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Comment by jzwinck | Hacker News Reader

This has everything to do with Bitcoin. Yes, the attack vector is old and boring, but it's a proven one that has been used more or less the same way to hack multiple Bitcoin exchanges.

Bitcoin transactions are irreversible, so there is no way to get back stolen coins. And there is insufficient consensus to block them from being spent in future. These, combined with the magical pure-virtual, ethereal nature of Bitcoin, makes it an unprecedented target for thieves.

Maybe Bitcoin can yet be extricated from these issues, but the basic system Nakamoto gave us does not address the needs we so clearly have. Given the track record of so many exchanges and other services, we have a long, long way to go.

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> Bitcoin transactions are irreversible

So are cash transactions.

People need to think of bitcoins more like cash than like credit cards.

But if I get robbed, I can contact the police and there are consequences if the thieves are caught. If my car gets stolen I have insurance I can claim off. There's no such thing with Bitcoin.

Why not? As far as I know, the law will treat your bitcoins like any other property you own. It's not legal to steal them just because they're "bitcoins", nor are they inherently uninsurable.

Now, whether that's an effective deterrent and whether there's a realistic chance of catching the thieves is a big question, but there's nothing inherently different. It's not that hard to rob your house of cash and not get caught either. The main reason it doesn't happen is because the criminals who are good enough to do it have bigger fish to fry. If they found out that you had $100,000 under your mattress then there would be trouble.

Neither of those things are impossible to build around bitcoins. If you catch the thieves, you can probably get the bitcoins back. The currency used has nothing to do with whether it's possible to build insurance around it.

And I can become a prostitute.

If I get robbed/assaulted, I can contact my pimp and he can go with his gangsters and kill the offender.

> There's no such thing with Bitcoin.

This is a feature.

Most people who read HN probably would never keep more than a thousand bucks or so in cash. Once you get a bunch of it, cash starts to feel "unsafe" and you deposit it at the bank, whereupon it becomes an obligation, a sort of "virtual currency" if you will. This "virtual currency" has various ways of being transmitted, and each way is at least somewhat reversible.

What about Bitcoin? If I have a bunch of it, can I convert it to an obligation with a reputable counterparty? One who will not store it in a form which makes it so easy to get away with, once stolen?

We can treat it like cash, but then we must wonder what we are doing piling up cash in our exchanges. Conventional exchanges do not work like this at all--there might be a good reason for that.

You bring up a good point, in how most dollars are "virtual". And indeed, we have seen the same kind of "virtual" bitcoins, where exchanges traded bitcoins that didn't exist in the blockchain (Mt Gox did this for a while).

Again, this sort of "virtual" currency (more technically, M2 currency), is something that you can build on top of bitcoin, and something I don't think that the bitcoin protocol itself needs to build, since we already have it.

http://en.wikipedia.org/wiki/M2_%28economics%29#Empirical_me...

You shouldn't keep any third-party balance of bitcoin. You can do any transaction you want from your own wallet, so there's no point putting them in a "bank." Currently, exchanges require keeping a balance, but that's not a safe thing to do. Hopefully someone will make an exchange that makes sense.

It's more like gold than like cash.

And people generally do not do business in cash. In fact, business done by giving someone a suitcase full of bank notes are usually of questionable nature.

In the first world, yes, but this is common in countries with a less developed financial system.

In China, for example, bank transfers aren't great and it's pretty common to buy things like cars with cash. It's especially crazy in China since the largest banknote there is 100RMB, roughly equivalent to 16USD, but cars cost about twice as much as they cost in the US, so it requires a lot of cash.

It's not even clear what you're complaining about here. Exchanges get hacked because they suck. Banks don't affect the customer as often because they are old and already have been hacked many times before, and have all kinds of insurance and hand wavy ways to avoid liability when they actually get hacked.

It's as if you are discontent that you are now liable for walking across the road safely after being driven around by a private taxi all your life (if the taxi crashed, the company would not lose any reputation, it would be the driver's fault, despite the low wages paid to the driver, pushed to the limit time pressures on the drivers, the recent line of flawed cars they ordered and decided to keep to expenses, and you would die, and it would just be like any other day).

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