I have been following the crypotcurrency for some time, especially BTC, and I must have missed out something because I believed the whole concept about a blockchain was to ensure no one can take possession of your coins. That the multiple checks of transactions was the core and could not be manipulated with.
But I must be wrong since Bitfinex had a hack and "they" stole nearly 120.000 BTC - How did this happen?
If the stolen BTC cant be traced and retrieved then isn't the whole bitcoin idea a little to weak to be a viable alternative?
When you give "your coins" to an Exchange, then they are not your coins until they give them back. An Exchange holds coins to trade for other "coins/fiat" and then when you withdraw, they "owe" you the "coins". Unless you hold the private keys to the BTC, you down't "own" the BTC.
Thanks for your information. I realise the transfer of ownership takes place eg it in custody at the exchange - what I dont understand is that - as I thought it worked - all transactions are recorded in the blockchain and verified a nuber of times from independent copies of the blockchain - so how can a "person" claim ownership over this amount of coins and they dissappear?
I would expect a traceback option in the blockchain would be possible
If you can hide your traces of transaction or change of ownership then whats the blockchain fore?
Or is this a flaw in BTC code?
All of the transactions are recorded in the blockchain, and verified numerous times. In this case the Exchange states that they were hacked. Which means that the Exchanges' keys were either compromised, or the programming on the Exchange itself was compromised, which in turn would expose the private keys. The exchange of ownership is only done by who has access to the keys. If I tell you my private keys, then we both would be able to transfer BTC to other Public keys. That transfer would show up on the blockchain as well. If I took the BTC and then sold them for fiat(US Dollars), then it's gone as cash.
OK I think I get it - so the hacker(s) simply "broke in" to the server (this is the breach) - took the key(s) and started to transfer BTC assets from the Bitfinex wallets using the illegally obtained key(s). Is that close to the thing you explained? And therefore, since the correct measures of processing was used (keys) no ripple or trace of false identity is possible. And ownership of any BTC or Satoshi can be changed between to key holders only - and that change is added to the block and therefore verifiable.
A little like if my brother took the key to my safe, takes my 50$ and spend it and I later went to the shop where he spend it to claim it back. And I don't get it back...
Thanks a lot for taking your time explaining the nuts and bolts of the theft!
I'm relatively new to cryptocurrency so I have a limited understanding how it all works. That being said, I think I get what happened. Exchanges are kind of like banks. Its a place where people keep their bitcoins. This also means that someone, other than yourself, is holding your bitcoins. The exchanges got hacked, and the mechanism that "stored" everyones coins got compromised.
While there is no fool-proof way to secure your bitcoin, I am a huge fan of using multiple paper wallets for storing larger quantities of bitcoin, and keeping a smaller amount of usable currency in digital wallets. Don't loose faith in bitcoin. All it is, is a decentralized digital bank account. Keep in mind that it is digital though. Any time you give your money or account numbers to a third party, there is risk.
Thanks for sharing your insight. As I wrote above I probably didnt understand the blockchain principles correctly - I believed the core concept was that possession of a BTC is based on the ledger - the blockchain - that verify that you have come to own a BTC via tansactions verifiable in the blockchain legders.
If BTC can be simply stolen like anything else - then I dont get the verification hype of the blockchain.
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