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> It requires human intervention to access the cold wallet (to replenish the internet-facing "hot" wallet), but that is what you want!

Am I the only one who finds it a bit amusing that an e-currency bank needs people to physically move the bullion from one vault to the other?

On the contrary, I think it's pretty neat you can implement a variety of security schemes depending on your risk tolerance and convienence requirements.

Some of the parameters you can pick from:online vs offline ("cold"), hosted vs not, SPV vs full node, multisig, dedicated hardware wallet, etc.

And you can combine them in various permutations: e.x. offline + multisig is just about the most secure thing you can imagine.

>I think it's pretty neat you can implement a variety of security schemes depending on your risk tolerance and convienence requirements.

Can you tell me the last time some you know had money go missing from their bank account?

Lots of people lose money because of scams, cards getting stolen/scanned/photographed, etc. - in a lot of cases, the banks just cover the cost and can rollback transactions because everyone has agreed that's how the system works. It is not because people do not have money stolen from their bank accounts due to various breaches.

My understanding might be wrong, but I believe during the 2013 Cyprus bail-in, all Cypriot depositors had money missing from their bank accounts: they lost 9.9% of funds above the insurance ceiling, 6.75% of funds below the ceiling:

http://www.economist.com/blogs/schumpeter/2013/03/cyprus-bai...

Airgaps are standard fare in very high security environments, e-currency is no different in this respect if the amounts get high enough.

That's a serious problem. Controlling access to the vault, when it's being accessed frequently, is hard. It's even harder for Bitcoin, where the threat is someone copying the data. You can have your original data and not have the assets it represented.

Question to ask Bitcoin exchanges: are your people bonded, and who's the bonding company. If they answer "What?", they're clueless about vault operations.

>Generate a bunch of (optionally multisig) addresses. Print the private keys. Copy the addresses to your server that processes transactions. Lock away the private keys (optionally in multiple places). Never connect the offline computer or printer to the internet.

Only for millions of coins? What about the savings of the average person? A loss would be devastating. Do you recommend the same security measures? If the system is insecure, it's insecure.

The idea that Bitcoin is in any way ready for the mainstream is kind of funny.

Cash and debit cards are pretty funny, too. Anyone who grabs your cash, or gets away with a purchase on your debit card is laughing pretty hard at your expense. Maybe, if you're lucky, your bank will get around to reversing the fraudulent debit card charges, but the thief still gets away. There is nothing secure about any money system.

I do this, minus the "dedicated computer and printer" part. Pretty simple, really. Another option is dedicated smartcards that hold the keys.

I'm genuinely curious. Can you envision any possible distributed internet currency that wouldn't require human interaction for the highest level of security? Keep in mind, the threat model here is someone gaining read access to a few kb of data. With an automated, internet-facing system, I see an airgap as the only reasonable defense against that threat.

If someone gains read access to, say, your bank session cookies, they could also feasibly clean you out. The only difference is the bank might be able to reverse the transaction (undesirable a decentralized currency) or cover your losses (not a bad idea).

If you're holding your savings in cash you're doing it wrong.

The proper security measures are so simple and easy. Yet this keeps happening... hmmmm.

>Edit: Of course, it could also be an inside job. An "exit scam."

Has there ever been any real or serious evidence to demonstrate that any of these seemingly numerous Bitcoin 'hacks' have been legit and not inside jobs, which is exactly what they all look like?

There are so many 'exit hacks' it seems virtually standard practice in the Bitcoin world, perhaps because nobody seems to actually go to jail for it or even face any serious legal investigations into it.

If a bank announced a multi-million dollar 'hack' I'd expect the authorities would be heavily involved, immediately, and everyone with a position to have facilitated a theft would be under suspicion and investigated until ruled out.

One the one hand Bitcoin is a supposedly serious, game changing currency and has billions of dollars tied up in it; on the other, it's treated as little more than internet karma points, and if people have it stolen from a wallet or someone announces yet another million dollar 'hack' at some comical 'exchange' any old clown/scammer can throw up, it seems to be simply 'tough shit' and nothing to see here.

This may be the non-regulated world the fanatics want, but it's a major reason why sane people (currently almost everyone on Earth) will continue to avoid Bitcoin like the plague.

Your mode of thought, trying to divide the world into 'fanatics' and 'sane people', is not a helpful way to analyze these issues.

>Has there ever been any real or serious evidence to demonstrate that any of these seemingly numerous Bitcoin 'hacks' have been legit and not inside jobs, which is exactly what they all look like?

You're asking people to prove a negative[1]. It's a common logical fallacy.

>nobody seems to actually go to jail for it or even face any serious legal investigations into it.

Really? This claim is trivially disprovable. Numerous people have been arrested, including Mark Karpeles of Mt Gox. You've never heard of that case? $500 million allegedly stolen

https://www.google.com/search?q=bitcoin+exchange+arrested

http://www.wsj.com/articles/japanese-police-arrest-mark-karp...

http://siliconangle.com/blog/2015/02/23/mintpal-scammer-ryan...

[1]http://rationalwiki.org/wiki/Negative_proof

Whats wrong with proving a negative? There is no fallacy in that first comment you quoted. datapat isn't claiming that what he's saying is true, he's asking for a proof.

The nature of this sort of conspiracy theory makes it impossible to disprove.

For example an identified backdoor and logs pointing to an external hack is exactly what you'd expect to see planted if this were a halfway clever inside job, right? So how do you possibly rule that out?

Well, at a minimum they should file a complaint with the authorities, hand over evidence that they did find, and so on. Too many times these 'hacks' have a weird smell and the companies for some reason do not want to get the authorities involved.

Imagine how strange it would be if you had a breach at your home, a very large amount of value would be stolen and you'd not make any effort to alert the authorities and if the only thing that would prove that it was an outsider was your say-so. Of course, you could make it look like a burglary when it really was you but the various agencies would most likely be able to tell the difference, or in fact may be able to conclusively prove that you were the one doing it in the first place.

Lots of real-life fraudsters get caught this way, I don't see why on-line fraudsters should get a free pass on having to at least meet the same level of proof before they are believed.

I agree, but I don't think failing to do so necessarily means there's more to the story. The simple explanation of greed and incompetence seems pretty plausible.

> You're asking people to prove a negative[1]. It's a common logical fallacy.

No, he's asking for proof that there has been a non-internal Bitcoin hack. That's a simple existence proof.

If he were asking one to prove a negative, he'd have to ask something like "prove that there have been no internal Bitcoin hacks" (which is likely easily refuted but beside the point).

(He may be implicitly claiming a negative proof, by implying that there isn't any evidence that these are non-internal hacks, and therefore they must be inside jobs. But that's merely asking others to disprove a negative, which is trivial with evidence.)

>he's asking for proof that there has been a non-internal Bitcoin hack. That's a simple existence proof.

In reality it's not simple. How would you prove it?

However you define this, a very serious problem with the OPs request for proof is the pseudonymous nature of Bitcoin, combined with the difficulty of definitively connecting a real life identity to an online action.

The Cryptsy 'hack' is a neat example of this. The money was moved once, 18 months ago, and for observers, that transfer of money did not appear suspicious at the time. It looked just the same as an internal movement of funds for security or accounting purposes. The money even remains where it was moved.

But now Cryptsy's owner has announced that the money was not moved by him.

How can we prove or disprove his claim?

We can say that he dishonestly hid the theft, but it seems impossible to prove that he stole it. Even if his ISP is ordered by a court to release logs that show his home IP address did the theft, he could claim that his computer was hacked. But for someone doing an inside job, anyway there are so many ways to hide their identity and IP address.

Edit: So, should anyone offer evidence of a non-internal Bitcoin hack, the OP can simply make these arguments, to plausibly suggest that it may really have been an internal hack, disguised as an external hack

Such deception is not that easy, to do this consistently after the fact is going to be an extremely dangerous thing to pull off. You not only will be facing a charge for the initial theft but another one for obstruction of justice and tampering with evidence and possibly a whole pile of others.

Personally I'd be already more inclined to believe it was an outsider if they filed this breach with the authorities and if they turned over all their evidence. You'd have to be fairly cocky to do that if you were the one that made off with the loot (not that it wouldn't happen, but it would happen a lot less frequently).

Yes, to create a convincing fake hack is not simple. In common crimes, managing a complex fake story is dangerous. The criminal can be revealed because they can't keep every detail consistent. They get tangled up in their own lies.

But in the cryptocurrency space, judicial authorities lack expertise, geographic jurisdiction can be unclear, and invesigators may not be able to unearth the truth. The Bitcoinica thefts are an example of that, Mt Gox may be another. Every time, it would be easy to prove negligence, but definite proof of criminality is hard.

It is true that if Cryptsy had reported the crime at the time, the story would have been more plausible, but even then there still would have been much doubt and a genuine possibility that it was fraud. At least the possible evidence, logs and whatnot, would have been fresh.

> It is true that if Cryptsy had reported the crime at the time, the story would have been more plausible

To me this is an extremely important aspect and it moves the needle from 'could be fraud' to 'definitely fraud'. Nobody taking a hit like that would try to hide it from both their end users and the authorities if they weren't involved, no possible gain could come from trying to cover this up other than to see if they could do it again.

Covering up a breach of this magnitude (which is simply the end for the company, assuming the funds won't be recovered, and which should be the end of the company even if the funds are recovered) is a much higher risk than being frank about it for the simple reason that the trail will be cold by the time the truth eventually comes out.

> no possible gain could come from trying to cover this up

Unfortunately, there is a possible gain, at least from the viewpoint of the owner: Simply keeping the business, and his normal life, running --- presumably hoping that a magical solution will appear from the clouds. (or to be try to be more charitable to him, maybe he hoped for a foolish new investor, or a dramatic change in bitcoin price)

If that's what happened, it was irresponsible, very stupid, and certainly fraudulent, but many people have done similarly stupid things in similar situations.

No matter what happened, that ridiculously long delay in reporting the theft is a most serious red flag, like you said.

How would that weigh up against the possibility of recovering the funds?

>How would that weigh up against the possibility of recovering the funds?

Maybe you're asking a rhetorical question, but historical precedent suggests the chance of recovering the funds in this sort of crime is really small. There have been tens of relatively big cryptocurrency heists like this, and but only in perhaps three or four cases that I know were funds recovered from the thief

But, to again imagine the Cryptsy site owner's viewpoint, statistics and probability are no match for pure human desperation, so, if we believe the 'hack' story, then a desperate plan based on the ill-advised belief that the funds could be recovered from the thief is not totally unbelievable. Though it sounds even more unlikely because the owner only announced a public bounty yesterday, not 18 months ago when the money was stolen.

A 35% chance to recover your customers funds would seem to me to be a chance worth taking, but maybe you're right and that was what drove this decision. Seems terribly incompetent and I'd say they deserve to be personally liable for the loss if that's how it went down.

After months of no activity on those wallets, someone put some dust in them yesterday. What can that mean? If they found silk road coins, they can find cryptsy coins maybe, right?

"Blame the Hacker" is a tried and true way of deflecting attention from internal issues to the outside. It's akin to claiming an act of god in old times, as soon as you cross that line you're supposedly in the clear because, after all, it wasn't you that was the problem.

I suspect several of the higher profile data leaks and acts of vandalism that were blamed on outsiders but where subsequent follow up was never shown to actually prove that this was the case were in fact inside jobs, especially in those cases where the company did not file the issue with the authorities.

I think that if a company claims 'a hacker did this' that they should provide conclusive evidence and absent that we should simply assume that it really was an inside job.

>You're asking people to prove a negative[1]. It's a common logical fallacy.

No, I'm asking for examples of investigations where authorities have concluded that so-called 'hacks' at Bitcoin exchanges were indeed hacks and not simply thefts by scammers running the services.

>Really? This claim is trivially disprovable. Numerous people have been arrested, including Mark Karpeles of Mt Gox. You've never heard of that case? $500 million allegedly stolen

Karpeles has not been arrested over "$500 million allegedly stolen", which is perhaps why you linked to a story about something else, behind a paywall.

As for Moolah guy, if you have 'proof' that he was arrested over the hacked Mintpal coins that amounts to more than Chinese whispers on Bitcoin forums/blogs, let's see it. All your link does is link to another site that claims he was arrested, almost a year ago, and doesn't even state why.

Even if we assume he might be one day charged with the theft of the coins, that's one person involved in a Bitcoin inside job facing prosecution over it.

I'm sure I can find more than one person involved in an inside job at a bank (involving dollar amounts considerably smaller than we're talking about with Bitcoin 'hacks') doing actual time for it.

The Bitcoinica hack definitely seems legit:

http://arstechnica.com/business/2012/03/bitcoins-worth-22800...

They hacked Linode's customer service portal, and compromised 8 Linode customers. So I guess it could be an inside job of a Linode employee instead of one of the bitcoin exchange's employees.

>There are so many 'exit hacks' it seems virtually standard practice in the Bitcoin world, perhaps because nobody seems to actually go to jail for it or even face any serious legal investigations into it.

And yet you have wealthy Silicon Valley Venture Capitalists actively promoting this crap, and no one is calling for heads.