Bitfinex Hack 2016
Depending on where your toss the marker, Bitfinex lost somewhere between $56 and $77 million dollars (USD) worth of bitcoin the other day. The spot was as high as $650 and as low as $471 during the "holy shit" period of confusion that let to a decline in fair market value. 

Although the price has recovered somewhat, it still remains under $600 and Bitfinex is diligently working on relaunch having restored some services and slowly rolling out restoration of others.

Part of this relaunch is determining what happened and how to prevent the same from happening again while another part is to determine how to handle the stolen bitcoin and who should bear the burden of the loss. This is immediately and undeniably apparent that 99.9% of the users on Bitfinex are not liable and cannot be held accountable however it appears as if this very thing is being proposed by Bitfinex in a "socialized loss sharing" program where users will eat the loss. 

HUH?!

You have to be kidding me. Do users share in the profit too? Socialized profit sharing program? It's one thing to payback customers transparently and over time like Poloneix did when they suffered a breach of similar fashion and its one thing to eat the loss as Bitstamp did back in 2015 when $5 million USD was stolen. No user funds were debited and Bitstamp took the hit and moved along. It is an entirely different approach to put the burden on users and make up a "socialized loss" sharing anything. 

They claim the details have not been pounded out which means they haven't spent allot of time on this. Well DUH!! That's apparent from the introduction of the concept alone. 

Bitfinex should carefully evaluate what this means to them for long term survival since pinning these losses on it user base while it relaunches and start rolling in the profit again is a poor decision that will likely not be easily forgotten. 

Bitfinex, and Bitfinex alone, should assume this loss, even if this is over a long period of time. People choose and exchange to trade on for the safety and activity on that exchange and when they leave assets secured properly in the custody of Bitfinex, they expect them to be exactly that. Secure.

The BitGo Factor

The only exception to the above would be if BitGo is in some way liable. There's been some speculation on BitGo's involvement of which has been answered with very little to no detail by BitGo other than saying they are not responsible for the losses. With a growing number of people demanding answers BitGo offered this non-explanation:

For the last 48 hours, I’ve been in the frustrating position of having to tell you that “due to an active investigation, I can’t give you answers.” I want to give you answers, and BitGo wants to give you answers, but we really just can’t right now.

First of all, this is in line with proper procedure so BitGo needs to be given some leeway. You do not start barking out detail of a hack on day one. For an example of exactly how not to handle this see the Ethereum DAO hack

Secondly, you have to understand how BitGo works and although they do say Bitfinex had a "special configuration", its not exactly possible to hack BitGo or its customer and obtain funds from the wallet since both parties are required for a multisig transaction. To the point this was automated by Bitfinex then this can certainly happen however wouldn't appear to be the liability or fault of BitGo unless there was a security breach.

Third, there are other ways to implement BitGo. You do not have to use a pooled wallet of funds, it's just a cheaper route.  Just to make that clear.

As far as socialized loss sharing, this may undoubtedly come with a subsequent socialized exodus program, so Bitfinex may want to man up and pay the bill.

However despite the terrible sound of a "socialized loss" program, it still sounds a hell of allot better than "Hard Fork".




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The opinions expressed by authors of articles linked, referenced, or published on dinbits.com do not necessarily express, nor are endorsed by, the opinions of dinbits.com or any of its affiliates.







In the bitcoin community, ecosystem, or whatever the buzzword of the day is, we all know that the mainstream media can't actually report the accurate news. The don't seem to check any facts or even manage to convey the actual truth most of the time (yes I am saying they lie in case that appeared to only insinuate the fact).

In fact the only time you ever hear about bitcoin in the mainstream media is when it's either declared gone, involved in something illegal, or otherwise makes it look bad in anyway. So we know they can't be unbiased.

Now they can't do math either?

In this doom and gloom piece from Fortune, they blast the headline in big bold letters:

...$72M Was Stolen ...


Well it actually said that "Bitcoin Worth $72M Was Stolen in Bitfinex Exchange Hack in Hong Kong" but that didn't have near the sarcastic affect as the above. 

Exhibit A - BIG DRAMATIC TITLE
Let's review this heap. First, we'll make sure the date is today and this wasn't published yesterday or anything ... yep that's today. August 3rd, 2016 at 6:42 AM. They know when they are.

Next, they seem to sure know exactly how many coins were lost, this coming after the more dramatic sounding 120,000 they first alarm everyone with. Of course, this is from the same clan that brought you the infamous: BITCOIN IS DEAD!

Exhibit B - Coins

Well, there seems to be a discrepancy there since it's been stated as 119,726 and 119,756 so maybe somebody turned a 5 backwards but regardless its 244 off. That's $138,372.40 USD. Trust me folks, they would have made just as big a deal had it been the 138k in dollars. Except they would have said it was 140k. 

It's a far cry from the 120k bitcoins they fire the story off with:

Nearly 120,000 units of digital currency bitcoin worth about US$72 million was stolen from the exchange 

The "nearly" 120k sounds like allot more than the alternatives of "over 119k" or "less than 120k". It's a subtle word people associate with as close as it could get without saying that. Regardless, the only price quote in the entire story is located here:

Exhibit C - $545 Price

That is the only one time a price is quoted and it depends on who you ask really since we had a price index of $548.19 at 7am (roughly the time of the article), however when the lost coins were announced the price was around $471.19 which is roughly $56 million, $56,427,829.64 to be exact.

However, lets just give them credit for bothering to look up the "press-time" price in the first place.

  119,756 
x $545.20
¯¯¯¯¯¯¯¯¯¯¯¯¯
= $65,290,971.20

How do we get $72 million out of $65 million? The price was around $650 when someone first noticed they couldn't get into Bitfinex, that would have been $77,841,400 and another index had the price at $660 which would not be right either. $72 million would come to $601.22 but well after the fact that Bitfinex was down and there was a hack with probable funds lost the price was around $610 so we know that can't be the number they used.

Most likely they just type in the coin loss, multiplied by $600 and round up to the nearest drama. Like the rest of this article it was over-inflated meant to elicit a much more drastic reaction because 65 doesn't sound nearly as devastating as 72. Which is either lazy or malicious. Perhaps they made up the number? Is this a new branch of mathematics?

Maybe they just suck at math?

Exhibit D - Bonus Gem

Math by Media ( Mainstream )

Finally we have this little gem. I'm not sure on what planet 23% from $601.22 (using their numbers) then plus 1% comes to $545. They say bitcoin PLUNGED to a dying dismal value of destruction to the tune of 23% ... followed by Wednesday only creeping up a mere 1%. Which by their price quote, the only price they went and got, would be around $5. According to their number that would have risen from around $462 down from $601. 

The greatest gift to the world of mathematics I am not but I am fairly sure that a price increase from $462 to $545 is not 1%.  Yes, I know what they actually meant but that's not how they presented it and even a justified 1% is wrong and miscalculated as well since its based on the wrong numbers to begin with.

They get the percentage from taking the margin of the 23% drop and reducing it by the new margin between the quoted price and the mysterious $601.22 minus the previous miscalculated margin which is roughly around 1%. At least that will be the justification if ever questioned, but certainly misleading and obviously done with that intent. At the end of the day it certainly makes it more alarming, shocking, and more interesting. Just pretty damn inaccurate.

I guess they call this branch, dramatic math.



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The opinions expressed by authors of articles linked, referenced, or published on dinbits.com do not necessarily express, nor are endorsed by, the opinions the of dinbits.com or its affiliates.






UPDATE: Bitgo has announced that no customer coins involved in the Bitfinex hack were on the Bitgo platform, all funds on Bitgo are safe. All coins involved were on the Bitfinex side.

A panic sell-off in the wake of the announcement form Bitfinex regarding a security breach brought the price of bitcoin crashing down to earth hitting $471.61 on the dinbits index.

It has now been confirmed that less than 120 thousand bitcoin, valued around $57 million USD were lost. Certainly a heavy hit, but overall a relatively small loss.

Although that is seemingly a large amount of money, in the grand scheme of things it is relatively low for bitcoin overall and even for an exchange the size of Bitfinex. To put that into perspective that is less than 48 hours of trading volume on Bitfinex where the average over the last 24 hours around $30 million USD.

It would account for less than a percent of the overall market cap at about 0.006%. 

From a bitcoin perspective and at an exchange the size of Bitfinex ... this is really nothing. One of those "it'll leave a mark but won't kill you" hits.

This is not to say Bitfinex is happy about this. It can be expected for heads to roll and law enforcement worldwide to begin the manhunt and like most hacks, will undoubtedly result in some kind of inside job or a platform exploit. However, to be clear.

THE  BLOCKCHAIN WAS NOT HACKED
BITCOIN WAS NOT HACKED

The blockchain has never been hacked and remains the safest place on earth to store money. Bitfinex was hacked and from the sound of the volume, likely just a hot wallet for liquid exchange volumes. Even if you were to include the company in a list all institutions of the world it would still be SWIFT and the Federal Reserve Bank leading the category of funds lost in 2016 with upwards of $100 million USD hacked. Bitfinex is not the blockchain and no assets from the blockchain have been compromised. It is likely that nothing from Bitfinex cold wallets have been lost either.

How Big is Small?

Over the past 30 days trading volume on Bitfinex was well over $400 million USD. In the 24 hours prior to the hack nearly have of the volume of the entire amount lost in the hack was traded on Bitfinex ($30 million USD). With each trade there is a fee and with each fee there is profit for Bitfinex. They are one of the largest digital asset exchanges on earth and $60 million is no drop in the bucket, but hardly anything that is going to cause much of a long-term issue for the company. 

Let's keep in mind that Mt Gox was hacked several times losing thousands of bitcoins on top of a $75 million dollar lawsuit and another $5 million funds seized by the United States until ultimately getting the final nail through the heart when upwards of $500 million was sucked out of the exchange as it imploded. When you factor in the value of bitcoin along the way with the size of the attacks each time you can see the company was always operating in a bit of a wounded mode. 

A much smaller exchange, Bitstamp, suffered a $5+ million attack last year  (announced the hack anyway, it actually took place in 2014) of which it absorbed and is still going strong. This is certainly a sting for Bitfinex but nothing they won't survive and as far as bitcoin goes there's more than enough other players to pick up the slack short-term.

Hot Wallet old Wallet

Hot wallets and cold wallets both store bitcoin but in different ways. Hot wallets are "live" accessible wallets storing bitcoins for immediate use such as on the Bitfinex exchange. Cold wallets are offline and cannot be accessed.

Cold wallets are where the majority assets of a companies holdings including those on behalf of its customers are held. This event is the exact reason why this is so. Another Mt Gox this was not.

This may bite Bitfinex in the ass and sting a bit but it will far from do anything more than be slightly annoying for a few days while they sort things out of work with law enforcement. We'll continue to monitor the situation over the next several hours and upcoming days for updates.

Bitcoin Rises

Since bottoming out at $471.61 just a few hours ago, bitcoin has been on the rise shooting up nearly $70 to its current rate of $537.14 where many are taking advantage of the panic selling and playing the huge margins.

The gap is closing as the price is quickly recovering. However, there appears to be some time left to take advantage of the low price on the rise with bitcoin still down around $100 from yesterdays spot.



Report by dinbits
Image source: dinbits staff

The opinions expressed by authors of articles linked, referenced, or published on dinbits.com do not necessarily express, nor are endorsed by, the opinions the of dinbits.com or its affiliates.







Bitfinex has released the following statement in regards to a security breach. This is obviously affecting the price and interfering with price index calculations.

Localbitcoins has removed ads containing the Bitfinex calculation in pricing formulas and others have taken similar measures.

Here is the Bitfinex release in its entirety which is also located here. Check back for updates as we will continue to monitor the situation.



BITFINEX:

Today we discovered a security breach that requires us to halt all trading on Bitfinex, as well as halt all digital token deposits to and withdrawals from Bitfinex.
We are investigating the breach to determine what happened, but we know that some of our users have had their bitcoins stolen. We are undertaking a review to determine which users have been affected by the breach. While we conduct this initial investigation and secure our environment, bitfinex.com will be taken down and the maintenance page will be left up.
The theft is being reported to—and we are co-operating with—law enforcement.
As we account for individualized customer losses, we may need to settle open margin positions, associated financing, and/or collateral affected by the breach. Any settlements will be at the current market prices as of 18:00 UTC. We are taking this necessary accounting step to normalize account balances with the objective of resuming operations. We will look at various options to address customer losses later in the investigation. While we are halting all operations at this time, we can confirm that the breach was limited to bitcoin wallets; the other digital tokens traded on Bitfinex are unaffected.
We will post updates as and when appropriate on our status page (Bitfinex.statuspage.io) and on the maintenance page. We are deeply concerned about this issue and we are committing every resource to try to resolve it. We ask for the community’s patience as we unravel the causes and consequences of this breach.




In case you haven't heard, Coinbase it raising it's fees for certain purchases. Hey, they gotta eat too. Although they have one less mouth to feed since their first employee, Olaf Carlson-Wee, is leaving to create a hedge fund.

We're simply going to relay the information, here is the announcement in its entirety which can also be found here.



Buy / Sell Pricing & Fees

Jul 29, 2016
  
Effective Aug. 5th, 2016

Using our wallet services to send, receive and store digital currency is free. We even pay the network transaction fees which are included with most digital currency wallets.

Your conversion rate for buying or selling digital currency through our Conversion Service is calculated as the market rate of the digital currency on Coinbase’s GDAX platform, plus a spread of up to 50 basis points. The final rate will be quoted to you before you complete your transaction.

We charge fees to use the Conversion Service, which vary based on your location and payment method. In some cases we may charge a fee on transfers to and from your bank account. We will always notify you of the service fee that applies to your transaction, both at the time of the transaction and in each receipt we issue to you. All fees are listed below.

Australia

Credit / Debit Card Buys
3.99% 

Canada

Credit / Debit Card Buys
3.99%

Europe

Standard Buy / SellCredit / Debit Card BuysBank transfers (SEPA)  - in / out*
1.49%3.99%Free / €0.15

Singapore

Buy / SellCredit / Debit Card Buys
1.49%3.99%

UK

Standard Buy / SellCredit / Debit Card BuysBank wires - in / out *Bank transfers (SEPA) - in / out *
1.49%3.99%N / AFree / €0.15

USA

Payment Method for PurchaseEffective Rate of Service Fee** ***
U.S. Bank Account1.49%, with a $0.15 minimum
Coinbase USD Wallet1.49%
Credit/Debit Card3.99%

Payout Method for SaleService Fee
U.S. Bank Account1.49%, with a $0.15 minimum
Coinbase USD Wallet1.49%
PayPal3.99%

USD Deposit MethodFee
ACH TransferFree
Wire Transfer$10 ($25 outgoing)

* Note - In some cases your bank may charge additional fees for transfers between your bank account and your Coinbase account.
** For details on how the effective rate of service fee is calculated, please see the Coinbase User Agreement
*** Does not apply to users in New York. New York users should refer to the transaction confirmation page prior to checkout for applicable fees and rates

Ethereum Classic 2016

Every so often when nobody is who should be paying attention is and right about when you think there's not a soul on earth cares so nobody is watching anyway, the opposite of your expectation is the unexpected result. 

Once in a while we have to be reminded that statistics show patterns and history that can guide us but nothing is ever truly absolute. Everything we know is a derivative of improbable perfection theorized through approximated mathematics where not even absolutes can be true or false with a precision of certainty. 

Chances that are slim to none are considered an absolute zero and worse case scenarios seem to be something you just say without any actual belief its actual occurrence could really happen. However, almost nothing is still something and odds of the most improbable truth still offer a chance.

Enter Ethereum Classic

Unexpected by some and hard to believe by others, Ethereum Classic (ETC) came out of nowhere and knocked it's newborn sibling (ETH) off of it's pedestal while most mainstream and industry media had already glorified ETH as the victor and pronounced it's predecessor officially dead. I didn't even realize this had become some sort of game.

If bitcoin and its blockchain has taught us anything, it's to expect the unexpected and never, ever, consider anything of its nature, dead. If there is still hash power, there is still a network and if there is still a network there is sill a digital asset that has some value to someone else it wouldn't exist at all..

Such was the case of Ethereum Classic. It was well known that some members of the community were in uproar over the hard fork claiming it essentially put everyone else at risk to enrich one organization. An argument that may actually hold water. What was not apparent was the depth of the unheard voices of those such as investors or normal users who had no vote or say so in the matter.

It is also important to note in all fairness that not doing the hard fork was not good either. The DAO was guaranteed to lose $60 million USD so as we stated back then there was no winning solution. They both sucked.

It just so happens that just about anything else other than the hard fork sucked less. The lesser of two evil, if you will. Regardless, during the fork the old fork had to remain active while the new fork had to move into "production" and the result were two completely separate and operating chains. 

ETC Rises

There is little doubt that anyone aside from a few expect the magnitude of what happened next. Exhcnages, beginning with Poloniex, began offering ETC for trade and within 24 hours ETC had traded well over 100 million USD rising to $2 per coin, something that we has never been done before. There was a coin 42 which rose to $1300, but the volume was far too insignificant to count. 

Ethereum Classic 8-1-2016

This not only dwarfed ETH in volume but continues to be the most popular traded digital asset at up to 5 times the volume of the 2nd placed ETH. At the time the above chart was obtained ETC was at 5 times the volume of ETH, while ETH also suffered in a price drop.

Bitcoin also suffered a price drop amid the outcome of a developer/miner meeting and a proposal of which we'll get into in another article. Just a side note.

The Hard Spark

For a split second there,  It appeared as if ETC had some strong, but very small support, and ETH had the developers claiming victory and success. This appeared quiet for the most part but of course the tension was far from relieved.

Supporters of new ETH seemed set on antagonizing the new ETC support community and continnued slinging allot of negative feelings (to put it nicely) in the direction of a small but determined ETC support group. At the cataclysmic point of this entire event, a miner by the name of Chandler Guo stated publicly that he intended to 51% attack the network along with a group of other miners he was in the process of assembling. He warned that his notice should be taken seriously and all supporters of ETC should stop supporting ETC.

To say "the shit hit the fan" would be the understatement of 2016.

For the next 24 hours and ever since that day, ETC rose above ETH in volume and has consistently remained there. currently at around 0.00405 (about $2.45) per asset, its surpassed every single digital asset and virtual currency there is, including bitcoin on some days, in trading volume for the past week and is currently the 5th most valuable asset. Not too bad for a week, but hard to fathom however since it actually got there in a single day.

Asset 

Price 
Volume 
Change 
Name 
BTC
 $611.31
922846.08
($2.32)
Bitcoin
ETH
 $ 10.99
174898.674
($6.90)
New Ethereum
DASH
 $ 10.19
7931.868
$1.52
Dash
LTC
 $ 3.84
4020.196
($2.18)
Litecoin
ETC
 $ 2.40
346770.334
$33.49
Ethereum Classic
XMR
 $ 1.72
2774.039
($5.52)
Monero
NXT
 $ 0.03
11529.176
$8.09
NXT
XRP
 $ 0.01
992.097
($0.83)
Ripple
STR
 $ 0.00
205.637
($2.57)
Stellar
Top 9 digital assets 08/01/2016 Source: Poloniex/dinbits index

In fact Ethereum appears to be getting close to the #3 spot as Dash nears. We'll note the SYNC actually traded 2 coins today at nearly $86 however due to the non-existent volume, it has been excluded from the list.

NOTE: In the few hours it took to write this article, ETC has risen to around 0.0045 XBT, or $2.70 with a volume of 67,000 XBT ($40.2 million USD).

Ethereum Classic 2016


You Can Only Make Your Choice

The chance of this type of support being thrown at the ETC network is certainly not something anyone could have predicted. Since the inception of bitcoin, thousands have tried to accomplish what nobody has yet to date. Usually because the idea was lame but mostly because the concept of bitcoin has little to do with money or even technology at all. 

It has to do with trust and its provision by adopting its existence. There are no people involved in blockchain trust. Miners only provide power to electronics that run software that execute code written by others to facilitate this trust and users merely make that possible by investing and/or using its evolving purposes which in turn fund the ability for it to exist.

That means many different things to many different people from privacy to security to new abilities to disruption of old ideas. It turns greed into security and protection from the greedy and records everything as a truth more absolute than any other to have ever existed in known history.

However the one thing shared among everyone who participates in its existence is choice. We choose for it to exist and no government, group, corporation, or other interest can change that that once the choice has been made by enough people.

Ethereum was in a position where that power of choice was not fully solidified and a body of people made a decision to create a new network of which they even stated before they executed its creation, might result in another fully self-supporting and operating chain where ETH (now ETC) would continue to exist at "some possible value". Right up to this point is was a bad idea, but a plausible one and had it been left at that, the events of the last 15 days may have been less dramatic.

However, they then (and I say they collectively as all that did) made the decision to try and destroy another network that they themselves created and going against the choice made by others by trying to tell them they cannot exist, that their choice is unimportant, and that they have no right to choose. This goes against everything blockchain stands for and had bitcoin followed this path of existence, it likely would have been dead the first time it was declared as such.

I'll note how safe everyone was told Ethereum was right up until the point new Ethereum existed. Then all of a sudden the ETH supporters changed message and delivered a new one stating how unsafe the ETC network was even though just a week before is was a completely safe network. Odd since nothing there had changed at all. 

To make matters really go from bad to worse, this was all done for terribly the wrong reason. I don't think anyone exists other than the one who obtained the 60 million in Ether was not sympathetic to what happened, but sympathy does not equate to the allowance of a dictatorship or any right to put others in harms way. It's hard to buy the "replay attack bug" when the disclosure of the issue itself was coupled with how to code around it. 

That's just not how this stuff works. You can choose not to participate, but you cannot choose what will or will not be if others choose differently. The decisions to attempt ending the ETC network only helped the exact opposite happen. As stated before in an article just a short time ago:

"actions like this generally elicit an opposite and equal reaction in subsequent response.

Like everyone else, I watch the troll-box, I hang out in various forums, roam around Reddit, and see the bickering and foolish statements made by both sides. Not all parties on either side participated (openly anyway) in the mudslinging or threats but as a bystander watching from the outside in, I can tell you it appeared pretty clear who was antagonizing who before it became blatantly obvious. Regardless, none of that is really relevant now. 

The rise of ETC, where the price is spotted, which symbol is consider the "winner" today, or how much volume is traded is really not what is important here, what is important is the reason why it exists at all.

Regardless of intent or reason of those who chose for it to exist simply made that decision. This is the reason bitcoin became what it is and why it matters, this why blockchain is important, and this is exactly why ETC matters. 



... and yes, you can use the ETC matters image for anything you wish to. See another poster version below.


Report by dinbits
Image source: dinbits staff

The opinions expressed by authors of articles linked, referenced, or published on dinbits.com do not necessarily express, nor are endorsed by, the opinions the of dinbits.com or its affiliates.


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