Alaric,
* Alaric Snell-Pym (ala...@snell-pym.org.uk) [110620 11:29]:
> On 06/20/11 17:59, Jon Cox wrote:
>
> > Yes, the value of Bitcoins crashed from $17.50 down to $ 0.01
> > in the span of about 5 minutes yesterday, and though people
> > were allowed to buy at $0.01, they probably won't be able to
> > cash out, because Bitcoin just announced a rollback.
> >
> > A rather timely illustration, wouldn't you say? ;)
>
> That wasn't Bitcoin itself, just mtgox, the biggest exchange. Somebody
> hacked an account and sold a heap of bitcoins at a negligble price, so
> the exchange froze itself before the USD were actually cashed out and is
> resetting to the state before the exploit...
Hold on a moment.
Because 100% of the worth of a Bitcoin is in its
"gamed network value" (it has zero "intrinsic local value"),
special importance is placed on faith its real-world
institutions. Saying that it was "just mtgox" sounds
absurd. They are the largest Bitcoin exchange.
The vulnerability to a compromise like this was only
made possible due to an absolutely stunning level of
operational negligence and/or incompetence:
Rather than using 2-factor security,
Mt. Gox went with one of the most
idiotic security choices of all:
non-salted MD5 passwords.
The result? 2300+ passwords were cracked
in < 24 hours on an old Pentium server.
Enjoy: https://uloadr.com/u/8C.txt
Bitcoin is therefore a 100% faith-based immature currency
with full code transparency but almost no institutional
transparency or independent auditing.
That's a recipe for trouble.
An institutional problem like the one at Mt Gox
should not be able to crash the currency from
$17.50 down to $ 0.01 in 5 min, then put the
people who *do* buy in a state of uncertainty.
All bets are that those who bought at $0.01
probably won't be able to cash out because of
the rollback.
A currency is more than the bits.
A currency is also its institutions.
So now, how will the people who bought at $0.01 be treated?
Will it be considered legal in all jurisdictions in question?
On and on.
That's my point.
> There's been a few bitcoin heists, down to the usual computer security
> issues; bitcoin itself has, interestingly, remained unbroken, which
> bodes well for its underlying security. The mtgox heist could have
> happened just as well with any online banking system; it's just that the
> bitcoin economy rather new, so there's lots of little bit players
> suddenly finding themselves transferring hundreds of thousands of
> dollars without having the expertise or capital to build the kinds of
> security that banks do...
The issue is what *happens* when such theft occurs,
not that it *can* occur.
Of course currency *can* be stolen.
Of course servers *can* be hacked.
That should not not cause a currency collapse
and/or leave people dangling in an uncertain
state who bought between the collapse and the rollback.
All currencies are systems; they need to be
analyzed from a systems perspective, or else
you'll wind up like one of those poor people
holding Bitcoins: $17.50 to %0.01 in 5 minutes.
This is what I mean when I say:
"a currency is also its institutions".
-Jon
