Why did you change your mind about hosting the wallet?
my bet: mtgox limitations 
Topic: Bitcoinica lost 43,554 BTC from Linode compromise, suspicious TXIDs publicized - page 6. (Read 56431 times)
March 01, 2012, 11:50:04 PM
March 01, 2012, 11:49:28 PM
and again +200k to the op for being a man and taking care of this in a responsible way, im just trying to bring awareness on how we can secure bitcoin for the future. I have only like 80 bitcoins in my wallet right now but you can damn well better believe it is in encrypted with a completely uncrackable password.
March 01, 2012, 11:47:37 PM
i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
it would take multiple fails for this scenario to be successful and the bottom line is an encrypted wallet would likely have saved this money. The problem is these web applications have not been developed to the level where they are able to interact with encrypted wallets. point blank.
March 01, 2012, 11:47:18 PM
Watch MTGOX, Im telling you someone is dumping these coins right now.
The limit for withdrawal is 10K USD for verified account, and he would need to pass fake information to MtGox's money laundering office. So the thief would need to create multiple accounts, multiple identity or compromise several mtgox accounts.
If Mark isnt aware of watching for this, he might just let this guy withdraw all the funds over a few days, Im not sure what the endgame is however some individual(yes it was way to coordinated, watch the graphs) solely dumped just over 20k BTC allready.
March 01, 2012, 11:46:10 PM
zhoutong, I do appreciate what your are doing for the community. This is a hell of responsibility your are taking, good job.
But, please, explain me - how could you be keeping the whole bunch of Bitcoins in a single wallet running on the VPS (!!!) in the wild? Having $200,000-250,000 worth customers' funds would make me invest my own money in renting dedicated server at least. Or two. Considering even this not being totally secure - it still would provide much more security at $50/month cost.
But hell, who cares about security at $50/month! Being a hero at $200 grands is much more effective!
But, please, explain me - how could you be keeping the whole bunch of Bitcoins in a single wallet running on the VPS (!!!) in the wild? Having $200,000-250,000 worth customers' funds would make me invest my own money in renting dedicated server at least. Or two. Considering even this not being totally secure - it still would provide much more security at $50/month cost.
But hell, who cares about security at $50/month! Being a hero at $200 grands is much more effective!
March 01, 2012, 11:45:56 PM
We didn't have the opportunity to scan our whole system for suspicious transactions that were not initiated from our customers because we had to shut down the system immediately after we've discovered the huge loss. We did get a rough estimate and we published a press release to warn our users about the deposit address replacement.
However, now we have concluded that we lost 43,554 BTC from this incident and we will reimburse our customers for the full amount.
However, now we have concluded that we lost 43,554 BTC from this incident and we will reimburse our customers for the full amount.
When you introduced Bitcoinica, you claimed one of your security advantages was that you "did not operate a Bitcoin wallet" and that "all your funds are stored on MtGox". Source: https://bitcointalksearch.org/topic/m.514429
However this theft makes it apparent that you changed your mind, as you lost a wallet. Why did you change your mind about hosting the wallet on your own servers? You had a great idea, you should have stuck with it.
March 01, 2012, 11:45:40 PM
Watch MTGOX, Im telling you someone is dumping these coins right now.
The limit for withdrawal is 10K USD for verified account, and he would need to pass fake information to MtGox's money laundering office. So the thief would need to create multiple accounts, multiple identity or compromise several mtgox accounts.
IANASE, but keep in mind that AML increase barrier of entry, reducing competition and privacy of users. Keeping record of user identity is also a security liability if identity thieves get their hand on it.
March 01, 2012, 11:45:00 PM
i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
March 01, 2012, 11:44:51 PM
i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
March 01, 2012, 11:44:01 PM
Watch MTGOX, Im telling you someone is dumping these coins right now.
This is right . Why not catch the thief at this part of the chain?
March 01, 2012, 11:42:35 PM
i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
March 01, 2012, 11:41:32 PM
Watch MTGOX, Im telling you someone is dumping these coins right now.
March 01, 2012, 11:41:13 PM
i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
March 01, 2012, 11:38:08 PM
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
AND mutlisignature
AND low amount of BTC in your hot wallet in case your defense in depth got bypassed.
this ^^
March 01, 2012, 11:38:02 PM
i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
March 01, 2012, 11:36:23 PM
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
AND mutlisignature
AND low amount of BTC in your hot wallet in case your defense in depth got bypassed.
March 01, 2012, 11:36:00 PM
yeah .... no?
explain to me how I am wrong.
as was mentioned before, the wallet would have to be decrypted at some point in time to use it, the attacker had root access so they would see the unencrypted wallet. This means that an encrypted wallet would not have help out at all. explain to me how I am wrong.
March 01, 2012, 11:35:29 PM
so basically the problem here is no one was using encrypted wallets because the web apps they were connected to were not compatible
damn what a shame thats a lot of money
props to the OP for doing the right thing.
damn what a shame thats a lot of money
props to the OP for doing the right thing.even if the 'web apps' were compatible, they would need to know the encryption key, so anyone with access would also have the encryption key
March 01, 2012, 11:34:35 PM
i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
thank you.
March 01, 2012, 11:34:11 PM
i mean seriously, could not this whole thing been prevented if the wallet was just encrypted?
Obviously the software running against the hot wallet has to have access to it. This means that if someone roots the server, they'll be able to have the same access to the hot wallet. Encryption would not have entered into it.
Zhou, good on you for covering this! I'm having a hard enough time covering the BTCinch theft; I can only imagine how pissed you are at linode.
In this case, encryption would have protected the wallet because the attacker was only able to get root access after a reboot.
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