
Binance exchange hackers steal bitcoins worth $41m - rayascott
https://www.bbc.co.uk/news/technology-48199375
======
beager
I get that is part of bitcoin, not the protocol failing, personal
irresponsibility etc etc.

But I’m seeing less and less a justification for the deliberate lack of
security in the bitcoin world. So a hack like this happens. Regardless of how
it happened or who’s to blame, why continue to tolerate bitcoin? What is it
giving you that’s worth the enormous mountain of precaution that you need to
take to secure yourself?

~~~
dijit
Little bit of a preface; I dislike bitcoin because of scaling reasons and
reasons due to power consumption per transaction. So don’t assume I’m a
supporter.

That said, how is this different from having physical cash in a bank, or a
digital ledger that pushes money elsewhere and is only caught much later.

The answer is only that it’s an immature global system, there’s no (current)
list of black market coins, which is entirely possible to create- meaning
hacked bitcoins would not re-enter circulation and the value diminishes
wildly.

The effect you’re seeing currently is due to an immature currency market which
has never been held to the same standard as our fiat currency market. It also
hasn’t been battle tested over hundreds of years. Of course it is deficient.

I’m not excusing them, I wish that people with little to no security chops
would not be involved in financial matters, but a lot of these companies
sprung up out of hobby projects many years ago and one could argue that the
industry they’re in has changed around them. It’s not as big a deal if someone
steals 4000 bitcoins if they’re worth 20c each.

~~~
akerl_
The difference is that I have physical cash in the bank and the bank is
robbed, I don’t even have to really think about the financial impact of the
news: even if the bills I deposited are stolen, I can walk in to another
branch of the bank the same day and still access the funds.

Bitcoin in its current form can’t have a useful “black market list”, because
that list has to be generated somehow. Do you make a central authority in
charge of list management? Or do you trust some fraction of the population to
“vouch” that coins are bad? All the options would either open the door to
immediate abuse or require a central authority that doesn’t exist.

Regarding the immaturity of the projects: your comment isn’t really a response
to the parent commenter. I agree that many bitcoin companies today started as
hobbits projects. But why should we tolerate that they’re operating in an
industry which can so easily lose millions of dollars for users, but operating
with the security guarantees of hobbyists running a hobby webpage?

~~~
CaptainZapp
_The difference is that I have physical cash in the bank and the bank is
robbed_

This may seem pedantic, but no! You certainly don't have physical cash at your
bank.

Only a miniscule percentage of monetary reserves are in physical form and a
bank is not obliged (as a matter of fact it would be rather counter
productive) to store physical cash on customer deposits.

~~~
koonsolo
It goes even further than that: a bank is unable to have such cash, since it
lends out money multiple times (see [https://en.wikipedia.org/wiki/Fractional-
reserve_banking](https://en.wikipedia.org/wiki/Fractional-reserve_banking)).

So even if all central bank money would be printed in bills and coins, and
would be distributed to banks, that still would be only a small percentage of
the numbers on everyone's bank account.

This means that those numbers on your bank account are not "money you have
now", it is "money you will have in some future, when everyone pays back their
loans".

So that is what they mean with a "bank run". Everyone wants their money NOW,
but that is impossible, since most of the money is lended out.

So to the parent poster, even if there is no robbery, you will have a serious
problem when everybody wants their money NOW. See what happened in Greece some
years ago, where nobody was able to withdraw more than 50 euro's per day,
since the banks had a crisis.

Thinking the money on your bank account is yours NOW is just an illusion.

~~~
koonsolo
Since people are downvoting, let me explain with an example to make things
clear:

Fractional-reserve banking is the common practice by commercial banks of
accepting deposits, and making loans or investments, while holding reserves at
least equal to a fraction of the bank's deposit liabilities.

Let's say we have a 5% reserve, which is realistic if you look at EU and US.
Let's say there is a new bank, and you deposit 100 euro's at that bank.

I go there to lend out $95, which is allowed because the bank keeps $5. You
have a nice shop, and I buy something for $95.

You deposit this $95 at the bank, which they can lend out again keeping a 5%
fraction. I go there and lend out $90, buy something at your shop, and you
again deposit this at the bank. We do the same with $85 and $80.

So you now have an account with 100 + 95 + 90 + 85 + 80 = $450. Nice! Now you
go to that bank and request that money in cash.... oops.

Seems weird, but this is actually how it works. Look it up if you don't
believe me: fractional reserve banking!!!

~~~
ForHackernews
I suspect you're getting downvotes not out of disbelief but because most
educated people in the developed world are already well familiar with the
concept of fractional reserve banking. (For myself, it was covered in my 12th
grade AP economics class) Your rather long comment doesn't contain any new
information for the majority of readers.

------
ebg13
All questions of its own merits aside, how is Bitcoin still worth anything at
all after so many hacks? Isn't a large part of value the security to know that
you'll actually be able to realize it?

~~~
sschueller
How is the USD still worth anything with the incredible amount that has been
printed? The fed chair himself said we can just print more money if we need
it. [2] No other country can do that without going into hyperinflation.

"$12 billion in U.S. currency was transported from the Federal Reserve to
Baghdad in April 2003 and June 2004, where it was dispensed by the Coalition
Provisional Authority. A Vanity Fair magazine report concluded that of this
sum, "at least $9 billion has gone missing"" [1]

$12 Billion in cash!!

[1]
[https://en.wikipedia.org/wiki/Allegations_of_misappropriatio...](https://en.wikipedia.org/wiki/Allegations_of_misappropriations_related_to_the_Iraq_War)

[2]
[https://www.youtube.com/watch?v=q6vi528gseA](https://www.youtube.com/watch?v=q6vi528gseA)

~~~
Dirlewanger
It's still worth something because the federal government says it's worth
something. That's what a fiat currency is.

~~~
ceejayoz
That's not at all how it works. Zimbabwe and Venezuela's federal governments
claimed their currencies were worth something until they were blue in the
face.

It's worth something because the _people using it_ feel it's worth something,
and that's true for non-fiat currencies as well. Bitcoin and gold are non-
fiat, but still heavily depend on demand to determine their value.

------
SmellyGeekBoy
Ah, "hackers", of course.

~~~
village-idiot
It doesn’t help that the Binance founder was shouting about FUD on twitter
before announcing the hack.

~~~
s_dev
What does FUD mean?

~~~
dmos62
> FUD is an acronym for fear, uncertainty and doubt. It is a marketing term
> that is often used to cast a shadow over a competitor's product when your
> own is unable to compete. FUD is a technique used by larger companies who
> have a large market share. The FUD acronym was first freely defined by Gene
> Amdahl after he left IBM to found his own company, Amdahl Corp, with this
> statement: "FUD is the fear, uncertainty, and doubt that IBM sales people
> instill in the minds of potential customers who might be considering Amdahl
> products."

[https://www.webopedia.com/TERM/F/FUD.html](https://www.webopedia.com/TERM/F/FUD.html)

~~~
neilv
The term became widely known among Internet techies a bit later:
[https://en.wikipedia.org/wiki/Fear,_uncertainty,_and_doubt#M...](https://en.wikipedia.org/wiki/Fear,_uncertainty,_and_doubt#Microsoft)

(I think this is an important period to understand. History repeats.)

------
czechdeveloper
They were even thinking about requesting blockchain rollback (that possibly
means making fork and paying to miners to follow that fork instead). If that
would pass, that would really doom bitcoin as is.

~~~
fabianfabian
Rollbacks can be considered for shitcoins, in Bitcoin it is nearly impossible
and very unrealistic.

------
tyler109
Hacks like that could be avoided if people would use decentralized exchanges
and other DeFi dApps. The goal of the whole blockchain movement is to have no
single point of failure. Luckily there is a whole suite of so-called
decentralized blockchain applications coming out and building the next level
of infrastructure for finance. This is a great newsletter to stay up to date
on the latest decentralized applications:
[http://tokenvalley.substack.com](http://tokenvalley.substack.com)

~~~
saalweachter
The goal of, like, 20% of the blockchain movement is to have no single point
of failure.

30% wish to avoid restrictions on the movement of money, 50% see it as money-
making operation.

~~~
sadness2
Binance is going decentralized imminently

------
alexandernst
Explain to me as if I was your 50 years old parent: "What is that Bitcoin
money and why I should use it if that 'exchange' thingy can loose it and they
won't recover it back? I know my current bank will recover all my money if
they get robbed."

Take for granted that I (your 50 years old parent) have near zero knowledge
about technology and I just won't use my own wallet and what not.

~~~
SkyBelow
Based on my own parents, I wouldn't want you within 100 feet of bitcoin. I
would also wouldn't want you being able to use a credit card online. I'm not
sure why they are so against learning anything about technology yet so capable
of learning new things not related to technology.

~~~
sofaofthedamned
Mass adoption soon, yeah?

------
granaldo
It looks like the market is still able to tolerate such large hack
[https://www.coingecko.com/en](https://www.coingecko.com/en) price of all
cryptocurrencies appear normal

Who remember how big of a blow it was during mtgox incident. People forget...

~~~
Traster
From wikipedia

>Mt. Gox announced that approximately 850,000 bitcoins belonging to customers
and the company were missing and likely stolen, an amount valued at more than
$450 million at the time.

This hack pales in comparison to the MT Gox incident. Partly because Bitcoin
exchanges are more professional now, have decent security, insurance funds and
real commitments. But it's also because this hack is actually relatively
small.

------
sadness2
> "Cyber-insurance is a common necessity today as identify theft, malware and
> cyber-attacks are frequently being performed against high-value blockchain
> and crypto-currency companies."

Except they're not banks, and not intended to store your funds long-term.

------
ForHackernews
Cue a dozen bitcoin apologists explaining how "bitcoin _the protocol_ is
actually extremely secure, it just so happens that every third person involved
with implementing bitcoin-the-actual-token is either a crook or incompetent or
an incompetent crook."

~~~
rich-tea
Name a technology that isn't susceptible to crooks or incompetence. Bitcoin
isn't worse than anything else in that respect.

~~~
root_axis
It's pretty obviously worse in practice as massive heists like this are
vanishingly rare except in blockchain token land.

~~~
rich-tea
Really?

[https://news.google.com/search?q=Theft+stolen+-bitcoin](https://news.google.com/search?q=Theft+stolen+-bitcoin)

~~~
root_axis
You can equivocate all you'd like, but the reality is that having your cash
stolen from the bank is a non-issue while having your bitcoin lost or stolen
is pretty much an inevitability without careful OpSec. Your disingenuous link
to a google search for "theft+stolen - bitcoin" reflects poorly on your
argumentation skills.

~~~
rich-tea
How is it disingenuous? You said that heists were "vanishingly rare" outside
of Bitcoin.

As it happens, your cash in the bank is being slowly devalued via inflation as
the banks are constantly making new money in the form of loans.

Bitcoin being the way it is is a feature, not a bug. If you don't get it,
that's fine, but don't make ridiculous claims like only bitcoin is susceptible
to crime and incompetence.

~~~
root_axis
> _How is it disingenuous? You said that heists were "vanishingly rare"
> outside of Bitcoin._

It's disingenuous because what I actually said was:

" _MASSIVE HEIGHTS LIKE THIS_ are vanishingly rare except in blockchain token
land."

Emphasis added to highlight your deliberate misreading of what I wrote.

~~~
rich-tea
Oh, so your point is that bitcoin-specific problems aren't a problem outside
of Bitcoin. Gotcha.

------
village-idiot
The interesting thing about bitcoin exchanges is that the exchange effectively
has a position in the market too, unlike traditional exchanges like the NYSE.
They have to buy bitcoin from other exchanges, and if they get hacked they can
lose it permanently.

Edit because I’m throttled and can’t reply anymore: the “buying from other
exchanges” is really not the lynchpin of my argument. The point is that these
exchanges hold inventory and are vulnerable to bank runs and theft makes them
much less stable than traditional exchanges.

~~~
jstanley
That's not accurate. They don't buy bitcoin from other exchanges.

Why would it be any different to traditional exchanges?

They hold funds on behalf of customers, and if they get hacked they can lose
it permanently, that's true. But it doesn't mean the exchange itself needs to
have a position in the market.

~~~
village-idiot
So .... where does an exchange get all the bitcoin they hold?

~~~
jstanley
...from the customers

~~~
bouncycastle
He's kinda right. Many exchanges use other exchanges to provide liquidity on
their exchange, either directly or through users who perform arbitrage. That's
how bitfinex started for example, they partnered with Bistamp and used their
book to fill in theirs. Nowadays, it can happen with DEX'es on the protocol
level too - eg, Kyber Network taps into the liquidity provided by Uniswap
(hey, keyber is a liquidity network after all. Disclosure: don't own any Kyber
tokens)

~~~
jstanley
The claim under dispute is:

> the exchange effectively has a position in the market too, unlike
> traditional exchanges like the NYSE. They have to buy bitcoin from other
> exchanges

Exchanges _don 't_ have to buy bitcoin from other exchanges, and exchanges
_don 't_ necessarily have a position in the market.

------
thisisit
Binance did a ICO raising $15 million. Their coins are now worth $3 billion.

I find it surprising is that coin price is down just 4%.

