FINDING 100,000 STOLEN BITCOIN
Yesterday, the US department of justice seized $3.6 billion worth of stolen Bitcoin from the second largest cryptocurrency hack in history. In 2016 an exchange called Bitfinex, which you're probably familiar with was hacked. And over 120,000 Bitcoin were stolen. At the time in 2016, that Bitcoin was worth roughly $71 million.
I think it has massive implications for the future of Bitcoin and cryptocurrency law enforcement and the U S.
First of all, a lot of the headlines around this story, refer to the Bitcoin as hacked Bitcoin, and remember in order for Bitcoin to be truly hacked, there's something that's called the 51% rule. The magic of the Bitcoin blockchain is that every node or computer running on the bitcoin network is actively working to protect and verify the transactions on the blockchain.
So in order for Bitcoin to truly be hacked, more than 50% of the nodes in the network need to all be hacked and agree and coordinate with each other to falsify transaction history on the Bitcoin blockchain. So this Bitcoin wasn't hacked.
Hot Wallets vs Cold Wallets
See the reason that this couple was able to obtain these Bitcoin in the first place was because the Bitcoin that they stole was being stored on the exchange Bitfinex.
When you own Bitcoin, unless you don't have your private keys and you have a custodial account, you have two options. One, you can keep your Bitcoin in what's called a hot wallet which is always connected to the internet and if kept on an exchange is subject to potential cyber attacks. Or you can keep your Bitcoin on a cold wallet, which is literally a hard drive and the only way that someone would be able to steal your Bitcoin is if they had your private key and that physical drive.
The only reason they were able to steal this many Bitcoin was because they were able to hack into people's hot wallets where the Bitcoin was being kept on the exchange.
Can the Government Seize Bitcoin?
The other important thing that a lot of people seem to be freaking out about is that the government somehow seized this Bitcoin
When one of the primary narratives about Bitcoin is that it's unseasonable, not controlled by the government decentralized and anonymous.
Well, that's where there's actually a ton of irony in the story. The couple who stole this. Bitcoin had an encrypted file on a Dropbox account. The government was able to locate this file because it was being stored on the cloud and Dropbox, and they were able to decrypt it, nothing to do with cryptocurrency or blockchain or Bitcoin. And when they decrypted the file, they found that it was literally an Excel sheet that had all of the location of all of the money, where it had moved and all of the private keys to all of the wallets that the money was currently being stored on.
Which to me literally sounds like a movie. They hacked an exchange and stole money from digital hot wallets. And then they literally kept all the information about where they had their Bitcoin in a file all in one place in Dropbox. On the cloud. It doesn't make any sense. It's hilarious.
Not to make any unnecessary light out of this situation, but I think that's just so ironic.
Where does all this Bitcoin go now?
Well, right now it's the property of the U S department of justice and the U S government and Bitfinex has already made the reparations that it promised to its customers.
Another ironic twist in this story is that despite the U S government's slowness to adopt, make policy and make stances on cryptocurrency, they now are one of the largest holders in the world of Bitcoin,
Again, the story just can't get any more ironic.
Ultimately though, I think this will end up being one of the most positive stories for Bitcoin and future implications of cryptocurrency. Think about it, it represents a large scale cooperation between blockchain technology and the U S government and law enforcement.
Bitcoin has had a bad reputation for a long time about being associated with illicit activity, being untraceable, being anonymous, being associated with the dark web but this story, I hope changes the narrative worldwide about Bitcoin and the value of blockchain
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