Hacker News Reader

Comment by copenja | Hacker News Reader

Does this same danger also apply to bitcoin exchanges?

Are they heavily guarded?

Just wondering...

Not at all, you can freely walk into most exchange offices. Theoretically an armed robbery of exchanges and payment processors would be the perfect crime. Commit private address to memory or tattoo it on yourself in code, after the robbery forcing them to transfer to your public address and waiting out confirmations turn yourself in to the police and do the 5 yrs. Walk out with millions worth of bitcoins on your arm. (Penalty here is 5yrs, unsure anywhere else). Blockchain.info would prob nickname that address "Hans Grueber"

They'd keep you in indefinitely for contempt of court for not handing over what you'd stolen.

Claim the exchange operator hired you to rob their own business and they have the private key :P

IANAL, but in the US, the 5th amendment still protects combination locks, and as far as I can tell, passwords.

Prosecutors can be as intimidating as they wish, the government is free to use their magical NSA powers to recover the bitcoin. They can't compel someone to incriminate themselves. giving the wallet address to the prosecutor is effectively admitting to a crime, perhaps just conspiracy, but nonetheless that's self incrimination.

Go for memorization over tattooing.

They can compel you to enter the passphrase to decrypt your computer so long as there is sufficient evidence that you are capable of doing so.

What they can't do is say "only the person who committed this crime knows the password" and then force you to enter the password (since doing so would be self incrimination). It's when it's already known that you could enter the password that you can be compelled to.

I'm not familiar with the American legal system. Ignoring bitcoin entirely, if you rob a bank and hide the money do you get to keep the money after your release from jail?

"In Chadwick v. Janecka (3d Cir. 2002), a U.S. court of appeals held that H. Beatty Chadwick could be held indefinitely under federal law, for his failure to produce US$ 2.5 million as state court ordered in a civil trial. Chadwick had been imprisoned for nine years at that time and continued to be held in prison until 2009, when a state court set him free after 14 years, making his imprisonment the longest on a contempt charge to date."

http://en.wikipedia.org/wiki/Contempt_of_court#United_States

Plausible deniability. You are only the low ranking front. You don't know the passphrase needed to hand over.

Ask Mt. Gox... Typically an exchange will keep most of its BTC in actual bank vaults. Similar to how you'd store a large amount of gold.

They claim they do but there's never been any 3rd party auditing or verification of this that I know of. In the gold business every reliable business has auditing and insurance while so far Bitcoin businesses are run like a regular startup with open offices. Who's cleaning the offices after hours with access to the workstations or servers, who are the hired developers and are they smuggling wallet stealing software inside to transfer to themselves while on a flight to Brazil, who is writing their custom wallet and is it robust, how do we know they didn't copy every address to themselves. Lot's of security questions I've never seen addressed by any of the big exchanges. There was a payment processor startup that posted their office to bitcointalk.org which was floor to ceiling open glass windows with laptops facing the outside. How many binoculars are trained on those laptops across the street to get logins.

Some friends of mine trade large amounts of Bitcoin on a regular basis and there's never been much of a delay withdrawing. I doubt they are going to a bank to physically take out printed keys everyday for every transaction over $10,000 or phoning 5 people to combine keys. I bet the backups are kept in a safe deposit box, the cold wallet is likely an offline system anybody can walk up to with some kind of feeble authentication judging by past Bitcoin exchange incompetence.

Many of the smaller exchanges are using Blockchain.info wallets as their hot wallet too but won't admit it.

>There's never been any 3rd party auditing or verification of this that I know of.

I think that's intended to be a feature and not a bug. With Bitcoin 'third party verification' means other people no longer use a service after you've generously sacrificed your money to demonstrate their incompetence or malice.

Reply on news.ycombinator.com