Someone 'Accidentally' Locked Away $300M Worth of Other People's Ethereum Funds (vice.com) 141
On Tuesday, a single user "permanently" locked down dozens of digital wallets containing nearly $300 million dollars worth of ether, the unit of exchange on the Ethereum platform, allegedly by accident. From a report: Now, some in the Ethereum community are considering the possibility of a risky network split, known as a "hard fork," to fix it. The affected wallets -- known as "multisignature" wallets because they require multiple people to sign off before funds are moved, making them popular with companies -- were all created with Parity, a popular program for digital wallets. Parity multisignature wallets experienced a bug in July that allowed a hacker to steal $32 million in funds before the Ethereum community scrambled to band together to hack back and secure the rest of the vulnerable ether.
Reasons not to use cryptocurrency (Score:5, Interesting)
1) It is extremely volatile
2) Few businesses accept cryptocurrencies
3) They are easy to steal
4) They are not backed by real world goods, so the value can easily go to zero
5) There is no anonymity because all transactions are public
Anyone who cares about their privacy and security should avoid cryptocurrencies like the plague.
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They are not backed by real world goods, so the value can easily go to zero
Fiat currency is backed by productivity: there's so much of it and it's standardized, so it represents everything produced and sold in a time frame. Digital currency ... is hype. The strategy is literally "it becomes more-scarce as more is made, so it's worth more dollars because more people want it yet there's less of it!"
Re:Reasons not to use cryptocurrency (Score:4, Insightful)
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There's already "emergency cryptocurrency" webinars designed to show all the "potential profits" of "record breaking cryptos", all picked by "experts" that could "make you millions! Just sign up now for $3k/year (senior discount available) and we'll tell you how to get rich!"
Fucking scammers. Pump and dump. Crypto and blockchain technologies have some great potential (I like inventory/process tracking, for example), but this run-up is 100% speculation.
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It costs approx. $1000 to create a single bitcoin. How much money does it cost for the US Govt to print $100?
Re:Reasons not to use cryptocurrency (Score:5, Insightful)
Just because something has a "cost" to make, doesn't mean the thing ends up with the same value.
I can spend an hour of my time sticking rocks to the side of a cow pie, but that doesn't mean the end result is worth $8.
Re:Reasons not to use cryptocurrency (Score:5, Insightful)
And yet, Artist's Shit [wikipedia.org], sold for €275,000.
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That is only true for goods and not for currency. Currency is re-used and recirculated many, many times. The cost to make it can be higher than what people are willing to pay for it, but the value of having a common currency to make financial transactions easier still makes it worthwhile for the government to produce it.
The caveat to that is that the value of recycling the currency can't be allowed to exceed the value of the currency in the market. When that happens, people start hoarding the currency in
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In fact, that is built into the bitcoin algorithm. As miners drop out (because it's too expensive to make a single coin), the effort required also drops, to entice people back in.
Re: Reasons not to use cryptocurrency (Score:2)
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What gives something value is what people are willing to pay. If people are willing to pay $7000 for a single bitcoin, then that's the value. Just because you don't agree with it doesn't make the value wrong, it just makes the value wrong to you. If enough people think this way, then the value will be driven down by market forces, however that's not what we're seeing here.
Re:Reasons not to use cryptocurrency (Score:5, Interesting)
Re: Reasons not to use cryptocurrency (Score:2)
Energy consumption is orthogonal to waste. The energy is almost completely dissipated as heat. If you are using mining rigs to heat your home or are otherwise reclaiming the heat for some purpose, then there is little to no waste.
Like any other industry, actors can be green or black.
Re: Reasons not to use cryptocurrency (Score:4, Informative)
I don't think orthogonal means what you think. You need to consume energy to waste it.
Also, heating your home with resistive heating is wasteful because heat pumps can be ~4 times more efficient (heating per energy consumed).
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If $1000 in electricity (and some depreciation of the hardware) makes a $7000 bitcoin ($6000 profit) plus heating your house, I'd argue that it's more efficient than spending $250 for the same heating with a heat pump.
If the expenditure of electricity is making me significant money I'd argue that it's most certainly not being wasted.
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Electric heat is usually one of costliest ways to heat your house, and come summer you have to pay even more to cool your now overheated house.
Once this sucker pops people are going be really baffled at how it managed to get so ludicrous in the first place.
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I wonder if they'll have enough left to buy some tulips...
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Re:Reasons not to use cryptocurrency (Score:5, Interesting)
Re:Reasons not to use cryptocurrency (Score:5, Informative)
The most efficient hash device available on the open market (and also used internally by the manufacturer for their own mining purposes) is the antminer S9 based on 16nm lithography ASICs. These have a specific energy consumption (this parameter is typically quoted as the main figure of merit for bitcoin mining systems, so is widely available for almost all mining hardware) of 60 pJ/hash.
From these figures, we can calculate an energy requirement of on average 300 GJ per block - or about 83 MWh.
A full block can contain approx 2000 transactions, giving a total energy consumption of approx 40 kWh per transaction at maximum transaction throughput (specific consumption is increased if transactions per block are reduced due to a low transaction rate).
Note that the above energy consumption figures are based on the ASICs only, and do not include power supply/distribution/conversion losses, as well as miscellaneous control devices/servers/networking. Add in these losses, and you could be looking at 45-50 kWh per transaction.
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Certain aspects of bitcoin are so braindead stupid that I don't know why everyone hasn't moved on to different currencies.
There's only about 1750 transactions per block, and only 1 block every 10 minutes. The energy cost is so high because the "difficulty" is artificially set so high, and the block rate is so low. This is probably to keep the total blockchain size from growing out of control, since it was never designed with scalability in mind.
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I've yet to have anyone tell me what anyone is actually doing with that computational power - even friends who are really into crypto currency.
Ok you're using it to solve a blockchain - for what? Even the reddit bitcoin forum calls it "magical internet money".
Also as the chain gets more and more complex - those of us who can't actually solve the blockchain for lack of computational power are now forced to not have any money? I mean I can draw a lot of parallels to our normal economy sure (like the paradise
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"Bitcoin and others are a drain on time, people, energy, and hardware resources. They provide little back."
Unlike a Gerald R. Ford class aircraft carrier (sticker price -- 8.5B USD) that gives one in return .... well ... unh ... wait a minute ... I'll think of something.
Question: Is a nuclear aircraft carrier an asset? It costs money to maintain. No one you'd want to sell it to can afford to buy it. You can't use it to attack a serious enemy -- they'll sink it.
Re:Reasons not to use cryptocurrency (Score:5, Insightful)
Fiat currency is backed by productivity
This is what cryptocurrency advocates forget when they state that fiat currency is as ephemeral as bitcoin. There's a caveat: you do need a responsible central bank to keep the money supply in line with the GDP, and a more or less stable economy. But that's why people favour dollars and euros over Nigerian nairas or Peruvian sols.
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Deflation [wikipedia.org].
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Deflation with actual zero monetary mass.
Re: Reasons not to use cryptocurrency (Score:2)
BTC are divisible to something like 8-10 decimal places, so there is little risk of this happening any time soon. If BTC becomes a significant global currency, it might be a minor hurdle, but there are ways to upgrade to support more decimal precision, so those hurdles can be easily leaped.
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Until there aren't enough for people to be interested in them, and then the whole thing collapses.
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LOL, yea, because all those goods and services produced by individual labor are so hard to see...
Seriously, dude. You're using the product of labor right now to bitch about how you think the products of labor are ephemeral.
A well placed atmospheric EMP could very easily destroy every last bit of "proof" that bitcoin mining has currently generated; but it would take a hell of a lot more force to wipe out the evidence of fiat-based production.
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The strategy is literally "it becomes more-scarce as more is made, so it's worth more dollars because more people want it yet there's less of it!"
And oddly, this works. It's kind of like the "Limited Edition" collectors cars the Lamborghini (and similar) sometimes put out; they promise to only make 50 of them per year, and the people put down $2M for a car they'll (probably) never drive, because they're pretty confident they'll be able to sell it for significantly more than what they paid for it, soon enough. As long as demand continues to outstrip supply, the price will rise.
Of course, this only works if (a) the manufacturer doesn't dilute the val
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The whole artificial scarcity aspect of it is driven pure greed by the founders and early adopters. There's no reason why a digital currency needs to be limited in such a way.
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It's driven by people who failed economics and think a deflationary system is good because they think hard currency is good.
In other words: Ron Paul.
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and think a deflationary system is good
In fairness, we don't have much experience trying. People just assume that inflationary systems are good because that's what they want to do. In most likelihood, inflationary or deflationary probably doesn't make any difference, as long as it's predictable.
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A deflationary system means any debt you hold becomes a larger and larger portion of your income over time. That means purchasing anything large requires squirreling money away and not spending it, decreasing revenues and thus jobs. Inflationary systems allow you to buy something for a percentage of your income, have it, and commit to spending that money on the thing over time; however, the portion of your income locked up in your debt payments becomes smaller over time.
Imagine if you got a 2% raise eve
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A deflationary system means any debt you hold becomes a larger and larger portion of your income over time. That means purchasing anything large requires squirreling money away and not spending it, decreasing revenues and thus jobs. Inflationary systems allow you to buy something for a percentage of your income, have it, and commit to spending that money on the thing over time; however, the portion of your income locked up in your debt payments becomes smaller over time.
All this doesn't matter as long as it's relatively predictable. You could easily make the opposite argument: "Who would loan money when the value of the loan is going to decrease over time? The loaner would not get paid back as much as he loaned in the first place."
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Actually, the guy who makes the loan generally outpaces interest rate risk and inflation, so he makes money on his loan. The guy who buys the goods with the loan can buy them earlier, and his payments are known and predictable, and will become less of a burden on his finances over time.
Inverting this with deflation means the guy who makes the loan takes a bigger risk on the debtor going bankrupt, while the debtor's burden increases continuously. This is even true at 0% interest. Some people say someth
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Incidentally, this means that in some cases interest payments will be negative, and that has happened.
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If the inflation rate is -3%, then the debtor's income will tend to reduce by 3% each year, while his loan payment is the same. Think like you have $1,000/month and a $200/month payment? In 10 years, it's like making $1,000/month but your payment has increased to $542/month: You'd be making $737/month with a $200/month payment. How's that 30-year mortgage looking? Can you handle it? Can you keep up?
If the inflation rate is -3%, the bank can make a 3% profit by just holding cash.
Again: with positi
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If the inflation rate is -3%, then the debtor's income will tend to reduce by 3% each year,
No that's backwards. The debtor's income will increase every year (unless his boss literally cuts his wages).
If the inflation rate is -3%, the bank can make a 3% profit by just holding cash.
And they can make 4% profit by loaning it out, just like now. Thus they will loan it out.
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No that's backwards. The debtor's income will increase every year (unless his boss literally cuts his wages).
With negative inflation, the employer's revenue stream per unit slowly shrinks. Wages thus have to shrink as well, or else jobs go away. The opposite is why you keep getting raises.
Think about paying five employees each $10/hr to make 100 hamburgers an hour at $0.50 per hamburger (let's ignore the other costs, which also will follow this pattern and adjust accordingly). Then, with 3% deflation, the hamburgers cost $0.485. You're now getting $48.50 of revenue per hour, and you have employees who must
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There are people who want inflation, and they produce quite a bit of propaganda, and you've been listening to that propaganda. Don't: there isn't enough empirical data to show that either inflation or defl
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It's kind of like making predictions on what would happen if you drove a lithium-batteried car through a concrete wall at 100mph. While nobody may have done that ever, we do know that the batteries are unstable and release energy when damaged--all batteries do. We can, in fact, predict the rate, thus temperature. We can predict chemical reactions and effects. A lot of "we've never done it before, but we know what would happened" comes out.
We actually do know what a deflationary economy looks like--we'
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It's kind of like making predictions on what would happen if you drove a lithium-batteried car through a concrete wall at 100mph.
Not at all.
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That part is covered by interest. In an inflationary system, you can charge a certain % of interest per year, so the value of the loan (if nothing is paid back) actually increases.
In a deflationary system there is no incentive to give out a loan or to take a loan - if you take a loan it will likely grow too fast for you to repay. If you don't give out a loan your capital will grow on its own, so why bother.
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. If you don't give out a loan your capital will grow on its own, so why bother.
Because you make even more money by loaning it out. The interest rate will increase to the point that people are willing to loan money.
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And since the interest rate will be high AND the value of each unit of currency will be growing very few people will be able to pay back their debts. Which will increase the interest rate (risk).
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They are not backed by real world goods, so the value can easily go to zero
Fiat currency is backed by productivity: there's so much of it and it's standardized, so it represents everything produced and sold in a time frame. Digital currency ... is hype. The strategy is literally "it becomes more-scarce as more is made, so it's worth more dollars because more people want it yet there's less of it!"
Pfft you mean we have to work for a living! I want my money?! Screw that I want to get rich without working. Isn't that what everyone else wants and why crypto-currencies like the stock market before it are filled with players.
If you got mine and the other guy didn't then you owe it to make more to make sure you stay rich
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Work for a living? Nah. You have to work for a good living.
Also people economize: they expend the least means for the most gains. That's a constant. When they fail to do this, we call it waste, irresponsibility, and failure; when we notice someone expected to get paid but the smart guy got it done without hiring him, we call it greed; and when we establish rules and someone violates them for gain, we call it fraud.
Re: Reasons not to use cryptocurrency (Score:2)
It's actually backed by debt. It's only backed by productivity inasmuch as debtors attempt to clear their debt with productive activity.
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It's simple: if your economy produces and sells nothing but 1,000 tonnes of rice and $1,000,000 are spent that year, then rice costs $1,000 a tonne and--more importantly--$1,000 represents one tonne of rice.
Let's say people had $2,000,000 sitting around at home, but only spent half of it for whatever reason. Then, the next year, 1,000 tonnes of rice are sold again--but this time, folks pay $2,000,000 in total. Well it's patently-obvious that, somehow, $2,000 got to represent 1 tonne of rice.
In pract
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Those goods don't "back" traditional currencies though, they simply use them as a medium of exchange. Print 10x as much currency, and it's worth 1/10th as much productivity. Compare to traditional gold-backed dollars - where to (non-fraudulently) print 10x the dollars you'd better be able to come up with 10x the gold to back it.
Cryptocurrency is similarly "backed" by the amount of business transacted in it - the only problem is that the majority(?) of transactions it's currently used for is speculation in
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Print 10x as much currency, and it's worth 1/10th as much productivity
Correct. More specifically: Spend 10x as much currency on the same goods and it's worth 1/10 as much.
Cryptocurrency isn't backed by productivity; it's backed by speculation.
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But are cryptocurrencies actually useful for that purpose? What you describe would require at least 3 transactions. The transaction costs of that if you were to use Bitcoin would already make it almost useless for transactions, and it will only get worse as more people tried to use it.
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Last I heard, the transaction costs to buy or sell bitcoin were in the low single digit percentages. Whereas international bank transfers can easily be in the double digits.
There's also the matter of convenience - say you want to send money home to your family in rural sub-Saharan Africa, who have no ID and are three days walk from the nearest bank. Nearly impossible via traditional routes, but easy enough if they (or someone they trust) has a cell phone and someone in town is dealing in bitcoin.
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Except that the transaction fees are NOT based on a percentage of the amount sent, but a fixed amount (kind of) per transaction - so in case you are sending 50$ worth of bitcoin to your family, you're going to have to pray 3 fees (buying, sending to family, converting to local currency), which at the moment would come to about 15%. And that is assuming that your local dealer doesn't take a cut for himself.
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You're adding one too many steps - just buy directly into your family's wallet, after all their public key is just that. Or into a single-use wallet that you send them, if you prefer (has the added benefit of increased anonymity).
It is a shame that the fees have gotten so outrageous, as it does undermine one the core purposes of the currency. We'll have to see if the recent fixes to some of the technical causes will eventually trickle down to the users.
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and the bank is backed law and they just can wipe out your funds with no recourse
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Bullshit. The banks are regulated so the idea they would simply burn your money, or something similar, is ludicrous. This doesn't even take into consideration the FDIC which will at least get you most, if not all, of your money back if something does happen. It's why it was developed.
Who is going to get these people's money back now that it's permanently locked away? You think a fork is going to help?
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He is right in theory (i.e. Congress could pass a law that empties all our bank accounts), however to consider such a thing in practice would completely cripple the economy, cause the banks to lose money rather than make it, and generally collapse society as we know it.
Yes, Virginia, you can cut off your nose to spite your own face, but most people won't.
6) you don't own it, you lease it (Score:2)
apparently your "assets" are as secure as a cloud with all the subscribers having full admin rights.
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Your taxes actually go to maintaining a country's infrastructure that actually allows the businesses that pay people that cash? Terribly inefficiently admittedly, but at the moment we don't have better alternatives.
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It really boils down to a single thing: government power.
Most cryptocurrencies are unique among value-carrying assets in that the government can't control them. But this also means government can't do things that people generally consider legitimate -- say forcing people who stole cash or electronic money to return that money to you.
It's a trade-off that for most people doesn't really make a lot of sense, but for people in businesses that are either illegal or semi-legal (like locally legalized marijuana)
What you should take away from this (Score:2)
2. Don't let one company run a cryptocurrency. In fact that's the entire point of cryptocurrencies.
3. why does slashdot still require me to type br / to make a new line?
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2. Don't let one company run a cryptocurrency. In fact that's the entire point of cryptocurrencies.
The entire point of cryptocurrencies these days, is to be be something like the "Subprime mortgage-backed securities" of not too long ago.
When it crashes, a US government bailout will be required. And guess who gets stuck with the bill . . . ?
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there will be no bailout.
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Are you saying bitcoin isn't too big to fail?!
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Bitcoin holders have nowhere near the influence of the UAW.
They bailed out the pension fund. In the process screwing others who held bonds by putting the pension fund at the front of the line. It's still working its way through the courts.
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They didn't bail out GM. The company ceased to exist. The owners of the company (shareholders) got nothing. The government bought the assets of the former company in order to form a new company in order to protect jobs. There is absolutely no reason to think the government would bail out bitcoin any more than they would bail out any other investors in a failed company.
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3. why does slashdot still require me to type br / to make a new line?
What I find more frustrating, personally, is that it still makes you type out the numbers if you want to do a ordered list. It also won't put in bullets if you do an unordered list.
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3. why does slashdot still require me to type br / to make a new line?
There's a setting for that [slashdot.org]
just tell the bank (Score:1)
To refund your account... Or wait....
Monetary system or Ponzi scheme ? (Score:4, Insightful)
So far the early adopters seem to be trying to make a fast buck on the ever increasing value of the system - which grows because new people enter it. Is this real growth or a ponzi scheme?
Wow - imagine if the banks could have an Undo button. Reset. Start over.
National Debt could be erased, all those bad loans. Bankruptcy? What Bankruptcy?!
I can't imagine losing $32 million in some money "system" --- could you imagine placing your paycheck into this "bank" to pay for all your stuff, and then the landlord says "last month's check never came through" only to find everything gone! $32, $320, $3200... or $32 million. Who cares how much evaporated - it's gone. Speculative investments at their best.
It's an experiment that people are willing to invest $100's millions into? Feels more ponzi to me.
Re: Monetary system or Ponzi scheme ? (Score:1)
1. Go and learn what a Ponzi scheme is.
2. Come back and tell us what type of scheme this is and then realise that not all bad investments with money are a "Ponzi Scheme"
3. You may have just called it Fascism or hate scheme as both sound narfarious and are unrelated to what you are trying to say.
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So far the early adopters seem to be trying to make a fast buck on the ever increasing value of the system - which grows because new people enter it. Is this real growth or a ponzi scheme?
Last year, about 270 new cryptocurrencies were launched, i.e., more than the number of national currencies in existence. I'm leaning towards 'ponzi scheme'.
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> Wow - imagine if the banks could have an Undo button. Reset. Start over.
Technically, the problem is NOT the debt, but usury.
Also, you DO realize that for thousands of years Judaism has the concept of "Year of Jubilee" where ALL debts are erased, right?
They realized that usury is a cancer to any society -- because it is not sustainable. Debt is a just a symptom of a broken system.
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Money today is worth more than money in a year. Sorry you don't like that, but it remains a fact.
Meh (Score:2)
I get the point of why people find cryptocurrencies necessary.
And, it's not like banks or investment portfolios haven't (effectively) done the same sort of thing to a comparable order of magnitude of actual dollars.
But while bitcoin et al *seemingly* climb in value, I personally don't see the market recognizing/factoriing in this sort of vulnerability to equally-fiat crypto currencies.
Utter, stark, raving madness (Score:5, Insightful)
So now we had a wipeout from a bug fix for the last wipeout. This will, of course, be the last one... until the next one. Recovery from the prior debacle involved white-hat hackers taking it upon themselves to steal currency from vulnerable wallets (and eventually returning it) before black-hat hackers could. And this time around, apparently the only fix is basically to start an entirely new ecosystem and hope like hell everyone migrates.
Contrast this miserable chaos to the sweet lilting tones from the founders [ethereum.org]:
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference .
Caveat emptor indeed.
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The funny thing is that the price will probably go up because of this, simply because the crypto got some additional press from it. There are probably a lot of people out there who nothing about Bitcoin (or cryptocurrency in general) except that it skyrocketed in value over the past few years, and they want in on the "next" Bitcoin.
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Looking for details (Score:2)
Details - guess? (Score:3)
Still trying to figure out if the bug was in the smart contract or in the "mining" code that allowed devops199's transactions into the block chain.
bolting (Score:2)
Apparently, I don't even give enough of a shit about this subject to stick around long enough to figure what 'locked away' actually means.
another do-over? (Score:2)
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Defeating capital controls.
For example: Chinese citizens whose parents are not central committee members are limited to about 50k$US capital moved overseas/year. Bitcoin lets them move some of their assets out from under the current bubble. Which will stabilize the situation when the shit hits the fan.
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Most Chinese real estate is 'bought'* with cash.
Letting them buy that real estate outside the Chinese bubble is a _huge_ benefit to them. Just in terms of risk management.
* 99 year lease is all they get in China.
no 99 year leases in China (Score:2)
There is no such thing as a 99 year lease in China.
If you can't even get that basic fact right, you lose all credibility for your other unsubstantiated claims.
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WTF are you on about? Are you twelve or do you troll for China professionally?
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Unless you just really are that bad at it...
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