Hackers Strip Flexcoin Almost Bare, Bitcoin Bank Closes

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Hackers Strip Flexcoin Almost Bare, Bitcoin Bank Closes

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The self-proclaimed world's first bitcoin bank has been robbed of over $600,000.

When Mt Gox went nuclear Flexcoin, the self-proclaimed world's first Bitcoin bank, seemed fine. It even went so far as to Tweet that "while the Mt. Gox closure is unfortunate, we at Flexcoin have not lost anything." Perhaps it ought to have added "at least, not yet," since thanks to a massive robbery Flexcoin is no more. Its hot wallets have been cleaned out, and 896 Bitcoin stolen, valued at about $620,000. Flexcoin cannot afford the loss, and is shutting down effective immediately.

"Flexcoin has made every attempt to keep our servers as secure as possible, including regular testing. In our ~3 years of existence we have successfully repelled thousands of attacks. But in the end, this was simply not enough," said Flexcoin in a statement published via its website. "Having this be the demise of our small company, after the endless hours of work we've put in, was never our intent. We've failed our customers, our business, and ultimately the Bitcoin community."

Flexcoin has promised to restore any Bitcoin kept in its cold wallet, stored in computers that weren't connected to the internet. However everything in its hot wallet was vulnerable to what Flexcoin describes as "a flaw in the code" that allows transfer between Flexcoin customers. That flaw allowed someone to shove everything in the hot wallet into a couple of temporary web addresses, and then vanish.

Flexcoin isn't the only one to have suffered losses. Poloniex, a Bitcoin exchange, admits that approximately 12.3% of its Bitcoin reserves have been stolen by a hacker exploiting its withdrawals code. "The hacker discovered that if you place several withdrawals all in practically the same instant, they will get processed at more or less the same time," says a Poloniex representative. "This will result in a negative balance, but valid insertions into the database, which then get picked up by the withdrawal daemon."

Poloniex is solving its problem by deducting 12.3% from its remaining customers' balances. Poloniex's owner has promised to donate some of his own money and refuses to take any profit until the debt is paid.

Source: Guardian

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It's a damn shame, but let's face it: with a digital currency just getting it's first bank, there are gonna be bank robbers, especially since there's a lot less risk in an attempt to rob a digital bank then a physical one since you don't have to actually BE at the bank

Well, so long Bitcoin, it was a fun experiment while it lasted...

Link XL1:
It's a damn shame, but let's face it: with a digital currency just getting it's first bank, there are gonna be bank robbers, especially since there's a lot less risk in an attempt to rob a digital bank then a physical one since you don't have to actually BE at the bank

that is until the FBI knocks at your door

while im not convinced of this whole bitcoin idea, i say people shouldnt fret that much over this, is the begining of a new kind of tecnology or rather concept, flaws and exploits are to be expected and theres plenty of reasons to believe things will get better, instead of worse

Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme. Unless you're one of the earliest adopters, you'll not get rich from Bitcoin. Only whoever "Satoshi Nakamoto" is and a few others stand to make money from this scheme.

NuclearKangaroo:
that is until the FBI knocks at your door

Assuming the robber is within FBI jurisdiction and assuming they even care about theft of crypto currency. All the joy of internet banking, none of the legal protection, about time for Bitcoin to devalue.

These digital bank robbers are becoming a real hassle. This is a problem with a digital currency... really a digital good of any kind.

While it sucks that people have lost money it is not a bad thing in one way if it puts the nail in the coffin of this whole digital currency nonsense. Heck people might be able to buy AMD GPUs at reasonable prices again then.

the moment someone managed to pull off a huge heist it was going to be open season on these sites.
it would be less risky to just send me you money. i at least promise to give you half of it back

fix-the-spade:

NuclearKangaroo:
that is until the FBI knocks at your door

Assuming the robber is within FBI jurisdiction and assuming they even care about theft of crypto currency. All the joy of internet banking, none of the legal protection, about time for Bitcoin to devalue.

Kim Dotcom would tell you that the FBI don't care much about jurisdiction these days.

Poloniex is solving its problem by deducting 12.3% from its remaining customers' balances. Poloniex's owner has promised to donate some of his own money and refuses to take any profit until the debt is paid.

So they are covering their losses by making the customers pick up the bill? How kind. If only they had used tax-payers money then they could be a real bank! At least the big cheese is throwing some money in as well and they aren't making a profit, but it seems unfair to pass their mistake on to their customers.

CriticalMiss:

Kim Dotcom would tell you that the FBI don't care much about jurisdiction these days.

They still had to get the cooperation of the NZ authorities to go after Kimdotcom, if NZ had told them to sing to wind there's nothing they could have done about it.

Again, not to sound like a conspiracy theorist or anything, but the ones who stand to gain the most from the downfall digital currency are those who are rich and are using "state-issued" money. I don't think we've heard anything about who the perpetrators are have we? It's just been a really well organised blitzkrieg on Bitcoin value.

erbkaiser:
Sad for the people that lost their fake money

All money is essentially "fake". The value of, say, the US Dollar is only what people place in it. Well... what Wall St places in it.

CpT_x_Killsteal:
All money is essentially "fake". The value of, say, the US Dollar is only what people place in it. Well... what Wall St places in it.

The value of the dollar is protected by the trust you can place in the US Mint and by extension the USA as a nation.

The value of Bitcoin is "protected" by the trust you have in some obscure math designed by someone who is still anonymous, and who personally owns about 10% of all Bitcoins that will ever be possible. Some other early adopters hold an immense chunk of the theoretical maximum number of 21M as well, I believe the last guess was that up to 30% of all Bitcoins were "locked away" by unknown persons/groups/whatevers.

We don't know who Satoshi is, and if it is even a person or a group, nor what their goals are (beyond getting insanely rich).

This opens up the risk of manipulation of the Bitcoin by SN and others, including hyperinflation should they suddenly release a great number of Bitcouns.

Sure hyperinflation could and has happened to real currencies, but it is extremely unlikely to happen with currencies like the Dollar, Euro, Yen or any other developed nation's.

In comparison, Bitcoins are as trustworthy as North Korean Wons or Zimbabwean Dollars or even less so, since with currencies controlled by failed states we at least know who is behind them.

NuclearKangaroo:

Link XL1:
It's a damn shame, but let's face it: with a digital currency just getting it's first bank, there are gonna be bank robbers, especially since there's a lot less risk in an attempt to rob a digital bank then a physical one since you don't have to actually BE at the bank

that is until the FBI knocks at your door

Considering most things like the sale of credit card numbers and presumably hacks like this are committed by people outside of the US (Russian organized crime seems big on this stuff for example), there's zero risk the FBI will ever come after these guys. And the likelihood of governments like that in Russia giving a shit is probably close to nil as well.

erbkaiser:
The value of the dollar is protected by the trust you can place in the US Mint.

Not really. All money only has value because people believe it does and accept it as currency in trade. Lose that and the money becomes worthless. There is some level of trust people place in government currencies because they simply do, but the value of any money can't really be guaranteed by a government, and in the event currency devaluation starts spiraling out of control, it is very hard for them to defend against it.

There's nothing that makes the value of any government stable aside from belief that it's stable. Which is almost terrifying if you stop and think about it.

So it sounds like Poloniex died to a race condition. Which is interesting, because I was pretty sure most off-the-shelf database software is specifically designed to handle that sort of thing. At bare minimum, I know real banks are able to avoid this sort of thing when doing stuff online.

If Poloniex went down to something that simple, I really don't have any trust in them at all.

As a novice programmer, I find it terrifying that these people's bugs are costing them hundreds of thousands of dollars. When I write buggy code, I usually just get a good laugh out of it.

Vivi22:
Not really. All money only has value because people believe it does and accept it as currency in trade. Lose that and the money becomes worthless. There is some level of trust people place in government currencies because they simply do, but the value of any money can't really be guaranteed by a government, and in the event currency devaluation starts spiraling out of control, it is very hard for them to defend against it.

There's nothing that makes the value of any government stable aside from belief that it's stable. Which is almost terrifying if you stop and think about it.

True, I meant it more in the sense of that the only one who can suddenly decide to print millions of new dollars is the US government, and it would be against the interests of the US itself to do so.

Bitcoin has no such protection. SN is an unknown, and if he/she/it/they decides tomorrow to release one million Bitcoins on the market, nobody can stop him/her/it/them.

erbkaiser:
Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme. Unless you're one of the earliest adopters, you'll not get rich from Bitcoin. Only whoever "Satoshi Nakamoto" is and a few others stand to make money from this scheme.

Or not, considering a hacker can rob all your coins. Say what you will about banks. When they get robbed, at least they are not robbing from the customers accounts.

CpT_x_Killsteal:
Again, not to sound like a conspiracy theorist or anything, but the ones who stand to gain the most from the downfall digital currency are those who are rich and are using "state-issued" money. I don't think we've heard anything about who the perpetrators are have we? It's just been a really well organised blitzkrieg on Bitcoin value.

erbkaiser:
Sad for the people that lost their fake money

All money is essentially "fake". The value of, say, the US Dollar is only what people place in it. Well... what Wall St places in it.

State owned currency are backed by the goods produced by that nation and their army.

Bitcoin is backed well by....... Wishful thinking

Lono Shrugged:

erbkaiser:
Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme. Unless you're one of the earliest adopters, you'll not get rich from Bitcoin. Only whoever "Satoshi Nakamoto" is and a few others stand to make money from this scheme.

Or not, considering a hacker can rob all your coins. Say what you will about banks. When they get robbed, at least they are not robbing from the customers accounts.

Unless you live in Cyprus

NuclearKangaroo:

Link XL1:
It's a damn shame, but let's face it: with a digital currency just getting it's first bank, there are gonna be bank robbers, especially since there's a lot less risk in an attempt to rob a digital bank then a physical one since you don't have to actually BE at the bank

that is until the FBI knocks at your door

while im not convinced of this whole bitcoin idea, i say people shouldnt fret that much over this, is the begining of a new kind of tecnology or rather concept, flaws and exploits are to be expected and theres plenty of reasons to believe things will get better, instead of worse

True, it's new but there are plenty of things that wee new and eventually found to be not worth pursuing. Remember Zipdrives? Superdisks? Those were new once...but those ideas failed. They were beaten by better ideas.

Bitcoins are pretty much the same really.

How is it that people investing in BitCoin are still using such insecure methods of storing their money?

Is the ease of being able to just jump online and access your wallet really worth the risk of having your entire investment get stolen? There are many ways to safely store a digital currency offline, with the trade-off being a slight delay in how quickly you can gain access to it.

BitCoin is an idea not so dissimilar from the many thousands of 'digital credit' type currencies that have been the mainstay of science fiction for years. It's almost like they took those futuristic-but-largely-undeveloped ideas and just ran with it, without ever giving consideration to how much effort needs to go into making sure your currency is stable and secure.

That makes me sad. Very, very sad.

I hope that a successful digital currency evolves out of the mess we've seen of these novelty monies, but at this point I'm beginning to fear that it may very well have set back the concept of universal digital currency considerably.

currencies should be backed by tangable wealth, or hell barter systems. all way better currencies than these invent value shell games, not just these crypto currencies but of these global government currencies.

it is has real value it cannot tank crumble be worhthless, back it in gold platnium dimaonds oil cotton, anything that has real value and keep a set fixed supply so it keeps value.

lacking that your debt grows too big your politicial situation becomes unstable, civil war, global economic collapse, market bubbles can tank your economy and collapse it utterly if the crisis is big enough.

So they have a cryptographically secure currency but still get hacked way more than real banks, eh? Sounds like these people are learning the hard way why there are so many regulations placed on banks.

Captcha: history repeats itself

Digital money, always a risky business. I know if I were ever to run a business, I wouldn't do it with a currency that could be hacked away overnight while I was sleeping or something.

Kinda saw this one coming eventually.

Not only did people lose a ton of their bitcoins; The value of said bitcoins is likely going to plummet and stay low for a considerable while because of this. Sad day for a cool concept :(

Btw, I have 0 knowledge on these things so take my ignorant opinion for what it is; a fool's thought.

erbkaiser:
Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme.

Except, by definition, it's not. Ponzi schemes involve taking money from Peter to Pay paul. Bitcoin involves investing in a cryptocurrency. They are two completely distinct things.

m72_ar:
State owned currency are backed by the goods produced by that nation and their army.

Bitcoin is backed well by....... Wishful thinking

That's not what backing means. Backing involves a promise to exchange the currency for something else at a given rate. With sufficient reserves and minimal printing, one can keep the price of a currency from dropping below that rate.

erbkaiser:
The value of Bitcoin is "protected" by the trust you have in some obscure math designed by someone who is still anonymous, and who personally owns about 10% of all Bitcoins that will ever be possible.

Nope. Satoshi proposed the theoretical basis for the currency, he never participated much of the implementation Bitcoin. I find it fucking hilarious that you think you know which wallets are connected to him, because that means you know nothing at all about Bitcoin or how it works.

erbkaiser:
Some other early adopters hold an immense chunk of the theoretical maximum number of 21M as well, I believe the last guess was that up to 30% of all Bitcoins were "locked away" by unknown persons/groups/whatevers.

I guess I'm part of that group, since I had 2 bitcoin in sitting in a wallet for the past 2 years that can't be connected to me personally without breaking in to my house. Most early and middle adopters aren't there to speculate and trade, they hold onto the bitcoins and wait. It doesn't take a genius to figure this out, just go on bitcointalk.org where all the developers and adopters hang out and you'll see all of them talking about how they aren't here to day trade or speculate on the price.

erbkaiser:
We don't know who Satoshi is, and if it is even a person or a group, nor what their goals are (beyond getting insanely rich).

You're hilarious. We know exactly what his goals were: he wanted to know if it was theoretically possible to create a cryptographically secure, decentralized currency. Hence he produced the original paper and released it on the web, then left.

Lono Shrugged:
Or not, considering a hacker can rob all your coins. Say what you will about banks. When they get robbed, at least they are not robbing from the customers accounts.

Yeah, they're robbing from everybody, even people who aren't customers of those banks. I'm honestly glad to see customers get bitten in the ass for once. Bitcoin security is pretty damn easy, only the technologically incompetent put theirs in banks. The only real thing you need other people for is exchanges, and that's what places like Coinbase can do.

erbkaiser:
Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme. Unless you're one of the earliest adopters, you'll not get rich from Bitcoin. Only whoever "Satoshi Nakamoto" is and a few others stand to make money from this scheme.

It's not a ponzi scheme and you're not supposed to get rich from BitCoin. That's half the problem, too many people looking at this as an investment instead of as a currency.

Like any currency, Bitcoin is simply a measure of service provided to a community.

Let's say you live in a small town. John, the roofer, needs some computer work done. You know John, so you go do the work but he has no money to pay you. Instead, he promises that he'll fix your roof when you need it done next. Well, you live in a basement suite, so that's really not worth much to you. However, you get him to sign a note saying he'll fix a roof of a certain size for anybody who gives him the note back. You take this to the grocery store. Bob the grocer doesn't need his roof fixed either, but everybody in town knows that John is good on his word, so he takes your note as payment and gives you some groceries. Bob then gives the note to Amelia, the local plumber, for fixing his washroom sink. Amelia hands it off to Mike, at the local hardware store for a new wrench. Mike in turn gives it to Jay, the hairdresser to handle his kids hair. Jay happens to need his roof fixed.. so he takes it to John and the cycle's complete..

Except that John is pretty happy about all of this. As far as he's concerned, he got his computer fixed, and then didn't have to do any work for that until three weeks later. John decides this is a good way to pay people, and starts giving people "roofies" to pay for stuff, which measure the work he'll do by square meter. It works fine, people in town think it's a little crazy, but folks are getting what they need, including their roofs fixed, and suddenly you've got a currency.

So. What's the value of a roofie? Is it the value of the computer work? The wrench? The hair styling? A fixed roof? What's the value of a roofie to someone just driving through the town? Now, let's say you decide that you'll help John by developing a database where people can store the total amount of "roofies" that they have. Some hacker gets in and destroys the database. All those roofies lost. Has the value of roofies gone up or down?

Bitcoin is, like the dollar, and like roofies, simply another currency. People trying to use it as investment are currency speculators, and so its "value" is only relevant to a person who's trying to exchange a bitcoin for some other type of currency. For those using strictly bitcoins, the theft is simply a theft. Unfortunate for those that got hit, but it doesn't change the services you gave for a certain amount of bitcoin, or what you expect to receive. Like any currency, if someone is demanding more of it than you think reasonable for their service, you turn them down and go elsewhere and they will either find someone else or drop the price.

Now, do I use them? Hell no. I don't live in roofie town, so they're pretty much worthless to me no matter what the speculators say.

Roofies is a cute analogy. Too bad it's also the date rape drug. Shingles is a painful illness. Maybe that should be roofer currency instead.

Kwil:

erbkaiser:
Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme. Unless you're one of the earliest adopters, you'll not get rich from Bitcoin. Only whoever "Satoshi Nakamoto" is and a few others stand to make money from this scheme.

I kind'a like the way you've put this.

BitCoin is definitely a currency, but it isn't the kind of currency that one can simply take out of their pocket and hand to someone. Treating it the same as one would treat an I.O.U fails to address the real problem, which is that it's lack of a physical presence limits the number of ways in which you can safely store it.

With a large, national bank there are billions upon billions of dollars to be spent on ensuring their internet-based security systems don't get hacked. They spend more than some small nations on ensuring the safety of their clients, and there are protocols in place (both those enacted by the bank and those enacted by federal law) to limit the amount of damage that can be done should a bank be robbed or fail.

Does this do anything to ensure that the economy won't be destroyed? Of course not, not when the banks themselves behave badly and violate their own rules, but at the very least they EXIST and serve as some sort of guideline by which the banks must operate. They also provide a measure of reassurance to the people putting their money into the HANDS of these banks, in the form of insurance.

If my bank gets robbed... even if the dollar bills I took there the night before and deposited into my account are stolen... I am not going to lose my money. My bank is responsible for covering those losses, and they in turn are insured against such thefts so as to prevent one robbery from closing their doors forever.

To go back to your talk of 'roofies', this would be akin to someone going to John's house and stealing the pad of paper he uses to write his I.O.U's. Nothing has happened to ME, except that John will have to get a new pad of paper and maybe start locking his door at night.

With BitCoins, it's more like someone walking up behind me and bashing my head in with a shovel, then running off with the I.O.U. and burying it somewhere in his yard before going off to steal John's pad of paper. Even if, by chance, you could identify who stole it... you could spend a lifetime digging and never have that I.O.U. turn up. Meanwhile, John's got no more paper to write them with, and the sudden fear of having people break into his house for a lousy pad of paper has turned him off of the idea of dealing in I.O.U's anymore.

All of this, and we haven't even gotten to the part where people start writing up COUNTERFEIT I.O.U's with the stolen paper.

The reason so many view a digital currency as an INVESTMENT rather than a form of money, is because keeping it in your hand and offering it up to people in exchange for things comes with excessive risks not entirely unlike the theft of my I.O.U. It's much easier and safer to simply soak up a few BitCoins and sit on them securely while their value rises and falls, waiting for a good time to trade them back for more than you got them.

Where it fails as a currency, it actually performs moderately as an investment/speculative interest. Or at least it did, before this latest rash of rather curiously-timed thefts and attacks riddled user-confidence with bullet holes.

If the security systems improve, then maybe you'll start seeing people looking at it more seriously as a currency.

Otherwise, confidence will continue to plummet and you'll see it slowly fade away into obscurity.

Surprise! This is why banks are regulated: to prevent you from losing all of your money.

You take away those regulations, you take away the safeguards.

This just reinforces my theory that bitcoins are a massive scam developed by some ex-EVE Online players who were bored with scamming/stealing money that could only be used to by internet spaceships and spaceship accessories.

Unrelated to the robbery itself (thought it's still sad that people got robbed), but I have a question; how can a single Bitcoin be worth $691?

I am quite sure someone advertised Bitcoin/cryptocurrency being "safer" than normal bank money transaction.
Tho if I feel unsafe about my bank I have the legal right to withdraw my money in cash and the bank has to find a way to get that money even at 17:59 on friday. (Unless I withdraw more than 10.000 that is when authorities have to know - tax thing). And if the bank loses my money I know who to hold accountable and know who is legally responsible. And all of the records will never disappear, tax records are almost eternal.

I don't buy in to this "unregulated free currency" idea. Money is only worth as much as the strongest authority is willing to back it. And if there is no authority then what guarantees it's value? And who is the authority behind making sure the currency functions and is kept secure? (I know it is crypted supposed to make it safe, but thats the same thing as unique ID# on bills, there are not 2 same ID#s)

There are so many loopholes behind currency that is unregulated and based on the idea of freedom.

Also I don't care about the "not being tracked by the government" bullshit. I have nothing to hide, I don't do anything illegal with my money. I pay my taxes - I have nothing to hide, I trust my government (Finland), I know my rights and their limitations.

I feel sorry for everyone who had a lot of money tied to this, but at the end of the day, you kinda knew to what you were getting in to. And don't put all of your eggs in to one basket. Even I got Euros and Dollars + 2 banks.

Mangod:
Unrelatd to the robbery itself (thought it's still sad that people got robbed), but I have a question; how can a single Bitcoin be worth $691?

Because that is as much as the highest bidder is willing to pay for the string of numbers that make it.
The same way as any other currency has it value (Including coffee beans and other things that are traded as stocks) the amount that the highest bidder is willing to pay.

The math and technology behind the string itself is another matter and is not really that simple. even if it is open source.

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