Bubble Chronicles: Drug Site Silk Road Wiped Out By Bitcoin Glitch

  Update: Feb 16th, 2014

Bitcoin plunges 50% on Mt. Gox to hit USD230 as troubles continue

  So much for the store of value and "Gold 2.0": Bitcoin continues its troubles now related not only to the herd mentality chasing the bubbles, but to the fatal flaw in the core of it praised crypto-currency architecture. Meanwhile the real and one only Gold is breaking out with topping $1,322 intraday. Realisation that there is no substitutes for Gold will be another factor to ignite this new Gold Bull leg. China was first here again and bought record amount of 247 tons of Gold in January.

Bubble Chronicles: Bitcoin Crashed Down Fast to $500 at Mt. Gox and $102 at BTC-e today.

"After all the news about the Mt. Gox and Russia making any transactions with Bitcoin illegal, Bitcoin is crashing fast now with Mt. Gox  quoting below any other exchanges at $530 and Litecoin is down to $15.

  Bitcoin has printed low $500 on Mt Gox and fell as low as $102 at BTC-e today! So much for the crypto-currency reliability as exchange, the "value" of vapour currency can literally evaporate at any moment.  Time is for Gold to shine again, it does not need any substitutes and is breaking out to the upside today clearing $1270 level."

CNN:

Drug site Silk Road wiped out by Bitcoin glitch

By Jose Pagliery  @Jose_Pagliery February 14, 2014

NEW YORK (CNNMoney)

The revived online black market Silk Road says hackers took advantage of an ongoing Bitcoin glitch to steal $2.7 million from its customers.

The underground website's anonymous administrator told users Thursday evening that attackers had made off with all of the funds it held in escrow. Silk Road serves as a middleman between buyers and sellers, temporarily holding on to funds in its own accounts during a deal. Buyers put their money into Silk Road's accounts, and sellers withdraw it.

At the time of the attack, here were about 4,440 bitcoins in Silk Road's escrow account, according to computer security researcher Nicholas Weaver.

The news has shaken confidence in Bitcoin. Prices dropped sharply overnight, though they've since bounced back to about $660.

Related story: What is Bitcoin?

Silk Road can only be accessed on the deep Web using Tor, a special program that hides your physical location. The FBI shut down Silk Road and arrested its alleged founder in October, but shortly thereafter, tech-savvy outlaws started Silk Road 2.0 in its place.

It is primarily used to buy and sell drugs. Bitcoins are the only kind of currency accepted on the site, because they are traded electronically and are difficult to trace to individuals. But Bitcoin accounts also lack protections that most bank accounts have, including government-backed insurance.

That means the bitcoins stolen from the Silk Road users are gone forever.

 

A look at rebuilt drug bazaar Silk Road

The new site's administrator, a faceless persona known only as Defcon, posted a nerve-racking message Thursday night that began with, "I am sweating as I write this."

He said hackers took advantage of the same flaw in Bitcoin that knocked major exchanges Bitstamp and Mt.Gox offline over the past two weeks. That glitch allowed Silk Road hackers to repeatedly withdraw bitcoins from the site's accounts until they were empty.

In detailing the alleged hack, Defcon listed the online identities of the three supposed attackers and shared records of the transactions. And in an example of the kind of dark, dangerous world of illegal drug trade, Defcon called on the public to "stop at nothing to bring this person to your own definition of justice."

"I failed you as a leader and am completely devastated by today's discoveries," Defcon wrote, adding that the website should have followed the approach of other major Bitcoin exchanges and halted withdrawals due to the Bitcoin system flaw. Silk Road has since temporarily shut down.

Many have accused the site's administrators of faking the hack and stealing the money themselves. But in a world where drugs are outright illegal -- and there's little to noregulation of Bitcoin transactions -- it's difficult to prove anything.

It's just his kind of bad news that smears Bitcoin's credibility and keeps the currency from going mainstream.

Computer developers around the world have been working on software updates that allow exchanges to make up for the security hole in Bitcoin. The largest exchange, the Slovenia-based Bitstamp, said it was implementing a fix as early as Friday. "