What happens when millions of dollars of bitcoin and other cryptocurrencies disappear?

A Brief History of Millions of Dollars in Cryptocurrency Disappearing

A Brief History of Millions of Dollars in Cryptocurrency Disappearing

Future Tense
The Citizen's Guide to the Future
Nov. 22 2017 12:40 PM

A Brief History of Lost Cryptocurrency

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NiceHash, a bitcoin mining service, announced on Wednesday that it would be placing a 24-hour freeze on operations after its payment system was breached, resulting in the theft over around 4,700 bitcoins—the approximate equivalent of $70 million. The company is now working with authorities in Slovenia and elsewhere to investigate the hack, and is encouraging users to change their passwords.

This latest incident follows in a long line of cryptocurrency cons that stretch back to bitcoin’s earliest days. Cryptocurrency is a digital asset introduced in 2008 by an anonymous inventor. People can transfer tokens amongst themselves through a decentralized network, which helps maintain the anonymity of the users. Cryptocurrency has become a hot commodity, even as financial experts debate whether it could be an actual alternative to fiat currency. Billions of dollars have gone into bitcoin and its imitators, and values have been shooting up in what some fear is a cryptocurrency bubble.

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Of course, when there’s money to be made, thieves will inevitably come to exploit the system. In 2011, an anonymous netizen with the screenname allinvain claimed that someone had stolen around 25,000 of his or her bitcoins, which would have constituted an approximately $500,000 loss at the time. On the assumption that the story was true, PC World suggested it may have been the “world’s first virtual heist.”

Three years later, a high-profile robbery hit a bitcoin exchange platform based in Japan called Mt. Gox. A hacker with a Hong Kong IP address broke into a user account that held a significant amount of the currency and managed to abscond with $8.75 million in Bitcoin. The hacker then laundered the coins and eventually exchanged the spoils for U.S. dollars.

Mt. Gox managed to recover for a short time before going bankrupt due to another heist in 2014. The cyber burglars made off with around $460 million, and another $27.4 million disappeared from its accounts under mysterious circumstances.

More recently, users of a Hong Kong-based exchange called Bitfinex had a collective $72 million stolen from their wallets in 2016. And this July, an Israeli startup named CoinDash lost $7 million during its initial coin offering when a perpetrator redirected investors’ cryptocurrency funds to a fake address.

Tether, the company behind a cryptocurrency that’s pegged to the U.S. dollar, also disclosed in a now-deleted announcement that hackers transferred almost $31 million worth of tokens from its treasury to an unauthorized bitcoin wallet in November. Tether claims it has updated its software to prevent the tokens from leaving the wallet and is ultimately seeking to recover them. The stolen cryptocurrency will not be redeemable for U.S. dollars.

However, not all bitcoin losses are intentional. In November, for instance, a user of the digital wallet service called Parity stumbled across a glitch in the system and accidentally hijacked other peoples’ wallets. The user’s attempt to return the funds ended up destroying over $300 million in cryptocurrency.

Yet despite of this turbulent history of missing bitcoins, cryptocurrency speculators seem undeterred. Bitcoin’s value rose by over 25% on Thursday, pushing the value per coin to more than $16,000.

Update: Dec. 7: This post was updated to include the hack of NiceHash. The value of bitcoin as of Thursday was also included.

Future Tense is a partnership of SlateNew America, and Arizona State University.