Bitcoin Exchange Flexcoin Wiped Out By Theft 704
mrspoonsi writes "Joining MtGox, Flexcoin today announced they have had their vault wiped out, to the tune of some 896 BTC (about $615,000) by hackers. 'On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. The attacker made off with 896 BTC, dividing them into these two addresses: 1NDkevapt4SWYFEmquCDBSf7DLMTNVggdu [and] 1QFcC5JitGwpFKqRDd9QNH3eGN56dCNgy6. As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.'"
From the FAQ (Score:5, Informative)
Q: Where will my bitcoins go?
A: Bitcoins deposited with flexcoin will be stored on our secure servers. They will remain in your account, and your account only, unless you authorize a transaction with them.
Wishful thinking.
From the Terms of Service:
We have taken every precaution to defend your bitcoins from hackers and/or intruders. However, Flexcoin Inc is not responsible for insuring any bitcoins stored in the Flexcoin system. You are entering into this agreement with Flexcoin Inc. You agree to not hold Flexcoin Inc, or Flexcoin Inc's stakeholders, or Flexcoin Inc's shareholders liable for any lost bitcoins.
We'll see.
Flexcoin was not an "Exchange" (Score:5, Informative)
Re:From the FAQ (Score:5, Informative)
Translation: We'll try to be secure, and we'll call it secure, but we're really new at this and not entirely sure about this security thingy, but since we're not really a bank we'll tell you that if we prove to be incompetent we take no responsibility for that.
Seriously, how many of us didn't see stuff like this happening?
Hell, it sounds like the most lucrative way to make money of bitcoins is to set up your own exchange, and then have one of your people steal all the money, and then say "oops, teh hax0rs, not our fault, too bad for you".
If you're not a bank, and not regulated like a bank, this is kinda like asking the kid with the lemonade stand to hold onto your life savings.
It's frigging amateur hour. Entrusting someone with no track record with your money when that person has a clause which says "we take no responsibility for this" is just plain stupid in my mind.
Then again, I don't own or care about bitcoins.
Re:Unregulated currency (Score:4, Informative)
Dependable banks pretty much require somebody large enough backing them. That is generally governments who can print money.
Re:So, doomed to fail? (Score:4, Informative)
You seem to have no idea what Schadenfreude means. It's happiness derived from others' losses.
You might want want a word like "overconfidence", or maybe recklessness.
Re:Indeed. But how can they be "stolen"? (Score:5, Informative)
Ok, I don't understand how bitcoin works, but ultimately they're just encryped hash files on a disk, right? So unless the other person spends them before you do and you have a backup, how can they be stolen?
Someone please explain...
Loosely speaking, a Bitcoin is a secret number. To spend a Bitcoin, you send that number to someone else and the transaction is recorded by the Bitcoin network. The network keeps track of who owns each coin, which means others can verify the ownership of a coin by consulting the network.
The exchanges work by you "spending" your Bitcoin to them, so now in the network's eyes, the exchange is the owner of that coin. In return, the exchange keeps a record that you have a certain number of Bitcoins in your account. The idea being that in the future you can instruct the exchange to send coins back to you, to other people, or to deduct an amount of coin and send you the cash instead.
It's just like a bank; you hand a teller $20, the bank adds $20 to your balance, and they keep the $20 bill.
Where these exchanges differ from a bank is in their lack of accounting ability, apparently.
Re:Unregulated currency (Score:5, Informative)
Yes, because never in history has anyone been "mugged" or "conned" or otherwise had their government regulated currency stolen by a third party.
Re:Unregulated currency (Score:4, Informative)
In this case, they could claim that the risk of having your BTC stolen can be mitigated sufficiently by individuals, by not having too many BTC in any exchange, and by looking into an exchange's reputation. Whether or not that's a reasonable risk to run instead of BTC and exchanges being subject to regulation is another matter... in the end, even free market proponents might come to the conclusion that some regulation is needed.
Re:Unregulated currency (Score:5, Informative)
Bitcoin may not have any problems with the protocol - which is debatable - but the problem lies in the requirement for exchanges.
In order to be able to change Bitcoin into dollars and back to Bitcoins, the exchanges must, out of necessity, maintain a stock of Bitcoins that is server-accessible.
If it's server-accessible, it's hackable and subject to theft. If you think you can make something hack-proof purely out of software, let me introduce you to Kurl Godel.
Also, from what I've read it appears that Bitcoin thefts are not reversible. This is especially problematic given that there is a finite supply of Bitcoins; no central authority can come in and save your Bitcoin "bank" if it is robbed, whereas if my local Wells Fargo down the street is robbed, the FDIC insures my deposits to the tune of $250,000 (which also comes in handy in case the bank fails entirely, which is an extremely rare occurrence.) Even if there was the equivalent of an FDIC for Bitcoin "banks", eventually they run out of Bitcoins they can pay back on insurance.
This, and myriad other problems with Bitcoint that have been enumerated on Slashdot ad nauseum, should really convince any rational-minded person that Bitcoin is entirely worthless.