Coincheck Says It Lost Crypto Coins Valued at About $400M | Hacker News Reader

Coincheck Says It Lost Crypto Coins Valued at About $400M

bloomberg.com

Other discussion on the topic:

https://news.ycombinator.com/item?id=16240874

Is it may be just may be possible that these exchanges are stealing their own money ...you it not being regulated and all ??

My thoughts exactly.

I feel like this is the ultimate fate of every exchange that holds coins.

> this is the ultimate fate of every exchange that holds coins

I do too. There is a reason modern markets feature segregation between exchanges, clearing/settlement, and customer-facing (and funds-handling) brokers.

There are indeed some definite advantages to the structure of modern markets, as you say.

Securities markets, even structured as they are, would totally eat their customers if they were unregulated. It's fear of the SEC and FINRA ending their careers that keeps most of them in line. You could add three more participants to the crypto trading process and it would still be a minefield, because any one of those participants may misbehave absent regulations.

Modern markets involve a brokerage that acts as a custodian of your account holdings, separate from the exchange itself. However, that alone doesn't prevent churning, violation of account terms, opening of unauthorized accounts, recommendation of excessively risky trades, misuse of capital that leaves little liquidity to ballast the whole firm, etc.

Keep in mind that it's the FDIC that insures your personal bank deposits, and that there are regulatorily approved clearinghouses to remove counterparty risk from many derivatives markets. These things wouldn't exist without regulators.

I'm not sure any amount of regulation would really solve the problem. At the end of the day someone is going to be able to see the private keys. And that's all they have to do—see it. Anyone with access to a private key can steal it at any time.

It's almost the same as being able to rob a bank just by being able to look in the vault. You just need a peak, and escaping with the pot is as easy as pretty a button.

I wonder what the multiplier of real money to crypto money was. They say $400M was lost but if $10M of fiat was put in and the price goes 40x (because one guy who threw in $50 cashed out at the high price) was there really $400M lost, or just the original $10M?

an interesting point you raise. I read recently that practically 100% of the principal for Madoff ponzi schema was recovered. 0% of the fictitious gains, mind you, but 100% of the original money invested.

About 73% of the principal has been recovered as of December 2017. [1]

[1] https://www.bloomberg.com/news/articles/2017-12-18/madoff-vi...

I was curious if anyone has done the real life equivalent of this. According to thrillistthe great bank heist (from a single bank) in history was like 70M. [1]

Funny how an over a magnitude more money just goes missing.

[1]

https://www.thrillist.com/culture/most-successful-bank-robbe...

http://bgr.com/2015/02/16/300-million-bank-theft-hackers/

100 banks to get $300M - $900M is still a lot better than a single exchange losing half a billion.

Well no, their customers lost it. Unless you think the unregulated exchange is going to make them whole.

Can't say I understand. Didn't the exchange's customer also lose it?

Money being taken from a bank generally does not get taken from the customers of that bank, unless the bank fails.

Money being taken from an exchange generally leads to customers losing it, so one could split the loss among them, the same way you split the loss among banks above

Sure, but even a half-billion lost is amateur hour compared to the Coalition Provisional Authority in Iraq:

https://www.theguardian.com/world/2007/feb/08/usa.iraq1

this is the future of money. amazing.

No, this is pretty much the proverb "a fool and his money are soon parted" in action

No, this just shows that future wallets and exchanges ought to be more secure. All the flaws that enable these crypto thefts are solvable on a practical level: multi-signatures, time-locked transactions, hardware wallets, offline wallets, etc (unsurprisingly, none of these technologies were used by Coincheck to protect their XEM tokens.)

"lost"

The addresses of the exchange are known and everyone can see the money that goes in and out. It would be quite difficult to actually steal the money.

would it? what keeps them from just making up a new address and stealing the $? and then transferring that cash to some anon coin? (genuine question; not versed in this at all.)

Sending to that new address would be public.

Yeah, but it's hard to say whether the transaction to the new address was done by a fraudster or the exchange.

They can claim their private key was stolen, and it wasn't the exchange's owner, but we have no way of knowing for certain.

so? Sending to an exchange and then selling it for a discount - what exchange would say no?

"Someone should really regulate this whole system, it's getting ridiculous."

People should really understand that trustless systems mean not trusting an exchange. If the coins aren't in your own wallet, you don't own them

An exchange is not a bank

True, but it doesn't help that exchanges are pitching themselves as a bank.

Of course, then you have to trust your own infosec. I don't, personally. Too many ways to fuck it up, and the bad guys only need to get it right once.

Dedicated hardware and encrypted backups go a long way.

Sure, until this happens: http://www.dailymail.co.uk/news/article-5323601/Bitcoin-robb...

Harder to do that to an exchange.

If people want the safety of regulated banks they have that option. If they want to risk their money with an unregulated exchange (though I think all Japanese exchanges are regulated) they should have that option.

If a million fools cause a systemic risk in the economy when their money gets lost or stolen, no, it turns out that there is a level of collective responsibility.

That's a nice thought, but it's not what happened when the fools crashed the "real" economy. Still zero prosecutions!

I thought crypto was supposed to be a better system.

That the available protections don't cover the entire history of every possible financial scam or system risk doesn't change the fact that regulations have effectively kept a lot pump-and-dump scams and securities fraud at bay.

Above you were talking about "systemic risk". Is that something pump&dump can cause? Those seem to be just plain old frauds...

Where is the risk to the real economy? No fiat was destroyed.

They're not children. I would strongly caution that we don't have a moral right to forbid them from using their own money how they wish. To think one does have that right is conceited, and the road to social ruin.

And with respect to the 'systemic risk' argument, a million fools squander billions on state-run lotteries, and probably trillions on frivolous consumer goods, every year. I'm sure our system can withstand a few hundred million dollars worth of losses in cryptocurrency hacks. It's also not clear that it is actually in the long term systemically harmful, given there is at least some technological innovation, especially in the areas of distributed computing architectures and web security (there's never been a better bug bounty or a canary for un-known security vulnerabilities than cryptocurrency on a target hard drive), being generated from this activity.

The state-run lottery is so because the profits go back to the system, which means that as a method of social ruin it at least subsidizing the rest of the social services.

About the second point, in the dot-com boom, billions of dollars in value were destroyed by people doing the same kind of speculation as they're doing now with crypto. At least a lot of that money paid for labor and assets. What do ICOs actually leave behind?

And what actual, useful innovation of blockchain technology has any uses whatsoever? Man, it's been over 8 years since we have cryptocurrencies as none of the tech's transcended that niche.

The dot com boom also spurred enormous tech development, and any government effort to curb it would have been a sweeping/imprecise measure that would have stifled the good (e.g. the early Amazon) with the bad (the 90% of firms that were crap).

Moreover, a valuable lesson would have gone unlearned, leaving the investing public in its more naive state where it is more dependent on the publicly funded risk assessment that regulatory agencies do. This socialization of due diligence is going to create moral hazard, which is an economic inefficiency.

>And what actual, useful innovation of blockchain technology has any uses whatsoever?

People are able to move value in situations that they previously could not.

Spin off benefits include the creation of a hardware wallet industry, an enormous amount of knowledge gained by cryptocurrency users on computer security, and greater public attention to monetary policy. I would argue that it has pushed PayPal and the credit companies to up their game and offer faster/cheaper services, but that's more speculative.

I believe the big benefits of cryptocurrency are yet to come. They represent a paradigm shift and paradigm shifts take a long time to materialize. To give you an example, e-commerce took a long time to move beyond the realm of fantastical claims about its future promise to actual large-scale real world utility.

This is why a technology like AirSwap [1,2] is the future of exchanges. You hold your own coins because the exchanges are just waiting to rob you.

[1] https://swap.tech/whitepaper/

[2] https://medium.com/@jon.doe.ethereum/airswap-a-centralized-e...

There is also a thing called AtomicSwap https://en.m.wikipedia.org/wiki/Atomic_swap

Are any exchanges actually built on robust decentralised infrastructure yet?

"custodial risk"

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