Man says he lost $500,000 in virtual currency heist
Found on The Register on Wednesday, 15 June 2011
Rumors of the heist have been swirling since Monday, when a Bitcoin user named Allinvain claimed 25,000 Bitcoins, technically valued at close to $500,000, had mysteriously been transferred to an unknown user's account.
"Bitcoins technical details are complex cryptography and there's no way for us (as developers) to figure whether there was a real theft or not," Nils Schneider.
The true value of the loss "would be more like $300,000 and cause the price to drop to around $10. Also, at the time he acquired the coins they probably were worth only $1000 or less. So the loss is in terms of USD is more a theoretical value."
Bitcoin naturally still has its share of problems, some of which are design flaws. As pointed out before, having every user download the entire blockchain (which contains every transaction ever made) to verify it may be a key part in the validation of transactions in the p2p network, but it delays the first use by hours; not to mention the needed resources for the validation. You'll run into the same problem if you don't start the Bitcoin client for a longer time: it will download all blocks since the last run and validate them. What's even more of a issue is the lack of encrytion. Bitcoin tells users again and again to securely store the wallet (e.g. in a Truecrypt container) instead of having the wallet encrypted by default so that you cannot open it, or make a single transaction, without knowing the password. At times where users rely on passwords like 12345 it is almost a sin to assume they would set up Truecrypt. That all aside, the user in question did everything he could to get robbed: no encryption and keeping the wallet on an trojaned system even after he noticed it. The anonymity of Bitcoin is not to blame here, it's the user. It's like leaving a suitcase full of cash on your front lawn and then crying when someone takes it at night. There's no way to get the money back then either.