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Network Security

Behind the Million-Dollar Bitcoin Hack

Behind the Million-Dollar Bitcoin Hack
November 8, 2013 12:41PM

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Putting a wallet that size on the Internet is like dropping your own wallet in Times Square and thinking your money will be there when you return hours later. Someone with that much money in Bitcoins should take appropriate security precautions. But, yeah. Sorry bro. A fool and his Bitcoins are easily parted, said security expert Ken Pickering.

Neustar, Inc. (NYSE: NSR) is a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, information services, financial services, retail, media and advertising sectors. Neustar applies its advanced, secure technologies in location, identification, and evaluation to help its customers promote and protect their businesses. More information is available at www.neustar.biz.

Hackers swiped more than $1 million worth of Bitcoins from Inputs.io. The site owner, which goes by the public-facing name TradeFortress, waited weeks to tell its customers about the theft of 4,100 Bitcoins in two separate hack attacks.

Bitcoin is the network behind a new payment system that lets you use digital money. It is the first user-powered, decentralized, peer-to-peer payment network with no central authority or middlemen. From a user perspective, Bitcoin’s creators describe it as cash for the Internet.

In a message simply headlined, “:(,” the company said the hacks left Inputs.io unable to pay user balances. Apparently, the hacker broke into the hosting account through compromised e-mail accounts. The attacker was able to bypass 2FA due to a flaw on the server host side, according to the company.

“Database access was also obtained, however passwords are securely stored and are hashed on the client,” the company said. “Bitcoin backend code were transferred to 10;15Hd@mastersearching.com:mercedes49@69.85.88.31 (most likely another compromised server).”

Prepare to Get Robbed

We turned to Matthew Bergin, a senior security consultant at security firm CORE Security, to get his reaction to the theft. He told us, plain and simply, that this is what TradeFortress gets for storing Bitcoins on a system connected to the Internet.

“There are several other options for storing Bitcoins that are much safer,” he said. “That's a lesson learned the hard way, but at least it has been learned.”

Tommy Chin, a technical support engineer at CORE Security, told us Bitcoin transactions are irreversible by design. In other words, there are no 30-day return or exchange policies.

“This attracts some serious criminal talent,” he said. “If you use Bitcoins, be prepared to get robbed no matter how much security you implement. By design, this system gives smart people easy methods to take someone else's money.”

Trade Fortress isn’t taking it lightly. Consumers who store more than one Bitcoin are invited to send e-mails to the company with a Bitcoin address, preferably an offline, open source light or SPV wallet like Multibit or Electrum. That doesn’t do anything about the coins folks lost, but could secure coins in the digital bank.

“I know this doesn't mean much, but I'm sorry, and saying that I'm very sad that this happened is an understatement,” the company said.

The Wallet Metaphor

Ken Pickering, director of engineering at CORE Security, told us the anonymity of Bitcoins makes them about as traceable as cash by default, and therefore as easy to steal as cash.

“The wallet metaphor is an accurate one. If someone gains access to your physical wallet without your knowledge, they can do much of the same thing. Putting a wallet that size on the open Internet is like dropping your own wallet in the center of Times Square and thinking somehow all your money will be there when you return hours later,” Pickering said.

“Someone with that much money in Bitcoins should take appropriate security precautions. But, yeah. Sorry bro. A fool and his Bitcoins are easily parted,” he added.

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