Some biggest bitcoin hacks and thefts of all times

Home » Some biggest bitcoin hacks and thefts of all times

For your pleasure, entertainment, and hopefully some information, I present below the wall of shame, starting with a less obvious and perhaps incorrect choice for the repugnant honor of the biggest bitcoin hack and theft of all time.

Jed McCaleb, founder of Ripple (publicly announced he was to sell around one billion of them crashing the price to less than pennies) who then found Stellar (a Ripple like currency), created MT Gox to trade Magic the Gathering Cards sometime in 2010, but adapted the exchange for bitcoin trading and sold it to Mark Karpeles in March 2011.

The details of the sale are not fully known, except that McCaleb was entitled to audit MT Gox to ensure he receives part of the profits for six months or so after the sale.

This is probably the most defining event in bitcoin’s history for the digital currency was, for the first time, shown to be insecure and easily stolen. Coders and the general public dismissed the new currency as unworkable.

It is at this point, just six months after Nakamoto left (the bitcoin creator), where bitcoin stopped being primarily a technology and became more of an ideology. The focus shifted from cheaper, faster, to a metaphorical Trojan horse that somehow was to bring down governments and banks in a utopia where we all will live happily ever after.

When people found out bitcoin was somehow still around and not forgotten to a dusty archive page for there was still the technology aspect which offered cheap, fast, permissionless, trustless, programmable money, they flocked once more in early 2013, not least because a guy went around reddit giving away hundreds of thousands worth of bitcoin, amazing everyone. Euphoria, once more, was in the air, with price up and up every day.

As bitcoin reached gold parity with an all-time high of around $1,200, MT Gox, the biggest bitcoin exchange, announced bankruptcy.

MT Gox claimed at the time hackers had exploited a bug in bitcoin’s protocol called transaction malleability which allows coders to change transaction ids, making it possible to, in effect, double spend. An academic study found hackers had indeed stolen from MT Gox by exploiting transaction malleability, but only 2,000 bitcoins, an insignificant amount compared to the overall theft.

After more than a month and a half we still have no idea what happened at Bitfinex. They instructed a company no one heard of, Ledger Labs, to investigate, but although you’d think the company would shout from the rooftop that they are so awesome others entrust them with investigating one of the biggest theft in the world, their blog and twitter is very much silent which makes us wonder whether the company is a one-man show contracting out to very, very, busy big names.

Bitstamp gained goodwill by being the only alternative to MT Gox, increasing its market-share while Gox went under. Unlike the previous two, they list their personnel, but although they state they are “The First Nationally Licensed Bitcoin Exchange,” their page doesn’t provide much information, such as license numbers.

The anonymous Russian exchange makes you wonder whether it is more trustworthy than even regulated exchanges or whether they will run with your money in the next few seconds.
We can’t have a bitcoin biggest hacks list without some inclusion of drug markets. There have been many, with most taking the form of exist scams since operators are anonymous, therefore they don’t need bother with any made up hacking story.

Although we are talking about abstract numbers and entities with bitcoin, even after almost eight years, still being something very new, every theft has a human tragedy at the other end. Fathers losing all their savings, mothers left with no retirement, entrepreneurs sent to bankruptcy, young industrious men sent back to nothing. We can of course criticize them and repeat that this space remains incredibly high risk, you might and perhaps will lose everything, but mistakes are made, people naturally dream of a better, richer, future, while traders and some entrepreneurs have no choice.

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