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Glorious
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Re: Nicehash just lost 4,736.42642789 BTC / $61,253,030.31 USD

Thu Dec 07, 2017 8:08 am

Kougar wrote:
Since every transaction just adds to the blockchain moving the stolen funds around a dozen times seems rather futile.


You mix them with other plausibly legitimate bitcoins in a bunch of convoluted transactions involving thousands of address.

Ultimately traceable? Sure, in sense. Extremely difficult to practically enforce? Absolutely.

Consider this: I steal 5 bitcoins, send to address A with another 5 bitcoins that weren't stolen. I then send 5 bitcoins each from that address to addresses B & C.

Voila! Addresses B and C are both for identifiable individuals, and you can even seize them! (what luck!)

Oh.

The owner of Address B, Bob, and the owner of address C, Carlos, both state that they purchased these bitcoins from Alice, the owner of Address A.

Alice cannot be found, and you are only legally entitled to claim 5 bitcoin in restitution.

Oh! We'll just split the different, 2.5 both from Bob and Carlos.

Well, OK, but what if Bob swears that Carlos is actually Alice: he BOUGHT his 5 bitcoins from Carlos/Alice. Oh! And Carlos says that Bob is Alice!

Oh my! Now we have to evaluate these claims, don't we?

And what if we only caught Bob? Is it legally justifiable to take his 5 bitcoin when, maybe, Carlos is actually Alice?

---

This is why "traceable" is only true in a sense: you can trace all transactions. Bitcoin isn't just legally fungible, like money (if someone steals cash from you, you're not entitled to restitution of those exact dollar bills with specific serial numbers & denominations, just the equivalent amount), it's unavoidably technically fungible too! Bitcoins don't have any independent existence and can't, they are simply balances on accounts with transactional histories.

Now, banks track account balances much the same way (Captain Ned, correct me if I am wrong here), but theoretically they don't have to. They could, for instance, issue a nominal ID for every dollar or cent you deposit and individually track those so they could answer a question of which specific dollar went where. Obviously that's an enormous headache, but it is at least technically possible. But because they don't anything remotely like that(unless Captain Ned corrects me) they are required to follow KYC regulations "Know Your Customer". That way, at least, we're supposed to know all the participants involved whenever we have to partition co-mingled funds and other such legal things.

That way Bob can't just point fingers at a numerical address as the "real culprit" and we're all just kinda stuck. Because if Bob looks upright and we can't demonstrate he isn't, the courts are going to get the shakes about taking all his bitcoin as the "stolen" ones.
 
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Re: Nicehash just lost 4,736.42642789 BTC / $61,253,030.31 USD

Thu Dec 07, 2017 8:42 am

Glorious wrote:
Now, banks track account balances much the same way (Captain Ned, correct me if I am wrong here), but theoretically they don't have to. They could, for instance, issue a nominal ID for every dollar or cent you deposit and individually track those so they could answer a question of which specific dollar went where. Obviously that's an enormous headache, but it is at least technically possible. But because they don't anything remotely like that(unless Captain Ned corrects me) they are required to follow KYC regulations "Know Your Customer". That way, at least, we're supposed to know all the participants involved whenever we have to partition co-mingled funds and other such legal things.

Fractional-reserve banking simply wouldn't work if dollars were not 100% fungible and, at this point, mere data. Besides, banks hate cash. It's too much work and too much risk for a non-earning asset. And yes, all US-based Bitcoin exchanges must register with FinCEN (the Financial Crimes Enforcement Network, a branch of the US Treasury Dept) as money transmitters, which then requires them to comply with KYC and the whole panoply of anti money-laundering regulations. They also need to license all of their branches with the states in which they operate.

Some ten years ago (roughly), some group put up a Bitcoin ATM in a local mall without asking anyone. They were served with a cease & desist order within a day or two. When given the opportunity to go legit and apply for a license, the people behind the operation refused to give the personal and financial information required to obtain a license, so they just hauled out the ATM.
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Re: Nicehash just lost 4,736.42642789 BTC / $61,253,030.31 USD

Thu Dec 07, 2017 9:53 am

Captain Ned wrote:
Some ten years ago (roughly), some group put up a Bitcoin ATM in a local mall without asking anyone. They were served with a cease & desist order within a day or two. When given the opportunity to go legit and apply for a license, the people behind the operation refused to give the personal and financial information required to obtain a license, so they just hauled out the ATM.

Gee, that doesn't sound fishy AT ALL! :roll:
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Re: Nicehash just lost 4,736.42642789 BTC / $61,253,030.31 USD

Thu Dec 07, 2017 11:39 am

...and in the "any publicity is good publicity" department, BTC has surged past $16,000. I think news of the NiceHash hack has raised awareness another notch and piqued interest among a new crop of suckers speculators.
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Re: Nicehash just lost 4,736.42642789 BTC / $61,253,030.31 USD

Thu Dec 07, 2017 11:46 am

Nicehash isn't an exchange. It's literally a mining pool (which probably doesn't mine much/any BTC). That's why the "hack"(embezzlement) had no effect on BTC.
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Re: Nicehash just lost 4,736.42642789 BTC / $61,253,030.31 USD

Thu Dec 07, 2017 11:50 am

DPete27 wrote:
Nicehash isn't an exchange. It's literally a mining pool (which probably doesn't mine much/any BTC). That's why the "hack"(embezzlement) had no effect on BTC.

As I've noted previously, it still serves to illustrate the immaturity and insecurity of the cryptocurrency ecosystem in general.
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Re: Nicehash just lost 4,736.42642789 BTC / $61,253,030.31 USD

Thu Dec 07, 2017 12:43 pm

DPete27 wrote:
HA. Riiight, they got "hacked". OR, an equally likely alternative is that someone at nicehash just carved themselves out a nice big retirement pension. Think about it. There's basically no regulation to answer to, probably nobody is going to do a proper investigation, everyone will forget about this in a week, and there you have it, $60M embezzlement that you can get away with. It seems to me that Nicehash is more geared toward "beginner" level miners, which would add to the unlikeliness that Nicehash will get anything more than a slap on the wrist for this.


Who is going to buy bitcoins from that wallet? It's already hard cashing out legally obtained bitcoins. Cashing out illegal bitcoins must be on another scale of difficulty. Then again, $60M is a big incentive...
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Re: Nicehash just lost 4,736.42642789 BTC / $61,253,030.31 USD

Thu Dec 07, 2017 1:30 pm

ptsant wrote:
Who is going to buy bitcoins from that wallet?

I think Glorious outlined how that BTC gets laundered pretty nicely. It was probably laundered before the news even broke.

Again [quote]hack[quote]
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