Feeds

Man says he lost $500,000 in virtual currency heist

Digital coins: As discreet as cash – and just as more vulnerable

The Essential Guide to IT Transformation

Leaders of the open-source virtual currency project known as Bitcoin say they have no way to verify one user's claim that hundreds of thousands of dollars worth of digital coins were plucked from his computer earlier this week.

Rumors of the heist have been swirling since Monday, when a Bitcoin user named Allinvain claimed 25,000 Bitcoins, technically valued at close to $500,000, had mysteriously been transferred to an unknown user's account. Allinvain speculated the thieves made off with the windfall after using malware to compromise his Windows-based computer.

"I just woke up to see a very large chunk of my bitcoin balance gone," the user wrote. "I feel like killing myself now."

More than 300 posts later, it's still not clear if the claims are part of an elaborate hoax. Because Bitcoin is built on a peer-to-peer foundation that completely bypasses any sort of centralized database, it's impossible for even the architects of the digital currency to verify if a theft took place.

"Bitcoins technical details are complex cryptography and there's no way for us (as developers) to figure whether there was a real theft or not," Nils Schneider, one of the project backers, wrote in an email to The Register.

Still, the claims highlight the darker side of a completely decentralized digital currency that's built from the ground up to be as anonymous as cash. Long considered the Holy Grail of futurist libertarians because it can't be traced by marketers or governments, the system has no mechanism to trace the types of digital heists that are becoming a common occurrence these days.

One can say many of the same things about cash, but there are a few caveats: It's typically not possible to store hundreds of thousands of dollars in a "wallet," digital or otherwise, and traditional wallets aren't protected by anything like the Windows operating system, which is notoriously susceptible to online criminals. Cash also can't be stolen remotely by someone who's physically located half-way around the world from the victim.

What's more, cash stored in bank accounts or paid using credit cards is often protected by guarantees from government agencies, such as the Federal Deposit Insurance Corporation, or card issuers, such as Visa. Those, of course, are the same boogeymen virtual cash-loving libertarians want to bypass in the first place.

Over the past few months, the exchange rate for Bitcoins has skyrocketed, reaching as high as $29 and hovering in the $18 to $19 range more recently. But Schneider said it's not realistic to value Allinvain's claimed loss at $500,000 because of another potential dark side in the virtual cash system.

"The market just couldn't handle the sale of 25,000 BTC at once," he explained. The true value of the loss "would be more like $300,000 and cause the price to drop to around $10. Also, at the time he acquired the coins they probably were worth only $1000 or less. So the loss is in terms of USD is more a theoretical value. It's not like he put $300,000+ into bitcoins and lost them." ®

Build a business case: developing custom apps

More from The Register

next story
14 antivirus apps found to have security problems
Vendors just don't care, says researcher, after finding basic boo-boos in security software
'Things' on the Internet-of-things have 25 vulnerabilities apiece
Leaking sprinklers, overheated thermostats and picked locks all online
iWallet: No BONKING PLEASE, we're Apple
BLE-ding iPhones, not NFC bonkers, will drive trend - marketeers
Only '3% of web servers in top corps' fully fixed after Heartbleed snafu
Just slapping a patched OpenSSL on a machine ain't going to cut it, we're told
Multipath TCP speeds up the internet so much that security breaks
Black Hat research says proposed protocol will bork network probes, flummox firewalls
How long is too long to wait for a security fix?
Synology finally patches OpenSSL bugs in Trevor's NAS
Israel's Iron Dome missile tech stolen by Chinese hackers
Corporate raiders Comment Crew fingered for attacks
Fiendishly complex password app extension ships for iOS 8
Just slip it in, won't hurt a bit, 1Password makers urge devs
Tor attack nodes RIPPED MASKS off users for 6 MONTHS
Traffic confirmation attack bared users' privates - but to whom?
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.