Topic: Hacked Linode & coins stolen to 1NRy8GbX56MymBhDYM... - page 12. (Read 62186 times)

While I think that a marked coin or tainted coin might be harder to spend with some users, there is still a whole segment of users that don't care either way, so the spice will still flow.

I agree that if a thief is willing to go through the trouble, they could launder bitcoins, so as to make them very hard to track; possibly even impractically hard to track.


I don't have a strong opinion on whether 'marking' coins - basically, trying to keep some record of which 'coins' were stolen (or rather, which fraction of the balance at a particular address was 'stolen') would have the effect of reducing the incentive to steal bitcoins.


I do like the idea that even if a small fraction of bitcoin users will refuse to accept 'marked' bitcoins, then this instantly decreases the value of 'marked' bitcoins; and this can possibly have a knock on effect; so that 'marking' doesn't have to be total, or centralised, for it to have an impact.

But I also see the argument that it would be very difficult to know who to trust to maintain lists of marked bitcoins; there seems to be some centralization inherent in the idea of lists of bad coins.

And there would be conflicts of interest; the more bitcoins that get marked as 'stolen', the more valuable non-stolen bitcoins become; anyone with a lot of bitcoins would be incentivised to have other bitcoins 'marked'.

There is also the fundamental difficulty of establishing whether bitcoins that are alleged to be stolen, were actually stolen, or not.  I'm not talking about any specific case here.
If its possible to pay for goods, with Bitcoins, and then later declare the bitcoins used in the payment to be stolen, and hence marked, you mess with the way bitcoin handles non-repudiation.
It would also totally change the setup of services, which have user accounts layered on top of the bitcoin protocol - they don't have a direct mapping from individual users, to bitcoin addresses - while they can be considered to be outside the bitcoin system, in some sense, 'marking' would not work well with them, in practice.

Like all these economic things, it's very hard to reason about the effects of such a system, so I've no strong opinion on it.

The fact that the complete history of a balance is stored, and publicly available, allows you to think about doing interesting things like this, in a way thats hard in other setups.
It might be interesting, if, instead of balances, there were specific 'coins' in the protocol (at the moment, balances lose their individual identities, when they pass through a transaction) - that would allow 'marking' to be done properly - maybe such a system could support 'marking' in some decentralised fashion, and be more resistant to theft.  I don't know, but interesting to think about.

No, I did use the term "backdoor" for a reason

They didn't acknowledge the access that had been through their "backdoor" until later.
It didn't show up in the logs or slush's information he had.
The first reply from Linode, didn't acknowledge the "administrative" access at all. (re: slush's pastebin)
i.e. they hide the access ...

That's why

Thank you Slush for being so man-up about the situation.  Also, I think Linode should be responsible for a portion of the lost.  We should send Linode this thread.   Definitely "Rogue Employee" come to mind at Linode.

Linode knows about bitcoin because we spoke to an employee from there about witcoin  months ago. They had asked us to take down a particular post about their policy of shutting down a site for content they didnt agree with. They are fully aware of it. I hate to say it but "rogue employee" comes to mind. Boycott unless they fix it.

Is just an idea but maybe offering to the miners the option to donate a percent of their choice from their earnings for the next x days/weeks to help the pool recover would also help

Just a small detail, but:

If I send tainted coins to an address which is already holding clean coins, the two transaction outputs don't "mix".  They stay separate - some tainted, some clean.  The mixing only happens when I combine several outputs to make a new transaction, then each of the outputs is tainted with:

output_taint = sum(input_n * input_n_taint) / sum(input_n)

Hey slush, I'm sorry this happened. I'm sending a few coins to you, for your hard work and the decision to cover the losses!

Did some work on this before:
http://anonymity-in-bitcoin.blogspot.com/2011/07/bitcoin-is-not-anonymous.html


Have you seen this SVG we made, linked to from that page?  
https://sites.google.com/site/btcanalysis/AllegedTheftBlogVersion.svg?attredirects=0&d=1

You'll need to open it in something that renders SVGs well - I use Google Chrome.

If you mouse over the graphics, you can see the addresses.

The node: 104741, as we number them (this corresponds to http://blockexplorer.com/address/12RyZB4odBmdenN6TPukb1ZR29DHKgMHuJ - the nodes in the SVG have clickable links to blockexplorer) (the node is in the top-middle of our diagram; but chrome etc will let you search the SVG to find it, by the number 104741), is where those coins you found, break off the main flow of funds, which we continued to track.  We only rendered the principal flow of coins; our code follows the 2K of coins, and ignores the flow of ~20coins that break off, that you mention; 10 or so hops later, that small flow arrives at the address you mention.

If you are interested in this sort of thing, check that diagram out.
I'm biased, but I think it does a pretty good job of allowing us to unravel bitcoin flows.

I'm glad you've decided that your predictions are infallible.

As I said:

Just coz you have an idea - doesn't mean is isn't flawed - step back and read it again.
I'll explain it if you really can't see it.

Can you say "Linode employee"?

That's your perp...

It is possible to keep your wallet outside of those large automated systems though.  I don't put my wallet on a system that anyone but me has a access to. Problem solved.

i.e. trust a "central authority".
As soon as a large % of Bitcoin people trusted such a central authority I would sell my bitcoins and go find a true decentralised secure currency.
Bitcoin would no longer be that.

And right there you have pointed out the obvious flaw in the whole idea.

It isn't possible to design large automated systems with no kind of management built in. It just can't be done. Certainly it would be possible for Amazon or any other provider to do something similar - shut down the VPS, modify /etc/shadow, and boot up again having given themselves access.

The question is whether they can keep it secure. Good passwords, token based authentication, minimal number of users with access, fine-grained permissions properly applied, etc. Not to mention blatantly obvious things like only allowing access from certain IP addresses. Not doing so is inviting disaster, as per Linode.

I heard a polish exchange lost their money there because they didn't backup the wallet somewhere else.

Big irony is that my previous login into Linode Manager (those on 08/02/12) was because I created backup machine and moved pool backup here from my home server. I had some connectivity issues at home and sometimes backup didn't finished properly, so I decided to move backup to standalone machine to make it "safer".

QFT

The security of EC2 is dependent on what applications you install on it.
If you install an application that has a security vulnerability that gives access to the wrong information then you are no better off.

However, the fact that Linode has an administrative "backdoor" into their system that they put in place with crap level security, certainly suggests anyone would be a fool to EVER use them again.
I'd probably even say that just having an administrative "backdoor" into their system that they put in place means you should not trust them.

Hopefully comments similar to that will spread across the internet and that will be the end of Linode.

Great analysis.  A good example of why we can't blacklist coins.

Dan

I love that post, thanks for taking the time to do that