So, I was reading Hacker News and came across this gem of an article: Bitfloor Hacked, $250,000 Missing

The article covers an alleged hacking of a Bitcoin exchange, leading to the loss of $250,000. For anyone who doesn't know, Bitcoin is an electronic currency that enables anonymous, irreversible transactions. The primary goal seems to be eliminating a central authority.

The lack of a central authority plus anonymity makes theft on Bitcoin relatively simple. There are only two requirements for theft, access to the Bitcoin wallet, and the wallet being unencrypted. These sound like they would be difficult to achieve, but the number of high profile thefts shows that isn't as difficult as you might think. Most wallets are going to be accessible through a network, otherwise the user can't make transactions. Then the encryption relies on the user being vigilant, which is never guaranteed. People make mistakes. These hacks can obviously be made, and they can be very lucrative.

Add to that these large exchanges where large numbers of Bitcoins are stored, and you effectively have a bank. Except this bank is not insured against theft, fire, data loss, nothing. For the people who lost their "money", it is just gone.

Now to the nefarious part. I used the work "alleged" above for a reason. We are going on the word of the owner of Bitfloor that he was hacked. What is to say he didn't take the money for himself? I obviously have no proof, and I don't truly believe he took the money, but it is possible. The money is untraceable. Whoever has the "wallet" has the money. He could say he was hacked, and just use the wallet for himself later. Slowly convert it back to USD through transactions with other exchanges, and he can have $250,000.

Why not? At least I know my bank can't walk off with my money.

AuthorMichael Cantrell