Security through the greatest obscurity of all
February 2, 2019 4:58 PM   Subscribe

“Despite repeated and diligent searches, I have not been able to find [the passwords] written down anywhere.” These were the words of Jennifer Robertson, the widow of Gerry Cotten, the sole CEO of QuadrigaCX, a Canadian cryptocurrency exchange. Cotten had moved currency worth an estimated US$137 million into a "cold wallet", an encrypted wallet which was not part of the online exchange. Unfortunately, while on a trip to India in December, Cotten passed away. Yesterday, Quadriga filed for creditor protection, admitting those funds are likely not recoverable.

Over 100,000 customers have likely lost their funds, and some poured into Reddit's crypto channels to fume, complain, threaten and rage. One theory is that all this is some sort of bizarre exit scam for Cotten to abscond with the money while outside Canada. Unlikely, but it has happened before...
posted by The Pluto Gangsta (103 comments total) 17 users marked this as a favorite
 
Y'all cryptocurrency 'investors' are nuts...
posted by PhineasGage at 5:17 PM on February 2, 2019 [28 favorites]


The idea of having one cold wallet for $137 million strains credulity to be honest
posted by BungaDunga at 5:19 PM on February 2, 2019 [13 favorites]


Cryptocurrency "investing" seems to have an awful lot in common with Eve online.
posted by jenkinsEar at 5:20 PM on February 2, 2019 [61 favorites]


amateur hour
posted by oxidizer at 5:21 PM on February 2, 2019 [2 favorites]


assuming the story about "losing" the keys, this has to be among the highest value bus factors ever successfully demonstrated.
posted by BungaDunga at 5:24 PM on February 2, 2019 [21 favorites]


It's hilarious that people who've lost money in this are threatening to sue.

I mean, the whole idea of cryptocurrencies is to operate outside of government purview... and then they want government institutions to come to their aid. If you lie down with dogs you get up with fleas.
posted by sjswitzer at 5:29 PM on February 2, 2019 [137 favorites]


I have a very hard time believing the story as told is true. I mean it's possible, cryptocurrency businesses are not known for being run competently (or ethically). But this story is barely credible.

OTOH if it's Bitcoin that's missing, it's 100% traceable. The moment anyone uses any of these supposedly lost coins it'll light up like a Christmas tree. So I guess we sit and wait?
posted by Nelson at 5:36 PM on February 2, 2019 [1 favorite]


> The idea of having one cold wallet for $137 million strains credulity to be honest

the claim of a single cold wallet is almost certainly factually incorrect. much more likely is that the private keys to various blockchain accounts were encrypted to a single key/password.
posted by oxidizer at 5:44 PM on February 2, 2019 [3 favorites]


Craig Wright and Dave Kleiman are two people who have been suspected to be Satoshi Nakamoto, the unknown, mysterious creator of Bitcoin.

(Craig Wright has claimed that he is Satoshi).

They were partners and certainly they had been mining bitcoins since their inception. Relatives of Dave Kleiman sued Mr Wright after Kleiman died in 2013, claiming he stole billions of dollars of his bitcoins.

So I guess the moral is, estate planning is especially important and can be very tricky for owners of bitcoins.
posted by eye of newt at 5:49 PM on February 2, 2019 [3 favorites]


If it were my money, I'd much rather believe that I was swindled by a criminal mastermind than lost through mega-incompetence.
posted by meowzilla at 5:53 PM on February 2, 2019 [13 favorites]


Happily, it looks like someone has access to these ... arbitrary numbers that represent a speculative investment vehicle.

https://www.reddit.com/r/Buttcoin/comments/ami8e7/quadrigacx_continues_to_support_unlimited_comedy/
posted by sebastienbailard at 5:53 PM on February 2, 2019 [3 favorites]


OTOH if it's Bitcoin that's missing, it's 100% traceable. The moment anyone uses any of these supposedly lost coins it'll light up like a Christmas tree.

Which means that it's likely true that they're lost, as anyone with the technical knowhow to steal them would know that they're unusable.
posted by Tell Me No Lies at 6:00 PM on February 2, 2019 [2 favorites]


I am not a bad person at heart and where I fail at that I try to do better, but... HAHAHAHAHAHAHAHAHHAHAHAHA.
posted by Tell Me No Lies at 6:01 PM on February 2, 2019 [30 favorites]


I guess I shouldn't have invested my life savings in Dunning-Krugerrands.
posted by incster at 6:07 PM on February 2, 2019 [60 favorites]


I’m so confused about bitcoin “investing”. Isn’t it attempting to be a currency? Why would you invest money into that? Like, do people invest money into yuan? Is that a smart thing to do?
posted by gucci mane at 6:08 PM on February 2, 2019 [1 favorite]




Like, do people invest money into yuan? Is that a smart thing to do?

People do speculate on currency, but real currencies typically change value so slowly that speculation is done with highly leveraged derivatives instead of by directly buying and holding the currency. And no, currency speculation is not a smart thing to do either.
posted by Pyry at 6:10 PM on February 2, 2019 [11 favorites]


the claim of a single cold wallet is almost certainly factually incorrect. much more likely is that the private keys to various blockchain accounts were encrypted to a single key/password.
What’s the basis for “almost certainly”? This doesn’t exactly sound like a best-practices kind of business even by cryptocurrency standards.
posted by adamsc at 6:17 PM on February 2, 2019 [1 favorite]


So when people typically speculate on currency they’re actually using stocks or something and not the actual cash, and they’re talking about trading those stocks over to the other currency at a particular time and date, which may possibly end up being a better deal due to the possible change of the currency it’s going over to?
posted by gucci mane at 6:18 PM on February 2, 2019


derivatives aren't stocks but are financial instruments that can be used to bet against the values of other things changing. Leverage means you don't need to put up the entire value of the assets in question, but just a portion.

If USD rises by 0.00001 against the euro, to make any money you'd need to own a massive amount of USD. So people use derivatives to amplify the change by betting on the rise or fall.
posted by BungaDunga at 6:30 PM on February 2, 2019 [3 favorites]


As someone on twitter (I want to say 0xabadidea?) said (something like): Cryptocurrencies are discovering why we have regulated banks one reason at a time.
posted by Canageek at 6:33 PM on February 2, 2019 [71 favorites]


I’m so confused about bitcoin “investing”.

It's speculation, not investing. Investing is when you buy a productive asset that generates some return. E.g. you can buy shares of GE Corporation, and in return you get some share of GE's profits. (The present value of a share is, roughly, based on assumptions about the claim it gives you on future profits. In a rational world it would be the only thing that affects the price.)

When you buy something that does not generate a return, in the hope that the value of that thing will appreciate, that's speculation. Buying gold coins is the classic example.

We tend to use these terms interchangeably, but probably shouldn't. When I become God Emperor of the SEC, describing speculative vehicles as 'investments' will be punishable by Death By McDucking (that's when we throw you headfirst off a diving board into a swimming pool filled with bullion; it's how we'll close the market every day instead of ringing a bell).

Is that a smart thing to do?

No.

There are situations where buying currency as a hedge against fluctuations in buying power is a reasonable thing to do in the context of international commerce, but not for average people. For Joe Investor, it's a casino game.
posted by Kadin2048 at 6:37 PM on February 2, 2019 [32 favorites]


the problem with bitcoin is that 1) bitcoin fans don't trust modern financial institutions and b) modern financial institutions don't really trust bitcoin so being able to bet on Bitcoin without actually owning bitcoin is hard. There's been various aborted attempts to produce a Bitcoin ETF which would let you bet on the future value of a bitcoin but they're not here yet.
posted by BungaDunga at 6:37 PM on February 2, 2019 [2 favorites]


Top comment on that Reddit thread @sebastienbailard linked:

Guys, this is huge. If it is indeed true that Gerald Cotten is behind this, then this is definitive proof of life after death.

IMHO this goes well beyond the minor issue of the QuadrigaCX liquidation. Losing $200 million is meaningless, but knowing that there’s an afterlife and that the souls of the dead can indeed return and walk among us is the most important discovery of the past thousand years.


As ever where cryptocurrencies and the blockchain are concerned, I guess this tale just goes to show, once again, I wasn't seeing the big picture.
posted by bunbury at 6:38 PM on February 2, 2019 [8 favorites]


I mean, the whole idea of cryptocurrencies is to operate outside of government purview... and then they want government institutions to come to their aid. If you lie down with dogs you get up with fleas.

The story of cryptocurrency is a speed-run through all the reasons banks and financial regulations exist.
posted by Pope Guilty at 6:54 PM on February 2, 2019 [61 favorites]


I had a man on the phone at my Major Banking Corporation call center job who was screaming at me about foreign transaction fees, because he was bringing in bitcoin from Coinbase (I presume the FX fee is because bitcoin is a “currency other than USD”). I ended up filing an SAR on him because he had a lot of money coming in and out of this account in weird, drastically changing increments, most of which was coming from Coinbase. I’m talking thousands and tens of thousands of dollars. Besides the fact that this guy seemed like he was laundering money, how is it possible for somebody to be bringing in so much money from bitcoin? The entire thing seems like a scam, and the only people I’ve ever seen talk about “making money” from bitcoin are people in Reddit who talk about the currency as if they were in Glengarry Glen Ross (so a bunch of 22-year-olds that missed the Ron Paul bandwagon).
posted by gucci mane at 6:56 PM on February 2, 2019 [18 favorites]


I have never gotten into this, but based on the understanding I have had, I knew that if I did, I would never leave my (cough) assets with an exchange as opposed to in my own "wallet". So buying $500 of cryptocurrency became even more of a hypothetical to me, because of the extra steps I imagined being involved in truly owning (and understanding!) my own "wallet". (Yes, I'm lazy, but also not a gambler anyway, so the laziness just helped avoid the stupidity.)

My ultimate hope for crypto-currency is that much of it becomes dead money* because everybody eventually misplaces the touchy digital bits that their fortunes are based on--that would be fitting. And the remainder ends up with thieves who have no real good use for it because no one else is using it unless they're thieves and then you want to remain anonymous and etc.

* Not so long ago was the story of a man in Europe who figured he had a USB stick worth $100 million sitting somewhere in his local huge trash dump. Self-made men, indeed.
posted by sylvanshine at 7:00 PM on February 2, 2019 [10 favorites]


Part of the reason why Bitcoin spiked was that Coinbase gave most Americans a relatively easy way to buy Bitcoin. I had $20 worth, but lost access to my Coinbase account because I'd lost access to the phone number I had prudently used as my 2-factor auth, and during the spike Coinbase's consumer support was more or less entirely overwhelmed.
posted by BungaDunga at 7:03 PM on February 2, 2019 [2 favorites]


Did anyone check if he had the decryption key stuck up in the old “CIA spy kit”?
posted by inflatablekiwi at 7:06 PM on February 2, 2019 [9 favorites]


a bunch of 22-year-olds that missed the Ron Paul bandwagon

they should Google him
posted by thelonius at 7:11 PM on February 2, 2019 [11 favorites]


My ultimate hope for crypto-currency is that much of it becomes dead money* because everybody eventually misplaces the touchy digital bits that their fortunes are based on--that would be fitting.

I mean, isn't this an existential threat to all crypto systems? If there's only a finite amount of cryptocoins ever in existence, which can be lost irrevocably through carelessness, happenstance, and just suboptimal estate planning, those losses over time will make up a significant, and eventually controlling or overwhelming proportion of the universe of all cryptocoins. Imagine if all money in existence, for all human history, were limited to 30,000 gold gold bars minted on the day Julius Caesar died, what the fuck would we be dealing in today 2000 years later?

Yes, I get that 1 btc can be infinitely divided in a way that a gold bar cannot, but a system in which a substantial proportion of the value of the entire market is irrevocably lost, not even hoarded by the ultrarich in legacy investments but just out of use and circulation for forever due to math, is stupid. And has unintended consequences. Imagine "Player One", but there's an entire subculture devoted to recovering lost cryptokeys.
posted by T.D. Strange at 7:37 PM on February 2, 2019 [11 favorites]


The story of cryptocurrency is a speed-run through all the reasons banks and financial regulations exist.

Honestly I’m feeling this way about a lot of “new, but with tech!” stuff.
posted by corb at 7:42 PM on February 2, 2019 [22 favorites]


I like Matt Levine (Bloomberg columnist)'s take:

"I really just cannot stress enough that you almost never see big traditional banks announce “hey guys, little problem, we put all of our depositors’ money in a big box, but then we forgot where the box was, sorry about that, anyway we’re bankrupt now.” I mean there are frauds and thefts and trading errors and lots of other ways for banks to lose money and even go bankrupt, but the traditional financial system really does seem to have mostly solved the problem of forgetting where the money is. Crypto, not so much."


The rest of the column is great too - come for the bitcoin, stay for the discussion of Canadian pot stock tickers.
posted by true at 7:46 PM on February 2, 2019 [27 favorites]


When I become God Emperor of the SEC, describing speculative vehicles as 'investments' will be punishable by Death By McDucking (that's when we throw you headfirst off a diving board into a swimming pool filled with bullion; it's how we'll close the market every day instead of ringing a bell).

Thank you for that imagery. It will feature heavily in my future discussions with Bitcoin enthusiasts.
posted by Tell Me No Lies at 7:55 PM on February 2, 2019 [4 favorites]


I mean, isn't this an existential threat to all crypto systems? If there's only a finite amount of cryptocoins ever in existence,

There are still bitcoin being minted. There is a cap so eventually there will be a hard, specific number of bitcoin. Other cryptocurrencies are more inflationary though and don't have a cap.
posted by BungaDunga at 7:57 PM on February 2, 2019


Imagine if all money in existence, for all human history, were limited to 30,000 gold gold bars minted on the day Julius Caesar died, what the fuck would we be dealing in today 2000 years later?

$8,400,699,422.80 USD today!
(That's if each bar weighed 20 lbs.)

In 1945, the national deficit was $23,703,518,035.46
So, hard to imagine, esp. when one could dilute the gold, counterfeit, or shave a coin.
posted by clavdivs at 8:25 PM on February 2, 2019


Always Be Crypting.

Threatening to sue is the fallback position for exactly the sort of person who would dump a bunch of money into a cryptocurrency.
posted by maxwelton at 8:41 PM on February 2, 2019 [2 favorites]


If there's only a finite amount of cryptocoins ever in existence, which can be lost irrevocably through carelessness, happenstance, and just suboptimal estate planning, those losses over time will make up a significant, and eventually controlling or overwhelming proportion of the universe of all cryptocoins.

The fact that a bitcoin is a number and not a brick of gold works to its advantage here.

You see, there's an infinite amount of cryptocoins in existence. There always have been.

It's only for simplicity sake that people talk about Bitcoin in terms of bitcoins. People can and do trade bitcents (1/100 of a bitcoin), millibits (1/1000 of a bitcoin), and microbits (1/1000000). Much smaller denominations (the satoshi and the microsatoshi) are already supported.

So losing all the bitcoins in the world save one will wreak havoc on the exchange rate, but in terms of the amount of currency available for use everyone can just switch to microsatoshi and continue life as normal. And when everything gets lost but one microsatoshi you can easily extend the system to smaller denominations and continue on again.
posted by Tell Me No Lies at 8:43 PM on February 2, 2019 [5 favorites]


Cryptocurrency failings are bleakly hilarious to my simple mind - A local crypto outfit here Cryptopia has just been hacked, no one knows the amounts stolen but it's upwards of NZ$20M.

I cant find the link now but earlier read that many Cryptopia transactions were outside the blockchain - one imagines sheaves of paperwork....with a very nice webpage. It all just sounds like any other sophisticated fraud. Blockchain sound like a good idea but not for money IMO.
posted by unearthed at 9:13 PM on February 2, 2019 [1 favorite]


Is Coinbase customer service working yet? They gave me $10 for signing up (worth a good $76 now) but have the changed email addresses during the fracas. Still fun to lookup where that $10 stands now. Silly lost key incompetence if this is true. You encrypt that thing with a "needs 2 out of 3 or 3 out of 5 or 15 out of 20" key.
posted by zengargoyle at 9:53 PM on February 2, 2019


So losing all the bitcoins in the world save one will wreak havoc on the exchange rate, but in terms of the amount of currency available for use everyone can just switch to microsatoshi and continue life as normal. And when everything gets lost but one microsatoshi you can easily extend the system to smaller denominations and continue on again.

Ok... but that ignores the unintended consequences point, in a world where all but one BTC is lost, and that last BTC is infinitely subdivided to fund all human transcriptions...the motivation to recover even one other lost BTC, becomes the sum total of all human activity. This is a fucking insane basis for an economic system, where arbitrary percentages of the economy equating to trillions of dollars of real world wealth...are tied to some old dude remembering to write down the passphrase before he dies.
posted by T.D. Strange at 10:08 PM on February 2, 2019 [19 favorites]


And imagine a full scale system based on BTC... any secured transaction cannot be denominated in a currency the creditor has no assurance the debtor has full control over.

I enjoy libertarians and morons learning why regulations exist as much as the next person, but suffering through harms that we know the solutions to already is idiotic.
posted by T.D. Strange at 10:12 PM on February 2, 2019 [7 favorites]


Obligatory plug for onepassword or lastpass so when you kick the bucket your family can save themselves a lot of headaches.
posted by simra at 10:22 PM on February 2, 2019 [10 favorites]


You could also just pay the fees to get paper statements for your various accounts sent to you. Or better yet, demand that that banks and other institutions cut the crap with those kinds of fees and arrange for the junk mailers they sell your contact information to, to sponsor the statements or something like that and thereby bundle the advertisements and statements together.

I guess it's a bit orthogonal, since paper statements getting sent around are more like printed status pages letting the survivors know an account exists and what's going on with it, whereas a password vault or service facilitates control of the account, but the former seems more important to me as far as account management thanatology goes. And at this point, in my country at least, I still prefer the postal service and its legal safeguards as the single point of failure rather the password vault/service vendor plus whatever contingency plan to get the current master password or other authentication method into your heirs' hands.
posted by XMLicious at 11:19 PM on February 2, 2019 [1 favorite]


my family will be fine because i'm not stupid enough to use bitcoin in the first place
posted by poffin boffin at 11:20 PM on February 2, 2019 [20 favorites]


I saw this news a couple of days ago via this article, which includes
There is a possibility that some of Quadriga’s funds are being stored on other exchanges, though this has not been confirmed, she said.
which I interpret as "the blockchain shows some 'into cold storage' transactions were to addresses that have actually seen ongoing activity". This increases my estimation of the odds that he's not actually dead and this is an exit scam.
posted by russm at 11:51 PM on February 2, 2019 [3 favorites]


Imagine if all money in existence, for all human history, were limited to 30,000 gold gold bars minted on the day Julius Caesar died, what the fuck would we be dealing in today 2000 years later?


GoldXT, Gold Classic, and then Gold Cash, Gold Gold, along with forks like Super Gold, Gold Platinum, Gold Cash Plus, Gold Silver, Gold Uranium, and Gold God.

Which, while blitheringly stupid, are still less stupid than you'd think, considering the original gold bar protocol only supports a transaction processing capacity maximum estimated to be between 3.3 and 7 transactions per second.

And then some ninny would amble up and invent some kind of gold bar based on smart contracts that would magically delete itself, lock you out of your vault, or teleport itself from your vault to their vault if the contract was erroneously or maliciously written.
posted by sebastienbailard at 11:52 PM on February 2, 2019 [2 favorites]


People do speculate on currency, but real currencies typically change value so slowly that speculation is done with highly leveraged derivatives instead of by directly buying and holding the currency.

I was in Turkey in the 90s, when inflation on the lira was about 100%. Each Thursday everyone would get paid and then race to the bank to buy DM. They definitely considered that investing.
posted by pompomtom at 12:06 AM on February 3, 2019 [1 favorite]


Ah, yes Bitcoin, the "what if Engineer's disease?" of money.
posted by axiom at 12:21 AM on February 3, 2019 [16 favorites]


It's all perfect nonsense unless you think antisocial behavior is valorous. So if people who played that game got f'ed, well... a lot of people have student loans. I hope you learned something.
posted by sjswitzer at 12:30 AM on February 3, 2019 [1 favorite]




Wow that Reddit post is fantastic.
posted by Literaryhero at 2:06 AM on February 3, 2019 [1 favorite]


Maybe I misunderstand but why can’t the lost bitcoins be still functionally considered a method of abstract exchange? I remember a potentially apocryphal story about goodies being lost so thoroughly at sea that, even given everyone knew roughly where the precious box was, access was functionally impossible—so exchange of the item switched to exchange of the concept of the item. The literal blockchain, if truely lost, still represents the money it does, right?
I recognize accepting this would create a weird dual layer bitcoin economy, but that’s essentially what it is anyway. Adding another layer of abstraction seems just as comprehensible as any other economy based on exchange rather than literal blocks of gold or whatever.
posted by zinful at 2:09 AM on February 3, 2019 [7 favorites]


that reddit post is hilarious and i hope the tattoo is on his butt and says "haha i made you touch my butt and also i spent your fake money on coke"
posted by poffin boffin at 3:10 AM on February 3, 2019 [18 favorites]


The literal blockchain, if truely lost, still represents the money it does, right? ... Adding another layer of abstraction seems just as comprehensible as any other economy based on exchange rather than literal blocks of gold or whatever.

Yeah, well, it depends on whether a public authority would stand behind it or not. Why would any public authority do that? (Leaving aside whether they stand with the people or the establishment, unless the establishment are well into the Coin and I suspect not).
posted by sjswitzer at 3:44 AM on February 3, 2019


It's all well and good having a world where everyone has adjusted to there being only a limited number of the bitcoins in active use and the rest lost. How does your economy function when everyone is used to dealing in microsatoshi and some guy discovers his great uncles key to a wallet with 10 bitcoins on it. Add to that that the finding of the keys to lost wallets becomes unpredictable. How does it work as a store of value then?
posted by DoveBrown at 4:14 AM on February 3, 2019 [6 favorites]


I admit I am not completely up to date on how this scheme is supposed to work when there's no money to be made in mining. How does the transaction processing happen then? I guess people with a stake in the system will pay for transactions in some way (like we do in other systems)? Presumably that will not require exponential resources? I mean, seriously, I do not know. Someone please explain.
posted by sjswitzer at 4:26 AM on February 3, 2019 [1 favorite]


that reddit post is hilarious and i hope the tattoo is on his butt and says "haha i made you touch my butt and also i spent your fake money on coke"
So, tattooed people of Metafilter: ummm, how accurately could a tattoist copy a QR code - say, like this - onto someones arse? And would it still be readable after, oh let's say 40 years?

Asking a purely hypothetical question for a friend…
posted by Pinback at 4:29 AM on February 3, 2019 [3 favorites]


If you are planning on getting a tattoo, allow me to recommend a qr code generating site, along with these other very legal and very cool resources.
posted by sebastienbailard at 4:40 AM on February 3, 2019 [3 favorites]


I remember a potentially apocryphal story about goodies being lost so thoroughly at sea that, even given everyone knew roughly where the precious box was, access was functionally impossible—so exchange of the item switched to exchange of the concept of the item.

Rai stones.
posted by zamboni at 4:59 AM on February 3, 2019 [9 favorites]


Has she checked under the birdbath?
posted by clawsoon at 5:32 AM on February 3, 2019 [2 favorites]


$137 million divided by one hundred thousand investors is $1,370 apiece. Anybody rendered destitute by losing a grand should not have been playing with currency speculation (of any kind) to begin with.

What's more likely to have happened (working from the long tail principle) is a few whales are genuinely fucked and they're the ones lawyering up. The significant majority are out a hundred bucks or less and have plenty of reason to be angry but are unlikely to be put out.
posted by at by at 5:36 AM on February 3, 2019 [1 favorite]


And no, currency speculation is not a smart thing to do either.

No argument. Story used to be that John Maynard Keynes made a tidy profit in the trade between the wars. On closer inspection, apparently not so much.
posted by BWA at 5:45 AM on February 3, 2019 [1 favorite]


zinful: I remember a potentially apocryphal story about goodies being lost so thoroughly at sea that, even given everyone knew roughly where the precious box was, access was functionally impossible—so exchange of the item switched to exchange of the concept of the item.

That reminds me tangentially of how Graeber describes the European economy working during the time that most gold coins had been melted down for church decorations. On the plus side: It was a lot harder to pay mercenaries, since heavily armed, highly mobile men with no loyalties weren't exactly a good fit for carefully tracked relationships of credit and trust. They wanted gold. On the minus side: It was a lot harder to pay an army. IIRC, Charles the Hammer had to strip down a cathedral in order to be able to properly train the army that beat the Umayyads at Tours.
posted by clawsoon at 6:11 AM on February 3, 2019 [5 favorites]


Ok... but that ignores the unintended consequences point, in a world where all but one BTC is lost, and that last BTC is infinitely subdivided to fund all human transcriptions...the motivation to recover even one other lost BTC, becomes the sum total of all human activity. This is a fucking insane basis for an economic system, where arbitrary percentages of the economy equating to trillions of dollars of real world wealth...are tied to some old dude remembering to write down the passphrase before he dies.

Oh yes, I was just talking about why the Bitcoin infrastructure can function indefinitely despite coins disappearing. The dystopic future where a Bitcoin style currency dominates the world money supply is a whole different issue.
posted by Tell Me No Lies at 6:19 AM on February 3, 2019 [1 favorite]


>> [Proposed changes to Bitcoin infrastructure]
>
> Yeah, well, it depends on whether a public authority would stand
> behind it or not.


A public authority standing behind Bitcoin would make it a fiat currency. The only way changes to Bitcoin (such as a new market consisting of lost bitcoins) can work is if someone throws the new infrastructure out there and people organically start using it.
posted by Tell Me No Lies at 6:28 AM on February 3, 2019 [2 favorites]


that last BTC is infinitely subdivided to fund all human transcriptions...the motivation to recover even one other lost BTC, becomes the sum total of all human activity.

BTW, I’m not sure this is the way things would turn out. Someone might get rich, but it would also totally devalue the existing Bitcoin. I think that having that hanging over the currency would cause it to be abandoned before the worst happened.
posted by Tell Me No Lies at 6:39 AM on February 3, 2019


By the by, when it comes to lawsuits I have a recurring fantasy that the courts rule that a competing currency that is unrecognized by the State has an effective exchange rate of $0.00 and thus there are no damages to be recovered.

Unfortunately it’s probably going to end up in more of a Beanie Baby situation, where the courts recognize a fair market value no matter how stupid it is.
posted by Tell Me No Lies at 6:50 AM on February 3, 2019 [3 favorites]


The Bottle Imp but with Bitcoin
posted by athenasbanquet at 7:02 AM on February 3, 2019 [3 favorites]


I've always thought of Bitcoins as being basically the same idea as Ithaca Hours, but that somehow appealed more to a certain type of person because of the *WOW Crypto!* factor. They'll be cool for a little while, but then people will lose interest.

People still don't seem to understand that the development of workable quantum computing (10 years off? 5?) will make all applications of the blockchain idea entirely obsolete.
posted by heatherlogan at 7:30 AM on February 3, 2019 [2 favorites]


I read Reddit so you don't have to. Boy there's lots of theories, like the CEO is not a real person who ever existed in the first place. Which I dunno, plausible but easily verified. A Canadian dying in India sure complicates matters. Also the observation that if he died of Crohn's Disease as reported, it wasn't like getting hit by a bus. You know you have a serious health problem that could be fatal, you would make plans. And he did make plans, including changing his will two weeks before he died and leaving $100,000 to take care of his chihuahuas.

Also lots of hopeful posts about how the cold storage wasn't really where Quadriga kept the money, it's sitting in other exchanges and could be accessible. Some amateur sleuthing on what the IDs of the cold wallets might be, plus some claims maybe money is still flowing out of them. Lots of people crying how sick they personally feel because they lost money. Warnings that phishers are targeting Quadriga victims.

It's fucking chaos, is what I'm trying to say. Who would have guessed that handing $MMM to an unregulated financial services firm run (apparently) by one guy would go so badly? Anyway, lots of human tragedy and comedy on display right now if you have the stomach for it.
posted by Nelson at 8:10 AM on February 3, 2019 [2 favorites]


Money is turning out to be one of those things that seem to work only because nobody fully understands them.
posted by jamjam at 8:27 AM on February 3, 2019 [2 favorites]


Crypto still always strikes me as a solution in search of a problem.
posted by freakazoid at 9:21 AM on February 3, 2019 [2 favorites]


I've always thought of Bitcoins as being basically the same idea as Ithaca Hours

I thought the point of Ithaca Hours and other local currencies was to be, well... local. To have the currency more accurately reflect the situation in the local community.

Of course Bitcoin is really highlighting issues in the crypto community, so maybe nevermind.
posted by Tell Me No Lies at 10:45 AM on February 3, 2019 [2 favorites]


changing his will two weeks before he died and leaving $100,000 to take care of his chihuahuas.

Unexpected face turn!!!!
posted by praemunire at 11:16 AM on February 3, 2019 [2 favorites]


Also, I work with/on behalf of victims of various kind of scams on a regular basis. Sometimes, depending on the circumstances, you struggle with your sympathy. How could anyone be that dumb/lazy/greedy, your brain yells at you, why are you wasting your time on these fools when there are plenty of people screwed over by the modern economy who didn't behave like Fredo Corleone. But usually you get back on track. Anyone can be fooled if the trickster puts enough resources into it. You only need to have one bad day. The human capacity for trust is essential but entails the human capacity to be defrauded. The cost of a little impulsive behavior shouldn't be your life savings. Etc.

There is no one I feel less sympathy for than the cryptocurrency crowd, and that includes the funds back in the day that bought into fraudulent RMBS.
posted by praemunire at 11:25 AM on February 3, 2019 [2 favorites]


Craig Wright and Dave Kleiman are two people who have been suspected to be Satoshi Nakamoto, the unknown, mysterious creator of Bitcoin.

There is not a single credible person who believes Craig Wright is Satoshi. He's a fraud that claims to be Satoshi with a wink wink nudge nudge, but also, in a world where cryptographic proof is paramount, has given no provable way to verify himself as Satoshi.
posted by ymgve at 12:42 PM on February 3, 2019 [5 favorites]


Yeah, Craig Wright isn't Satoshi. He could prove it by sending transactions from bitcoin addresses known to be associated with Satoshi and the origin blocks of bitcoin. (And if he is Satoshi the timeline we're living in is even dumber than I thought.)

If Satoshi is/was a real individual human being, he's either dead or in such deep hiding he might as well be dead. The bitcoin addresses associated with the original bitcoin chain's beginning blocks are now worth theoretical millions and billions. People have been watching these addresses for years and years now and pretty much since the beginning because of how much they're worth and specifically because any transactions from those known addresses would be huge news.

It's a known thing that there is a huge iceberg of bitcoin "missing" and locked up in those addresses from mining the origin blocks of the chain, back when the difficulty to reward ratio was much higher.

Because of this there's a bunch of big time criminals and black suited government TLA types and even bankers that would love to get their hands on the keys to those coins.

You may logically assume that there have been many, many people with deep resources looking for him or trying to figure out exactly who he is or if he's even just one person and not secretly a team for some time now.

You may even logically assume that it's likely that amateurs and keyboard warriors have used bitcoin raised capital to throw not insignificant amounts of real foldable money to do their own sleuthing or have hired PIs to try to find Satoshi or anything they can about him.

And not just to steal the coins themselves. With that many coins you could manipulate the hell out of the market and do some pretty terrible things. You'd have split coins on every bitcoin fork that exists after the initial classic origin chain and could crash and short all of them.
posted by loquacious at 1:14 PM on February 3, 2019 [3 favorites]


People still don't seem to understand that the development of workable quantum computing (10 years off? 5?) will make all applications of the blockchain idea entirely obsolete.

quantum proof signature algorithms are a thing you know.
posted by oxidizer at 2:55 PM on February 3, 2019


How could anyone be that dumb/lazy/greedy, your brain yells at you....Anyone can be fooled if the trickster puts enough resources into it.

I remember a long article, maybe in NYT, about a Harvard psychiatrist who got taken in by 419 fraud for 6 figures. And yeah, you wonder, how could you have enough wherewithal to have advanced degrees and a career like that, and not realize that you're encountering one of the oldest cons out there? But it happens.
posted by thelonius at 2:55 PM on February 3, 2019 [1 favorite]


The bitcoin addresses associated with the original bitcoin chain's beginning blocks are now worth theoretical millions and billions

Oh how nice it is to laugh

They are absolutely not worth billions. They’re worth whatever someone will pay for them, and the trading volume and liquidity of the bitcoin market suggest that you couldn’t sell very many of them before everything seized up.

It does seem a lot like hundreds of millions of dollars was extracted from lowend investors and now it’s mostly gone and it’s just a game of musical chairs with one chair and looots of techbros. (Or something, I’m tired.)
posted by schadenfrau at 3:11 PM on February 3, 2019 [3 favorites]


There is not a single credible person who believes Craig Wright is Satoshi. He's a fraud that claims to be Satoshi with a wink wink nudge nudge, but also, in a world where cryptographic proof is paramount, has given no provable way to verify himself as Satoshi.

Unless, of course, he is Satoshi, and being aware that sooner or later, the bad guys will cotton onto that and go after him and his family for all those bitcoins, he decided to preempt that by playing at being an inept attention-seeker claiming to be Satoshi, and producing hand-waving “proofs” that conspicuously fall short. Then, every time some goon cottons onto who he is, it'll be obvious that there's no way this shmuck is Satoshi.
posted by acb at 3:46 PM on February 3, 2019 [2 favorites]


It's a known thing that there is a huge iceberg of bitcoin "missing" and locked up in those addresses from mining the origin blocks of the chain, back when the difficulty to reward ratio was much higher.

I've seen the claim that the Satoshi bitcoins now constitute a canary for quantum computing. If they start moving, it means that someone has a working quantum computer capable of breaking cryptography, and that most encryption is, to all intents and purposes, dead.
posted by acb at 3:49 PM on February 3, 2019 [5 favorites]


So losing all the bitcoins in the world save one will wreak havoc on the exchange rate, but in terms of the amount of currency available for use everyone can just switch to microsatoshi and continue life as normal. And when everything gets lost but one microsatoshi you can easily extend the system to smaller denominations and continue on again.
Until some kid finds gr'gr'granther's wallet that has 100 bitcoins in it and suddenly owns the universe. This cannot happen with traditional currencies (you know, the ones that don't get lost all the time and are backed by the full faith and credit of SOMEONE other than crypto dudebros).
posted by Gilgamesh's Chauffeur at 4:19 PM on February 3, 2019 [4 favorites]


quantum proof signature algorithms are a thing you know

oxidizer, what do you have in mind? I would think that symmetric-key algorithms would not work for blockchain, because the whole basis of it is that it's verifiable by anyone, not just the other party in your two-party encrypted communication. (Likewise for actual quantum cryptography, which is basically one-time pad construction using entangled photon pairs, again kept secret by the two parties who want to communicate securely.)
posted by heatherlogan at 4:27 PM on February 3, 2019


I've seen the claim that the Satoshi bitcoins now constitute a canary for quantum computing. If they start moving, it means that someone has a working quantum computer capable of breaking cryptography, and that most encryption is, to all intents and purposes, dead.

Considering that the U.K. may or may not have allowed the destruction of Coventry rather than reveal their code-breaking capabilities, I suspect that's going to be a very durable canary.
posted by heatherlogan at 4:34 PM on February 3, 2019 [2 favorites]


Pinback: "So, tattooed people of Metafilter: ummm, how accurately could a tattoist copy a QR code - say, like this - onto someones arse? And would it still be readable after, oh let's say 40 years?"

They can do text that is readable decades later; seems like a QR Code would be simple.
posted by Mitheral at 5:55 PM on February 3, 2019 [1 favorite]


Unless, of course, he is Satoshi, and being aware that sooner or later, the bad guys will cotton onto that and go after him and his family for all those bitcoins, he decided to preempt that by playing at being an inept attention-seeker claiming to be Satoshi, and producing hand-waving “proofs” that conspicuously fall short. Then, every time some goon cottons onto who he is, it'll be obvious that there's no way this shmuck is Satoshi

I've seen this episode. He gets tortured to death by some goons too clueless to realize he's a fake. (which is flipped in a last scene reveal that he actually was the real deal)
posted by Tell Me No Lies at 7:40 PM on February 3, 2019 [3 favorites]


I understand very little of economics. I understand monetary theory least of all. Therefore, I'm perfectly willing to withhold judgment on cryptocurrency for now. Maybe it'll work! Maybe we just need to try a bunch of different things to find the most viable version of the idea! If I pretended to know the answers to these questions, I'd by lying.

Here's the thing, though: I'm very much unconvinced that most crypto enthusiasts understand this stuff, either.

It's one of those subjects that attracts techno-libertarian bros who think that spending all day on Reddit makes them experts on a topic. Who mistake bold, counterintuitive, Gladwell-esque posturing for insight.

And, like I said: with so much activity in the crypto world, some of these folks are bound to be right about something. But the odds of any given crypto-bro knowing what they're talking about are slim enough that I'll be keeping my weath in good old US dollars, thanks.
posted by escape from the potato planet at 4:31 AM on February 4, 2019


I'm very much unconvinced that most crypto enthusiasts understand this stuff, either.

Whoever coined the term Dunning-Krugerrands was a genius.
posted by Tell Me No Lies at 6:18 AM on February 4, 2019 [7 favorites]


> They are absolutely not worth billions. They’re worth whatever someone will pay for them, and the trading volume and liquidity of the bitcoin market suggest that you couldn’t sell very many of them before everything seized up.

That's what any currency has in common with tulips and Beanie Babies: Their value is in what two parties mutually agree that they're worth. When that value is logged or published, it can inform subsequent transactions. Speculators place bets anticipating what bitcoins or some other currency will be worth, and their activities can also inform actual transactions, which is part of why currency speculation is a rough game.

One problem with bitcoin is that there are more currency trades than there are real-world transactions, so its relative value can be controlled by the speculators without being moderated by the greater scope of daily transactions. As such bitcoin can be gamed pretty easily (relative to the US Dollar or the Euro) in part because it doesn't have a real-world market to stabilize its fluctuations. Currency speculators can try manipulating the market to devalue or inflate the Euro, but they can't really move it much on their own because of the millions of people making billions of transactions in Euros every day to purchase goods and services which have their own markets setting their own prices based on the Euro or other hard currency.

Which is a roundabout way of saying that if Satoshi's wallet ever opens up, the bitcoin market will probably do the opposite of freezing. I'm guessing two things would happen: First, any introduction of a significant quantity of bitcoins would mean BTC takes a major inflationary hit (for the same reason printing more fiat currency would), and second, there would be a bidder's frenzy for the oldest bitcoins so that fanboys have bragging rights over owning the most highly collectible bytestrings, which in turn would remove a few of those bitcoins from circulation. After that, who fucking knows, because BTC trading has rarely made a goddamned lick of sense.
posted by at by at 7:14 AM on February 4, 2019 [2 favorites]


QuadrigaCX Chain Analysis Report (Pt. 1): Bitcoin Wallets. "It appears that there are no identifiable cold wallet reserves for QuadrigaCX. It appears that QuadrigaCX was using deposits from their customers to pay other customers once they requested their withdrawal. ..." Very detailed analysis of transactions on the chain that I didn't even try to follow.
posted by Nelson at 10:11 AM on February 4, 2019 [5 favorites]


I meant to say earlier that the very plausible option was always that the funds were emptied long ago by a hack or embezzlement and "oops we lost the keys to the cold wallets that definitely exist" was a story meant to cover that up.
posted by BungaDunga at 10:20 AM on February 4, 2019 [2 favorites]


I'm pretty sure that all Bitcoin 'banks' are either Ponzi schemes or will be.
posted by tavella at 11:56 AM on February 4, 2019 [4 favorites]


One of the weirder things about bitcoin exchanges is that it's not that hard to publicly prove how much bitcoin you have control over, so any reputable exchange should be able to do it periodically. Any exchange that hasn't done that is either 1) not competent or 2) a Ponzi scheme, either by accident or on purpose.
posted by BungaDunga at 1:45 PM on February 4, 2019 [1 favorite]


QuadrigaCX Chain Analysis Report (Pt. 1): Bitcoin Wallets.

Hmm. This link is now showing a page saying "This page is unavailable." and titled "Suspended - Medium". This is different from their usual 404 page. Not sure if it was removed by the author or by Medium.
posted by mhum at 7:05 PM on February 4, 2019


To add another (red?) herring to this kettle of fish, it has transpired that QuadrigaCX's founder's widow owns $7.5 million of Nova Scotia real estate that was purchased in the past 2.5 years.
posted by heatherlogan at 7:08 PM on February 8, 2019 [4 favorites]


QuadrigaCX Lost Another $500K in Bitcoin By Mistake: EY Report
Canadian crypto exchange QuadrigaCX, which owes customers $250 million in CAD ($190 million U.S.) in cryptocurrencies and fiat, lost another $500,000 CAD by mistake last week.

In an initial report published Tuesday on Quadriga’s progress since it filed for creditor protection in late January, court-appointed monitor Ernst and Young (EY) said that the company accidentally moved more than 100 bitcoins into a cold storage wallet it cannot access.

According to the report:

> “On February 6, 2019, Quadriga inadvertently transferred 103 bitcoins valued at approximately $468,675 [CAD] to Quadriga cold wallets which the Company is currently unable to access. The Monitor is working with Management to retrieve this cryptocurrency from the various cold wallets, if possible.”
posted by sebastienbailard at 6:59 PM on February 12, 2019 [1 favorite]


I'm sorry sir, the dog ate my bitcoins.
posted by pompomtom at 8:04 PM on February 12, 2019 [3 favorites]


QuadrigaCX Lost Another $500K in Bitcoin By Mistake: EY Report

lol wut? They apparently transferred 103 BTC to the very same inaccessible cold wallets described in the article on *Feb. 6*, four whole days after this very FPP was posted.

If this isn't straight up fraud, what kind of Three Stooges operation are these guys running?

"Uh... hey. You remember how we accidentally lost like $100 million down a sinkhole?"
"Yeah, of course."
"Well, you're never gonna believe this but we've just lost another half mil..."
"Another sinkhole?"
"Same sinkhole."
posted by mhum at 10:30 PM on February 12, 2019 [7 favorites]


QuadrigaCX Lost Another $500K in Bitcoin By Mistake

Sure it did. This is sounding less like a mistake and more like a half-assed attempt at grabbing the money and running because the whole thing is a possibly-inadvertent Ponzi scheme. Consider:
Much of the $70 million in real money owed to creditors is in the form of bank drafts, which the company has failed to deposit in a financial institution because regular banks remain leery of dealing with unregulated cryptocurrency businesses.

Nine third-party payment processors that worked with Quadriga have been told that any funds belonging to the company, including bank drafts, must be delivered to the monitor.

According to Robertson, one of those processors has five bank drafts worth $25.2 million.

However, Ernst and Young confirmed it has yet to receive any funds from those businesses.

"It may be necessary for the applicants (QuadrigaCX) and monitor to return to the court for additional assistance in ... securing the return of funds from third party payment processors," the report says.

"The applicants and monitor are working with the issuing banks ... to determine the necessary documentation and/or endorsements required to facilitate the transfer and negotiation of the bank drafts for deposit into the disbursement account."
If you tell your investors you've converted their deposits into bitcoins, but the deposits are still sitting in bank draft form with your payment processors, how will you pay back out when the "value" of the supposedly-purchased bitcoins changes dramatically?
posted by heatherlogan at 7:59 AM on February 13, 2019 [2 favorites]


To add another (red?) herring to this kettle of fish, it has transpired that QuadrigaCX's founder's widow owns $7.5 million of Nova Scotia real estate that was purchased in the past 2.5 years.

I found the lede was buried here:
…an island in Mahone Bay the couple purchased in September 2017 from Fox News personality Tucker Carlson for $161,250 — well below the island's tax-assessed value of $349,400.

Carlson was identified on the deed as general manager of Island Limited Partnership, registered in Maine.
Also this is pretty incredible to see:

“Here’s an example of Quadriga’s bookkeeping. These are apparently bank drafts. According to Chiasson they are now, ‘Off the stove.’”.
posted by boost ventilator at 6:54 PM on February 17, 2019 [1 favorite]


Quadriga Crypto Mystery Deepens With ‘Cold Wallets’ Found Empty
It looks now like the storage Quadriga is known to have used -- dubbed cold wallets -- has been empty since April.
posted by RobotHero at 12:40 PM on March 2, 2019 [1 favorite]


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