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The Almighty Buck Bitcoin Businesses Security The Internet

How Silk Road Bounced Back From Its Multimillion-Dollar Hack 50

Posted by Soulskill
from the easy-come-easy-go dept.
Daniel_Stuckey writes: "Silk Road, the online marketplace notable for selling drugs and attempting to operate over Tor, was shut down last October. Its successor, Silk Road 2.0 survived for a few months before suffering a security breach. In total, an estimated $2.7 million worth of Bitcoin belonging to users and staff of the site was stolen. Some in the Silk Road community suspected that the hack might have involved staff members of the site itself, echoing scams on other sites. Project Black Flag closed down after its owner scampered with all of their customers' Bitcoin, and after that users of Sheep Marketplace had their funds stolen, in an incident that has never been conclusively proven as an inside job or otherwise. Many site owners would probably have given up at this point, and perhaps attempted to join another site, or start up a new one under a different alias. Why would you bother to pay back millions of dollars when you could just disappear into the digital ether? But Silk Road appears to be trying to rebuild, and to repay users' lost Bitcoins."
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How Silk Road Bounced Back From Its Multimillion-Dollar Hack

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  • The FDIC will only pay back the first $250K and can take up to 10 years.
    • by AlphaWolf_HK (692722) on Wednesday April 23, 2014 @01:58AM (#46820625)

      Having money in US banks is risky anyways. If you can't account for a large sum of money, government organizations are known for just outright taking the whole damn thing. Not even taxing, it, just fucking outright taking ALL of it away. I even know people who had the police confiscate cash (in one case, $5,000) and just flat out keep it if they can't provide receipts showing where it came from. I honestly don't blame the super rich for hiding money in offshore accounts; you never know what the government will suddenly and irrevocably decide is "theirs," and public opinion will never be on your side either if you ever made an issue of it (popular opinion seems to be that the wealthy are only wealthy if they steal or inherit, in spite of some 70% of the forbes 400 not having wealthy parents.)

      • by Gryle (933382) on Wednesday April 23, 2014 @07:08AM (#46821549)
        Paraphrasing an observation I once heard, the US has a funny way of looking at wealth. If I'm wealthy I made my money fair and square through hard-work, determination, and maybe a pinch of luck, and I deserve to keep my hard-won earnings.. If you're wealthy you're a lying, thieving bastard who exploited someone else and don't really deserve your earnings.
      • by Ellie K (1804464)
        FDIC is insurance. They repay you if the bank goes out of business. They don't take your money!
        Comparing $5000 confiscated by police, and suggesting that it is the motivation for the 100's of millions of dollars kept offshore by Forbes 400 billionaires is illogical.
    • Re: (Score:3, Insightful)

      The ten years part is a myth, see Snopes [snopes.com].

      From the relevant primary source (Spring 2006 FDIC Consumer News newsletter):

      If a bank fails, the FDIC could take up to 99 years to pay depositors for their insured accounts.

      This is a completely false notion that many bank customers have told us they heard from someone attempting to sell them another kind of financial product.

      The truth is that federal law requires the FDIC to pay the insured deposits "as soon as possible" after an insured bank fails.

      Histori

      • I had a bank robber come in line behind me. I deposited my paycheck and left. He robbed the teller and made off with my check. ME: Where is my paycheck? BANK: We got robbed and the robber took it. ME" Who is "we"? YOU got robbed, you have insurance. I saw the FDIC sticker on the door. BANK: The funds will be in your account tomorrow. ME: Thanks
  • by ddt (14627) <ddt@davetaylor.name> on Tuesday April 22, 2014 @11:55PM (#46820281) Homepage
    Their customer base includes hit men?
    • by erichill (583191)
      Indeed, reading this one wonders how long before something bad happens to those who at least apparently have run off with the money. Part of the usual overhead for playing in a black market, after all.
    • Their customer base includes hit men?

      Like the taxpayer supported hitmen that most pay for? Silk road at least never allowed for assassins to be hired and bid upon; the same cannot be said for other organizations.

  • by iroll (717924) on Tuesday April 22, 2014 @11:59PM (#46820293) Homepage

    These losses illustrate perfectly the stupidity of giving some pseudoanonymous sociopath on the internet your money to "hold" for you. WHY? WHY? WHY?

    Nobody would ever think, "Hey! I've got $500 in my pocket, better give it to the first creep that I find in an alley!"

    Using a shady, tor-based business to broker a transaction is risky, but it only risks the single transaction (or the consequences for making transactions in contraband). Putting your funds on deposit with a shady, tor-based business (or a Japanese trading card exchange) is dumb in ways that must boggle even the Princes of Nigeria.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      These losses illustrate perfectly the stupidity of giving some pseudoanonymous sociopath on the internet your money to "hold" for you. WHY? WHY? WHY?

      There was nothing else before this. Silk Road 1.0 was so succesful, it heralded an era that no one ever saw before and only those that were around during it's time can understand what a free society truely looks like (except for those that have been to Burning Man). Silk Road 2.0 is an attempt to provide that same experience, except it's not. Nothing like the original days when DPR2 was in charge. With MultiSig, decentralized escrow coming into play, we are ready to enter that new era. Beyond the black

      • by iroll (717924)

        TL;DR: you didn't read what I wrote, and responded to something you made up.

        With a broker or an exchange, you only have risk associated with the transaction. You put money in, bitcoins come out. You put bitcoins in, money comes out. Or, alternatively, you put bitcoins in, special brownies come out. The risk is all associated with that transaction.

        With a deposit, you're basically putting money in and crossing your fingers.

        In the above-ground market, there are lots of rules to try and mitigate the risk, which

        • by Anonymous Coward

          "With a broker or an exchange, you only have risk associated with the transaction. You put money in, bitcoins come out. You put bitcoins in, money comes out. Or, alternatively, you put bitcoins in, special brownies come out. The risk is all associated with that transaction."

          Yes, and the GP explained to you how new approaches (multisig) moves silk-market like operations too into that space, by making deposits with a third party unnecessary. You need to trust that the broker and the dealer aren't conspiring a

      • understand what a free society truely looks like (except for those that have been to Burning Man).

        Burning man is a festival and a holiday. It's not a free society.

        The reality of this free-as-in-libre currency Bitcon appears to be that people are ripping other people off left right and centre.

    • The entire reason they are succesful is BECAUSE the deposits. It enables them to create an escrow system which makes things much more comfortable.

      Also you can depisit on a per-transaction basis...there is no minimum.

      • by iroll (717924)

        If you deposit on a per-transaction basis, you can only lose as much money as you can lose if all of your transactions fail.

        If you leave your money on deposit, or "store" your bitcoins there because you don't know how to drop a wallet into dropbox, you are basically dangling a carrot for somebody to steal (MtGox). I mean, think about PayPal for goodness sakes. After the whole minecraft incident, what sane person would just "let it ride" in a paypal account? PayPal is great for facilitating transactions, but

    • by AmiMoJo (196126) *

      People addicted to drugs tend not to think too clearly about the potential risks involved in obtaining them.

  • by Anonymous Coward

    "an estimated $2.7 million worth of Bitcoin belonging to users and staff of the site was stolen"

    LOL

    Bitcoin, the online money.

  • by Anonymous Coward

    Why would you bother to pay back millions of dollars when you could just disappear into the digital ether?

    Because TRUST is a vital ingredient in trade. In order for other to trust you, you need to prove yourself to be trustworthy.

    In that sense, the people behind Silk Road has more trustworthiness than that guy sitting inside the Oval Office.

    • That guy sitting in the oval office is Barack Obama. We know quite a lot about him. We even have his birth cert!

      Now who is that person trading as "The Silk Road"? And where is he?

  • It's not like they wanted to hurt anyone, just make money. So depressing. I feel sort of crappy myself. I wish I had more time to rest. It feels like I'm waiting for the mortician. Sorry for all this, I needed to vent.
  • by Anonymous Coward

    If you feel the brand is worth more than $2.7m I guess - how much profit did the site make per annum?

  • Why would you bother to pay back millions of dollars when you could just disappear into the digital ether?

    I'm just guessing, but I'd have thought that ripping off certain users of Silk Road could be extremely bad for your health.

  • Decentralized Black Markets are being created and working proof of concepts are available.

    https://github.com/darkwallet/darkmarket

    All of these old darkmarkets mentioned in the OP are obsolete. Theft from the market owners will no longer be possible. Theft from sellers, while rare in past, will become even more rare with escrow mutisig authentications. Theft from governments shutting it down and stealing everyone's bitcoins like in SR1 will now become impossible.

    http://www.coindesk.com/airbitz-wins-toronto-

  • First off, they haven't 'bounced back' ... someone is trying to, but at this point its not really shit to brag about. Second, in order for them to 'bounce back', their going to have to rob someone else.

    The first morons who let these guys hold their money were idiots. Who the fuck lets their drug dealer hold their money? NO ONE WITH A CLUE.

    Then, when the drug dealer runs off with your money ... what moron gives them more to hold on to? Not even strung out junkies are that stupid in general.

Aren't you glad you're not getting all the government you pay for now?

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