Bitstamp Accounts Frozen
All customers should have received the following email. For some reason its not posted on their website.
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Dear customer,
Today our transaction processing server detected problems with our hot wallet and stopped processing withdrawals.
You should STOP SENDING bitcoin deposits to your Bitstamp account IMMEDIATELY as private keys of your deposit address may be lost.
Your bitcoins already deposited with us are stored in a cold wallet and can not be affected.
We will send you more info as soon as possible.
Best regards,
Bitstamp team
111 comments
[ 3.4 ms ] story [ 136 ms ] threadhttp://www.reddit.com/r/Bitcoin/comments/2rdbgf/bitstamp_hot...
Also, couple of more Reddit threads with an ongoing discussion around this:
http://www.reddit.com/r/Bitcoin/comments/2rd6bb/problems_wit...
http://www.reddit.com/r/Bitcoin/comments/2rd2xe/bitstamp_is_...
"We are working to determine what has gone wrong. The majority of our coins are swept and placed in cold storage often so this shouldn’t be a major issue right now but we are still working to determine the breadth of the issue. This seems to be a server issue and not a compromise but our teams are still investigating."
The majority of our coins are swept and placed in cold storage often so this shouldn't be a major issue right now.
It leaves too much wiggle room. It's like saying:
At least some coins have not been placed in cold storage so this could be an issue.
Does not look good.
With a bit of luck just the hot wallet got compromised, they trace how, fix it and honour any deposits made to the that wallet before the breach was detected. So far this is exactly what they say they are going to do. Time will tell but there's no reason to believe they wont act correctly at this stage.
It's very suspicious when a Bitcoin exchange claims problems on the deposit side and stops processing withdrawals. Nobody trusts a Bitcoin exchange in trouble, with good reason given the history. On the other hand, it's 6:30 AM in London, where Bitstamp is, and their staff is probably not in yet. Bitstamp is still processing trades; they haven't shut down their trading engine.
Most merchants who accept Bitcoin do so through Coinbase, which sells on Bitstamp. Coinbase only holds a working float of Bitcoins. When Coinbase can't unload incoming Bitcoins, they start refusing transactions. So most Bitcoin e-commerce will stop within hours if this isn't fixed rapidly.
On top of that, Bitcoin, after being stable around $315-$320 or so for weeks, suddenly dropped to a low of $255 in the last 48 hours. Right now, it's around $270. Something is going on.
They're definitely communicating poorly, though.
Withdrawals will require movement from cold storage - am I right? Well - if you've got a security problem with your hot wallet, then this would be a ridiculously stupid thing to enable.
Most? Source? Bitpay seems to be bigger than Coinbase
And wouldn't Coinbase just sell somewhere else, instead of shutting down their entire business?
Your claim that most Bitcoin e-commerce will stop within hours seems implausible
"From payment processors serving billion-dollar merchants to bitcoin ATMs and advanced trading platforms, Bitstamp's stoppage caused quoted prices in bitcoin to become inaccurate, some products to be suspended and select services to be retailored in light of the interruption."
It turns out that BitPay got their pricing from Bitstamp. Robocoin also used mostly Bitstamp, and had to switch exchanges.
If you had just said something like "I think this is probably going to cause a lot of problems for the Bitcoin eco-system..." that would have been a reasonable guess. The article you linked to actually shows that, but it does not show the effect that you predicted. It does not show "most Bitcoin e-commerce" stopping.
On top of that, Bitcoin, after being stable around $315-$320 or so for weeks, suddenly dropped to a low of $255 in the last 48 hours. Right now, it's around $270. Something is going on.
Stable for weeks is probably over stating it, looking at the chart it looks like almost exactly two weeks it was in that range, so technically it was weeks, but I wouldn't be quick to draw a direct connection between that recent price decline and this unfolding event, as the dominant pattern for the past 6 months or so has been a week or two of relative stability followed by a rapid decline.
[speculation] If this is a gox-esque scenario, there could be a connection with the recent price decline in that the price decline is what is causing them trouble and not a technical issue.
It is indeed strange...and strangely familiar. Every Bitcoin company that has had massive holes in its books has first claimed that technical difficulties were the reason they had to suspend withdrawals. Then over the following weeks comes the annoucement that the money has been stolen, lost, or law enforcement moves in and says it has been embezzled.
I would be extremely uncomfortable at the moment if I had money in Bitstamp. If withdrawal capability does come back online, try to get your money out ASAP.
This is probably what a lot of people will try to do, which will lead to further drops in price.
I wouldn't be surprised to see prices break the 1y low at this point.
Already happened. Yesterday.
Bitstamp now has a huge PR problem. Even if they "fix" the problem and resume withdrawals, no one will believe they're solvent without an outside audit. They had a sort-of audit once before (Bitcoins only, not fiat), but now customers will want a full audit.
There's a report on Reddit that withdrawals stopped 16 hours ago: http://www.reddit.com/r/Bitcoin/comments/2rayix/bitstamp_bit...
Yet no official comments from Bitstamp. Just a strange email, possibly forged. That's a very bad sign.
"It is indeed strange...and strangely familiar."
Right. This is a pattern we've seen so many times before in the Bitcoin world.
"If withdrawal capability does come back online, try to get your money out ASAP."
Yes. Definitely.
Expect this to start hitting the financial press in London in the next hour or two.
edit: whoops, added to the FT Alphaville article! http://ftalphaville.ft.com/2015/01/05/2079012/who-needs-cave... Come in via Google News for full text. They're using it as one example in a piece on how Bitcoin's infrastructures and the community's ability to assess expertise are not very good.
Two days later, it's in the Economist, Wall Street Journal, USA Today, etc.
Mt. Gox underestimated Bitcoin's media profile. When they went down, they acted as if the event would mostly be ignored and they could quietly get away with it. Instead, they got coverage in just about major business newspaper worldwide: WSJ, NYT, Forbes, South China Morning Post, China Daily, even al-Jazeera and Russia Today.
Bitstamp seems to be dead. They said they'd be down for "24-48 hours". Two days later they're still down. They haven't issued any new statements. There's a good chance they're in "take the money and run" mode.
It's pretty clear Bitstamp is buggered.
Wonder what Bitpay are going to do, since their "aggregate price" turns out to have long closely tracked ... Bitstamp. How in the bag are they? Did they in fact cash out daily?
You could also just log in and supervise two automated systems interacting, rather than entering numbers.
(Mind you, I don't believe in the glorious future of bitcoin, but any wider usage will certainly be accompanied by better UX)
Hierarchical deterministic wallets (HD wallets, BIP 32): https://github.com/bitcoin/bips/blob/master/bip-0032.mediawi...
Stealth addresses: http://sx.dyne.org/stealth.html
The former is more broadly supported.
An address isn't a destination in Bitcoin, it functions more like the serial number of a bill (though the system is able to handle duplication). It would be better thought of as an invoice number.
You don't expect to reuse a different invoice number of separate payments.
Not exclusively. Coinbase also sells (and buys) bitcoins directly to consumers. In fact, Coinbase is probably the biggest seller of bitcoins in the US (or second biggest after Circle.com - none of these companies publish volume numbers due to competitive reasons).
"Something is going on."
What is going on is very simple: customers of Bitstamp see that bitcoin withdrawals are halted. So the only way to get money out of the exchange is to sell coins and withdraw fiat. This selling activity is what is causing the price to crash. This always happens whenever an exchange halts bitcoin withdrawals (eg. see MtGox's demise in early 2014).
Edit: @TylerE: some customers usually learn about news before others: friends of employees, or even simply the first affected customers (before a public statement is made... remember: rumors spread fast). Again, the same scenario happened with MtGox: the exchange rate started crashing on MtGox a few days before the public news of their insolvency came out. I have been trading BTC for 4 years. I have seen how most of these scenarios play out in the Bitcoin world.
The dumb money always leaves after the prices has gone down.
If you don't know who the dumb one is, it is you.
I believe the problem is the following: if you deposit to a certain, old deposit address, that Bistamp has lost the private key to, the Bitstamp deposit system might credit your account with the bitcoins anyway, even though they are not there, because the private key is lost.
If you then withdraw bitcoins subsequently, you are literally withdrawing someone else's bitcoins, because the bitcoins you deposited never arrived, although the Bitstamp software architecture believes they are there, because the deposit address reflects a deposit -- Bitstamp just doesn't have the private key, so the balance of that address is irrelevant.
That's one meaningful explanation, at least.
America is a free country, but not everyone in America is free (some are in prison, for instance).
Are you saying there are 7+ million BTC stored on exchanges? I disagree based on two data points: Bistamp's reserves were 180K in November 2013 and MtGox's were 850K (with 650K of them missing) at the time of its death.
Even if you add BTC-E, Chinese exchanges, Coinbase and LocalBitcoins, it most likely won't exceed 2-3 million which means the remaining 80% is owned by end users directly.
So even if it's a minority at 20%, that's a pretty substantial number, and I can't imagine why it won't grow. Bitcoin's success depends on mass adoption, and I can't imagine a scenario where Jane Public would rather learn the technical skills to secure a local wallet versus trusting a company like Coinbase or Circle.
Wrong.
And this is why these Bitcoin debates are so annoying and repetitive.
For some reason everyone feels entitled to their little doomsday speech without bothering to research even their most basic premises.
edit: Did you totally change your reply? From the time I started my comment to hitting submit, your comment completely changed.
But to your point, you're presuming I have no clue, that I own no Bitcoin, that I'm not a regular participant in communities like Bitcointalk and /r/bitcoin. You believe there's a world where everyone has paper wallets and Trezors and ASICs. No: the early adopters are becoming a smaller percentage of the Bitcoin world. People are buying via Coinbase and Circle, and if they're really advanced, they sweep to a hosted wallet on Blockchain. Even many miners aren't immediately sweeping their coins, instead, leaving them on the pools. Do you really think it's going the opposite direction, towards less centralization?
...
See the comment by qnr.
I don't have the numbers, but guess what, you don't either. I'm going on mostly anecdotal evidence: Bitpay's growth, Circle's growth, Coinbase's growth, etc. I may be wrong about "most", but in the face of hard numbers (which many companies like Coinbase don't provide), how could any observation of the community not lean towards a conclusion of increasing centralization?
And most people are never going to buy physical gold because they have to worry about the technical side of securing their own funds.
Know what? Bitcoin/Gold is not for these people respectively, and nobody ever claimed otherwise.
Well, I can assure you that in threads and forums other than this one that plenty of people have claimed Bitcoin is destined to replace traditional currencies worldwide. Though I do recognize that you made no such assertion here.
> And most people are never going to buy physical gold because they have to worry about the technical side of securing their own funds.
Plenty of people do trade/invest in gold through avenues other than direct physical ownership (ETFs, etc). At the moment it definitely at least "feels like" it's impossible to do that with respect to Bitcoin due to the security issues and general shadiness that seem to plague many Bitcoin-related companies. The supposed Bitcoin ETF that is forever just-around-the-corner could alleviate some of the concerns with respect to accounting issues and negating the "take-the-money-and-run" factor, but I'm not sure there would be reason to trust them to any greater degree with respect to cryptographic security of their holdings of any virtual currency.
Yes, and it also "feels like" it's impossible to use a chainsaw as a toothpick.
Maybe you should just refrain from doing that then?
Only because Bitcoin is a currency doesn't mean it will replace all existing currencies next year, be an amazing investment vehicle or fulfill any other of the wet dreams that people may have about it.
Like everything it is better for some purposes and worse for others. Stop blaming the chainsaw for not being a toothpick.
At the risk of pissing off numerous Bitcoin fanboys, I think Ripple has a greater chance of world domination than Bitcoin, despite their different purposes/design. Any currency that isn't linked to a power base, IMHO, has little chance for world domination. Then again, what do I know... IANAE (economist :).
The safety of your Bitcoin, on the other hand, depends on some level on your own technical expertise. As long as this is the case, owning Bitcoin will never be as safe as owning gold.
except lots and lots of bitcoin advocates.
It would have been true, too, if gold bars were what we were talking about when we talked about cash. BTC needs the convenience equivalent of keeping greenbacks in a wallet in your pocket. Probably a mobile app with a good UX would do it, maybe one built into the OS at a low level ala Apple Pay.
What problems would that be?
(US banking is technologically backwards even by the normal low standards of the banking industry, partly due to less aggressive pro-consumer regulatory coordination)
Ask a Russian if they're feeling good about the recent fluctuations in the value of the ruble. It's telling that some Russians consider Bitcoin to be more stable than their national currency!
Ask an Argentinian if they're happy with the currency controls their government has imposed on them.[1]:
Those are just two quick examples.[1] http://blogs.wsj.com/moneybeat/2014/06/25/bitbeat-why-bitcoi...
this is all I could find from Twitter search: does the timing match up at all?
11:48 AM <jecar> protip 11:48 AM <jecar> and exchange is getting hacked now 11:48 AM <jecar> GOXXED 11:49 AM <jecar> an exchange 11:49 AM <heaven> what 11:49 AM <jecar> guess which one im goxxing 11:49 AM <jecar> thats why prices are falling 11:49 AM → dzan joined ⇐ mpm quit 11:50 AM <Fate> you sound like shovel 11:50 AM <Fate> hi shovel
edit: quite possibly this is a false rumor being spread by malicious party to sink bitcoin for their profit, now the title and the tone makes sense to me, as well as lack of any news about this from bitstamp
edit2: checked r/Bitcoin seems convincingly legit but still nothing official from bitstamp, might be good idea for people to use better exchanges like Kraken anyways, those guys are cool
Bitstamp Service Temporarily Suspended
We have reason to believe that one of Bitstamp’s operational wallets was compromised on January 4th, 2015.
As a security precaution against compromises Bitstamp only maintains a small fraction of customer bitcoins in online systems. Bitstamp maintains more than enough offline reserves to cover the compromised bitcoins.
IN THE MEANTIME, PLEASE DO NOT MAKE DEPOSITS TO PREVIOUSLY ISSUED BITCOIN DEPOSIT ADDRESSES. THEY CANNOT BE HONORED!
Customer deposits made prior to January 5th, 2015 9:00 UTC are fully covered by Bitstamp’s reserves. Deposits made to newly issued addresses provided after January 5th, 2015 9:00 UTC can be honored.
Bitstamp takes our security and soundness very seriously. In an excess of caution, we are suspending service as we continue to investigate. We will return to service and amend our security measures as appropriate.
Bitstamp Team
https://twitter.com/nejc_kodric/status/552091195795845120
https://twitter.com/nejc_kodric/status/552090819659071488
Shouldn't deposits go directly to cold storage addresses for exactly this reason, and in case someone makes a large deposit that exceeds their desired hot/cold wallet ratio?
The bookkeeping system can generate an unlimited number of addresses from the public "seed" that corresponds to the private keys that will eventually be generated using the private key seed stored in the cold wallet.
However, I didn't consider that the hot wallet needs to be replenished as people withdrawal, which would require a steady flow of bitcoins from cold to hot storage. I think it would make sense to have a "warm" wallet for all deposits, then immediately send deposits to hot or cold wallets depending on withdrawal demand.
I posted a link to http://bitshares.org earlier but now realise that there isn't that much information immediately obvious there on how the decentralised BitShares exchange works.
This episode from BitShares.tv provides a bit more information than the homepage on the main website:
https://www.youtube.com/watch?v=TtCVRIwcBYU&index=1&list=PLj...
Check it out if you're looking for a solution that avoids the risks associated with deposting to a centralized exchange such as Mt. Gox or Bitstamp.
I read this as wallet file(s) having been corrupted. The way to avoid this is to use deterministic[1] wallets
However...
> We have reason to believe that one of Bitstamp’s operational wallets was compromised on January 4th, 2015.
makes it sound like one would be wise to short sell btc immediately.
[1] https://github.com/bitcoin/bips/blob/master/bip-0032.mediawi...
Every time I try to touch bitcoin I lose money before I even buy them. And when the price starts dropping all the exchanges become a bit shady.
That's not how you do crisis PR. In this situation, a company has to overcommunicate.
Their CEO should have called a press conference for noon in London. All the financial press would show up. They should be announcing "We've been attacked. All customer funds should be intact, but we're shutting down temporarily for a snap audit. We've brought in outside auditors. We've notified the Metropolitan Police (Scotland Yard). Here are their representatives and you can question them. We will have another press conference in 24 hours".
Now people will be asking hard questions, such as "Is Bitstamp really in London or are they really in Slovenia", and "Why is the CEO on a plane for Vegas?" (Going to CES, yes, but in this situation, he needs to get back to the office.)
PS: There is no current Concorde service.
Feels a lot safer having it all in there!