I'm the guy who bought 259684 Bitcoins for under $3000 yesterday (2011) | Hacker News Reader

I'm the guy who bought 259684 Bitcoins for under $3000 yesterday (2011)

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131 pointsbaazaar57 comments

I was around when this happened. If I recall correctly, Mt. Gox ended up rolling back all the trades by doing a "restore" to a certain date before the sell off happened.

toasty didn't get to keep any except for the 600 some he withdrew.

He actually had to go through a lot of trouble to prove he wasn't the hacker originally responsible for the Mt. Gox hack.

that sucks

Given the current exchange rate, those 600 BTC would still net him $628,932.00. That seems like a pretty good deal. Granted, it could have been nearly $260 million, but I guess one can never have it all.

Totally true. I rather meant Mt.Gox' decision of handling it.

The important point about this incident was that there were no real Bitcoins involved. What happened was that someone added coins to an account balance on mtgox and then sold them. When you are using mtgox you are not actually buying and selling bitcoins. You are buying and selling IOUs for bitcoins and that is why MtGox was able to just roll back later.

Wait... is that how an exchange works? or just gox? I mean, so do they only actually buy the bitcoins when the user wants to cash out from the account?

I believe some, like Bitstamp, trade by connecting actual buyers to actual sellers in the transaction, to limit their own amount of BTC and USD holdings. That's what it says on the FAQ anyway.

Not really true. You have to deposit your cash and/or your BTC into Bitstamp's accounts. Only then you can trade them. And you only get cash and/or BTC back when you withdraw. In between it's just a bunch of data being pushed around, no actual transactions (though they seem like transactions, they only exist inside Bitstamp's database).

I think damian2000 was making a distinction between an exchange holding funds on behalf of customers and an exchange that trades with its own money.

An exchange is nothing more than a marketplace for buyers and sellers. They could in theory not buy the coins till you wanted to cash out, that would be a Ponzi scheme. That happened recently with a small exchange site. See this article:

http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=2013...

In general the way it works for a non ponzi scheme setup is that another user on MtGox is selling, and you are buying, so essentially if you buy, your account balance of coins goes up and at the same time the seller's balance goes down. Keep in mind though, no actual bitcoins moves because MtGox is holding them all in their account. It's exactly like what happens when you transfer money to someone who banks at the same bank as you. The money moves from one account to the other on the ledger, but really no money moved at all.

So do they get a transaction fee every time even though all they're doing is changing the id of the owner in their database?

Yes they do. Mt.Gox gets the transaction fee.

It does cost money to run that database.

No, gox works like all the other bitcoin exchanges, people send them bitcoins and/or fiat currency which they put in the person's gox account. The exchange provide an mechanism to let them swap one for the other with somebody else, and a mechanism for withdrawing whatever is in your account back to your bank account or bitcoin address or whatever.

The key here was that somebody basically compromised gox's security rather than some random user's security, and managed to put coins in a gox account without actually depositing any bitcoins. This was why rolling back was a justified action (albeit the hack shouldn't have been possible to being with).

related term to search for: settlement risk

Most financial institutions operate as a black box in that regard. Until you actually withdraw something, you know nothing about the internals or where your money / security may really be.

From a programming perspective, it doesn't really make any sense to make real Bitcoin network transactions for every buy and sell order; an internal database can keep track of all that way better. Arguably, they could steal all your Bitcoins if they wanted to anyway, so it doesn't really matter how they handle the internals.

Where did you find out that "someone added coins to tan account balance on mtgox and then sold them"? If that's true, that is really irresponsible for MtGox in terms in security.

https://www.mtgox.com/press_release_20110630.html

"On June 20th at approximately 3:00am JST (Japan Time), an unknown person logged in to the compromised admin account, and with the permissions of that account was able to arbitrarily assign himself a large number of Bitcoins"

I'm not so sure (although I haven't informed better) -- how was Kevin able to retrieve Bitcoins then?

Also there are people on the thread claiming they traced the wallet that had those coins.

Well, he was able to transfer out 643.27 coins which was not worth that much at the time and certainly not the windfall that he was hoping for. True, that portion could not be rolled back. I wonder if he kept those or transferred them back to MtGox in the end. I bet he gave them back because he was a verified customer, not an anonymous hacker and I doubt he wanted to go to jail over a few thousand bucks.

Worth $1000 or be precise.

They were worth $1000 only on MtGox at the time right after the crash. He says that their real value was probably closer to $10,000 once the price bounced back up.

So when the user transferred 647 BTC, that basically came out of Mt.gox's "personal stash" which is then backed by BTC transfers from other people using the system?

Was this title changed to [2011] only once it hit the front-page?

I was on the forum reading the post with no date context, I thought it was "yesterday", up until I refreshed the home.

Is this a common approach to get historical stuff on the home? Post an extraordinary title and let it rise to then rename it to the fact that it is historical?

Submitter puts in whatever, then when a mod notices it the title often gets changed.

Mods edit titles all the time.

Same happened with me. i thought this happened last night. (lets not forget this is a NEWS site, so expecting posts about CURRENT events is the default modus operandi)

Or well, you know, it got the attention of any mod once it reached the front-page.

The hugest takeaways from the thread to me were that the administrators of Mt. Gox were way over their head, and that the posters on the Mt. Gox forum were about par for the course in terms of tech-skewed internet forums.

That's the most worrying thing about BTC for me, too much of it is run by people in over their head, and now it's mega serious money.

Yep, There are a few that have sunk and some learning to swim. We'll see plenty of both over the next two years.

So just like in real banking? Nothing to worry about IMHO.

And its still got a dodgy reputation, due to the difficulty of withdrawing USD, which can currently take weeks to arrive your account. Other services like bitstamp and coinbase have been eating their lunch.

This part is interesting.

> I attempted to withdraw the bitcoin balance into my own wallet, and hit the limit that Mt Gox has, preventing you from withdrawing more than $1000 USD worth of bitcoins (at the current market value) in a day.

What is the reason for all the limits and delays that exchanges impose on converting Bitcoin into USD? These appear to prevalent even today.

For example, MtGox says:

> - Withdraws lower than 100.00 EUR are on average take less than a week.

> - It takes at least a month on average for withdrawals larger than 10,000 EUR

> - Withdrawals greater than 50,000 EUR need to be split it into multiple transfers or you can use the International Wire payment method.*

Coinbase says:

> I assume you're talking about selling coins here though. It's 100 BTC a day, and that can be done on successive days - in this example it would take 5 days to withdraw 500 BTC. Hope that helps!

I guess the goal is to somehow prevent fraud. But (a) how do the delays and restrictions help? and (b) what is the long term prognosis here? Will these limits ever go away, and if so, what would have to change for this to happen?

As far as I can tell it also helps avoid bank runs. If you can only withdraw a small amount of your balance every day, it may prevent the price from tumbling precipitously when people get spooked - they would have to consciously cash out over many days. It might also allow the exchange to operate with money it doesn't actually have, but that's just speculation on my part.

> As far as I can tell it also helps avoid bank runs.

Sounds plausible but it puts the exchanges in a major position of power in the bitcoin economy. If they're actively managing liquidity of the BTC economy in this manner I have a hard time understanding why they're any better than the central banks that bitcoiners are attempting to disrupt.

> It might also allow the exchange to operate with money it doesn't actually have, but that's just speculation on my part.

Let's hope not, because that is literally a ponzi scheme.

An exchange shouldn't be vulnerable to bank runs. All of the money (USD, BTC) should be there all the time. They're not loaning it out. For that matter, the exchange shouldn't care what the price is. It's all just shiny beads to them.

I'm guessing part of it might also be in order for Mt. Gox to keep its float steady. They have a certain amount of BTC available at any one point, with the rest in cold storage. If someone were to withdraw a huge amount at one point, it'd drain the float and everyone else would not be able to do anything.

What's the purpose of separating the 'float' and the 'cold storage'? Is it to increase security by limiting the amount of BTC exposed to an attacker who breaks in Mt. Gox?

Correct. A cold storage scheme might be private keys printed on paper and stored in a safety deposit box, for example. Then, if their network is compromised, they won't lose everything.

Not sure how much exchanges normally keep in their "hot wallets", but I've heard numbers from 10%-30%. If an exchange is hacked and decides to close and go under, they can also use cold storage to send some percentage of user's balances back to them.

Thread from when this happened: http://news.ycombinator.com/item?id=2676263

Seeings this is from 2011, what was the outcome?

And I am curious if the owners of Mt Gox are the ones that end up keeping these Bitcoins for themselves? Makes it quite the valuable business to be a middle person in..

This is what the banking industry have known for years! Keep clipping the tickets...

Yep, bitcoin is being heralded as the great successor to malignant bankers and their greed only to be almost completely reliant on shady exchanges.

Exchange was rolled back to before the hack, so all transactions after that point were voided. In the end nothing happened except that people had their trades reverted during that time.

When everyone are talking about bitcoin, it's the time the bubble will burst

So if he kept it, he now got about (1000/(3000/259684))x profit!

Wow so 259684 BTC at $939 (current buy price as I post this) is 243185236.74 = $243,185,236.74 :o

post is from 2011 though

More importantly the post is about an exchange failure that was rolled back.

It's not that easy.. an amount that huge would definitely affect the market severely.

There's enough volume now to space a quarter of a billion dollar exit out over two quarters, and most likely at or above $1,000 per. Volume and demand will continue to increase predictably for while yet, making it even easier as each day passes.

The bitcoin exchanges and trade platforms are a scam.

Its a worse market than wallstreet.

Read Kevins post without your bitcoin-glasses on for reasons why.

I wouldn't say it's a scam per se, but it could become one really fast. Right now there are 15 bitstamp employees, what's stopping any of them from taking the money and running?

bitcoin had just hit a $1000 a piece.

This is from 2011.

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