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Bitcoin “Total Crypto Breakdown” Highlights Risks to Non-tangible Assets
Bitcoin “Total Crypto Breakdown” Highlights Risks to Non-tangible Assets
- Bitcoin wallet app Blockchain suffers major security blunder
- Poor tech sees multiple accounts being created using same address
- Security lapses in electronic and digital currencies not uncommon
- Bitcoin and cryptocurrencies in infancy but are useful tools
- Physical gold offers most secure form of wealth preservation
Blockchain.com, which claims to be the maker of the most popular Bitcoin wallet, suffered at the weekend what the Guardian describes as a "total crypto breakdown", highlighting once again the vulnerability of electronic and digital currencies to human and technological errors and hacking.
Multiple accounts were created using the same bitcoin address which meant that many users apparently had access to the same pool of funds which led to losses for a few.
The newspaper reports that a "series of bad development choices" in the software "all failed in the worst way possible". It was operating in the typical "belt and braces" mode where if one line of defence failed another should still be operational.
"Bitcoin wallets are typically created by randomly generating a public address and a related private key. As a result, it is important for address and key to be truly random, or else it may be possible to guess the private key by looking at the public address."
In the case of Blockchain.com, the random code was generated from two different sources which were then combined. The first was the random number generator on the device on which the app was being installed.
However, some Android phones failed to deliver the code to the blockchain app which meant its random code was generated entirely from the second source. The second source was an online service called random.org.
"But on 4 January, Random.org strengthened the security of its website, requiring all visits to be made over an encrypted connection. The blockchain app, however, continued to access the site through an unencrypted connection. So rather than getting a random number, as expected, it got an error code telling it that the site had moved."
Blockchain then unwittingly used the same error code in creating the address for multiple users, the devices of whom had failed to produce the first line of random code.
"The magnitude of the error sparked shocked reactions from information security professionals."
Security lapses in software for managing digital and electronic currencies are by no means uncommon. The constant march forward of technology often means that less attention can be paid to older systems which have not yet become obsolete.
Early last year banking giant JP Morgan was hacked. It had its system hacked and details of 76 million customers were stolen (Cyber Attacks Growing In Frequency – Entire Western Financial System Is Vulnerable). JP Morgan use the "belt and braces" approach of two-factor authentication but in one older overlooked system they were still using a less sophisticated single password system.
In February, we covered the story where Russian cybersecurity firm Kaspersky lab uncovered an international hacking group who had managed to tamper with customers accounts in order to steal possibly up to $1 billion from over 100 banks globally (International Hacking Group Steals $300 Million – Global Digital Banking System Not Secure).
There have been numerous incidences in recent months where strategically vital monetary, financial and infrastructural computer systems have been seen to be very vulnerable to human error and malintent.
We can see the benefits of Bitcoin and cryptocurrencies in the coming years. We are particularly excited about the potential of the Blockchain itself ( Blockchain Promises To Be As Disruptive A Technology As The Internet)
Cryptocurrencies are a useful tool which could provide a vital degree of short-term liquidity and means of exchange in the event of capital controls and or a banking or currency collapse.
However, given their non-tangible nature and other risks posed to them, we do not view them as a store of value or a safe haven asset akin to physical gold bullion in your possession or stored in the safest vaults in the world in the safest jurisdictions in the world.
Must-read Guides:
Essential Guide To Storing Gold In Singapore
Essential Guide To Gold Storage In Switzerland
MARKET UPDATE
Yesterday's AM LBMA Gold Price was USD 1,186.60, EUR 1,067.23 and GBP 777.60 per ounce.Today’s AM LBMA Gold Price was USD 1,182.45, EUR 1,041.76 and GBP 766.55 per ounce.
Gold fell $8.10 or 0.68 percent yesterday to $1,185.30 an ounce. Silver slipped $0.25 or 1.49 percent to $16.55 an ounce.
- Gold in USD - 5 Years
Gold in Singapore for immediate delivery fell 0.2 percent to $1,182.80 an ounce near the end of the day, while gold in Switzerland edged marginally higher.
Gold stumbled to its lowest in three weeks today despite very mixed U.S. economic data - there is a perception amongst some market participants that the U.S. economy is recovering and a U.S. rate hike will be occur … timing undetermined.
Physical gold demand remains robust in China and India and this is supporting gold near the $1,200 level.
The chart below shows the cumulative gold buying in “Chindia” since 2008. As can be seen gold demand has been and continues to be voracious. Monthly global gold production is shown in the bottom section highlighting the rampant gold demand of Chindia.
U.S. weekly jobless claims are at 12:30 GMT and tomorrow's nonfarm payrolls figure will be watched.
Gold is moving into the quiet summer months. Demand from Asia remains robust with premiums in China at $1.50-$2 over the global benchmark and SGE withdrawals robust.
Greek Prime Minister Alexis Tsipras said a deal with creditors was "within sight" after he stepped out of talks with senior EU officials in Brussels. Tsipras said that they would make the IMF payment on Friday.
This has taken some of the safe haven appeal out of gold bullion and moved money into other assets as market participants see a Grexit as less of a threat. Although stock markets today are sharply lower suggesting jitters on bond markets are spreading to equities.
In late European trading gold is down 0.27 percent at $1,182.40 an ounce. Silver is off 0.17 percent at $16.47 an ounce, while platinum is up 0.17 percent at $1,105.55 an ounce.
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PMs have poor price discovery, cryptos have poor security, but my rifle has great accuracy. Such is life.
bitcoin was not hacked it was just another dodgy web site.
bitcoin has unbreakable security.
ROTFLMAO...
the control freaks-AKA the triple alphabet outfits-own all hte public "random" number generators
you can generate your own bitcoin private keys by rolling dice . Don't see how "they" could possibly control that.
8 years ago I could not conceive they could control every major market on the planet either..
But they could, would and did.....
The crypto wasn't hacked, the website's software was. If you trust other people with your bitcoins you run the risk of them being stolen. Cryptos have the best security humanly possible.
Mr. Frosty The crypto wasn't hacked, the website's software was. If you trust other people with your bitcoins you run the risk of them being stolen. Cryptos have the best security humanly possible.
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So I am assuming that you have your bitcoins stored offline on your own hardware and software you created? I think not. You may have your stuff offline, but you are dependent on others for the software and hardware. And once you actually have to USE your bitcoins, you are exposed.
Correction:
"Cryptos have the best security mathematically possible."
Correction:
"Cryptos have the best security mathematically possible, notwithstanding current understanding of mathematics."
SSL was once considered secure, until it was discovered that the mathematics involved were simply not secure enough. That isn't something you can simply write a software patch for, or ask the user to turn it off and on again. You have to discontinue it completely, hence use of TLS instead of SSL.
It's unwise to consider any mathematics future-proof, when it comes to security, moreso because you will never ever know what the state of the art is, when it comes to research: It wasn't until Diffie-Hellmann key exchange was published that GCHQ coughed up to having invented the same concept several years earlier.
No matter how good the math, it must be turned into an algorithm, then written as a program and the quality of the programmer and his attention to detail makes all the difference. Unfortunately 'beta' code is too often considered 'good enough' to ship......
"Cryptos have the best security humanly possible." Uh-oh, humans are involved. Funny thing about humans, they can't turn lead into Gold but can hack software and fool each other. "Ethercoin".
In theory I like Bitcoin, it's when it crosses over into the real world that I'm doubtful. The net wasn't designed for high security transactions, so a security overlay is used. In order for the overlay to work everyone in the chain must use common standards and how well those standards are individully implemented determines the strength of the entire chain. So meet the (latest) weak link....
As soon as Bitcoin hits $1.37 I'm buying some!!! But only three or four with the downside risk being so high.
Will never happen. blockchain already reimbursed the users who had a loss.