Paypal invent in order to do all of those amazing things described above? How'd they kill fraud? What are the details of how the technology works? Is it still a closely guarded secret? Do they use some advanced statistical mathematics to detect fraud, or do they bruteforce the detection by providing massive quantities of data to the otherwise-dumb detector algorithm? What fascinates me is that they've come up with a way to detect fraud automatically, with no human input. There are false positives, which everyone here has probably had some terrible experiences with, but... Still, how did they train a computer to detect and freeze the very sophisticated and very subtle covert techniques of Russian mobster money launderers? Any info would be very much appreciated, especially citations / references for further reading on this topic.

UweSchmidt 13y ago

In my opinion the two main problems with Bitcon are the complexity and the libertarian philosophy around it. Currently the first problem is being exploited. People struggle with how to keep a bunch of long numbers safe and wrestle with vague abstractions - hot wallet, cold wallet. People should know better, but they don't, why? Because it's complicated. People will probably keep losing money for a while because of that, until everyone gets a handle on things. But then there's a much bigger unsolved question though: How will the libertarian thing work out? In Bitcoin threads the phrase "IF A MAJORITY OF THE MINERS [decides to screw up everyone]" appears occasionally, usually tempered by "...but being all rational, they won't!" I predict that there will be at least one serious attempt at that during the next 12 months. If the first boom has subsided a bit, and fewer new people seem start with bitcoin, it would be time for a collusion of people who are able and willing to try out that angle. And please take "predict" not as gloating, but rather as a warning. Are you sure you understand bitcoin well? If not, why not get out now?

jordigh 13y ago
> two main problems with Bitcon are the complexity Agreed, we need to build better software around the bitcoin protocol, with a cleaner UI. People are working on this problem. (haha, "bitcon", I bet that's gonna turn into an insulting dysphemism soon). > and the libertarian philosophy around it. There isn't any inherent philosophy in the protocol. You can use bitcoins with a tinfoil hat firmly planted on your head, or you can use bitcoins to build centralised banking again if you want to. It's just a tool.
- enraged_camel 13y ago
  >>There isn't any inherent philosophy in the protocol. You can use bitcoins with a tinfoil hat firmly planted on your head, or you can use bitcoins to build centralised banking again if you want to. It's just a tool. It's a deflationary currency that enables decentralized commerce. I think that in and of itself speaks volumes about the philosophy behind it.
  - jordigh 13y ago

ChuckMcM 13y ago

Ouch, there is a reason banks usually have leases that don't give the landlord any access to their buildings. If you're hosting a system that has more than a few thousand dollars of nominally liquid assets around you really really have to start with a secure computing environment. That means locked buildingings where only you have the key, and security audits (cameras, key cards, biometrics, as much as you can get) and ideally additional insurance provided so you can charge failures on the part of the colo against their insurance up to the amount of assets you keep at risk. What is the current ratio of exchangees that lost customer money to ones that haven't? It feels like it is close to 100%. That can be very damaging to the long term success of btc.

tokenadult 13y ago

A while ago I wrote that perhaps the greatest contribution the Bitcoin experiment will make to humankind is to teach you and me and our neighbors more about the realities of economics. And later I added that the Bitcoin experiment will also contribute to greater understanding of attack surfaces and online crime. Many of the ideas about how to mine Bitcoins, store Bitcoins, and trade with Bitcoins as a medium of exchange illustrate both the strengths and weaknesses of any other medium of exchange in a world full of human beings. Seeing the discussion of Bitcoins here on Hacker News reminds me of early online discussions in the 1990s of online payment systems such as PayPal, and the arguments beforehand that PayPal wouldn't have to invest a lot of time and effort (as it eventually did) building defenses against theft and fraud. If a weakness in a system is attached to a lot of money, the way to bet is to bet that someone will go looking for that weakness, even if you haven't thought of it.