Thursday, December 26, 2013

Three Steps to Steal Bitcoin

Bitcoin is the first peer-to-peer payment network and digital currency, which was introduced in 2009 by pseudonymous developer “Satoshi Nakamoto”. There’re three main ways including exchanges, mining and online services to get Bitcions.

Although with a very powerful encryption method such as encrypting your emails using the GNU Privacy Guard, it’s frequently revealed by the media that Bitcoins have been stolen. How does the digital theft work? As the owner of Bitcoins, the more details you know, the better you can protect your own property. Put simply, this stealing process includes the following steps: copying the keys, laundering money and changing money.

1.Copying the Keys

Bitcoin has a public ledger system which called the blockchain. It keeps track of an ever-expanding list of addresses and how many units of Bitcoin are at those addresses. By checking out the private cryptographic key, it confirms whether or not you’re the owner of Bitcoins. So, for thieves, it’s necessary to get the private keys.

They attacked online services which store the private keys for a mass of users and copied the database of private keys. Then they could control Bitcoins at these addresses under the circumstance of not moving them by the original owners.

2.Laundering Money

This is a key step to shifting Bitcoins from the original owners. Blockchain has a public record to which address the Bitcoins were transferred next, but for the moment, it’s not very useful for capturing the thieves, because Bitcoins is anonymous. With technological improvements, some clues the thieves left behind will be detected someday.

Laundering Bitcoin is done with “tumbler”, which randomly crisscross your Bitcoins with other users’ Bitcoins so that you get a clean address. Note that the whole process is operated as described below.

①The thief must transfer his stolen Bitcoins to a new address by the tumbler. He creates a new account firstly.
②The tumbler makes a note for him to transfer the same amount of Bitcoins from other users to the new address.
③There’s a clear path from the original owner’s address, so the tumbler doesn't make the transfer right away.
④Some time later, all his Bitcoins will transfer into his new address in the form of a small amount every time. It doesn't attract people’s attention like this.
⑤Because the tumbler is only accessible through the anonymizing Tor network, it’s hard for police to find any trace of the thief.

3.Changing Money

Now the thief has got clean Bitcoins. Owing to the fact that many places don’t accept Bitcoins, the thief has to convert his Bitcoins to real money. To find a rich buyer who just wants to get a discount and doesn't care about the thief's identity. It’s necessary to exchange as long as several months for safety.