2017 December 18 - Volume.1 Issue.8

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2017 December 18 - Volume.1 Issue.8

Goto Full Issue

Stolen Bitcoin Mark Massive Share of Circulating Supply

Whilst centralised Bitcoin hacks have become less of an early technology hazard than in recent years, the money supply has been riddled with thefts and heists. Diar analysis shows that a whopping 10% of bitcoins circulating have been the victim of theft. But with a public ledger and companies that track movement of wallets with stolen goods, it may prove too difficult to withdraw into fiat as exchanges adhere to Know-Your-Client (KYC) and Anti-Money Laundering (AML) requirements. What this could mean however, is an additional sum of lost coins.


 

In early December, Bitcoin mining marketplace NiceHash was hacked and more than 4,700 BTC was stolen. While the news was treated as an innocuous event due to Bitcoin’s latest bull run and futures markets start, the hack was actually the third largest breach in Bitcoin’s history in US Dollar value at the time of the hack. NiceHash lost $63Mn at the time of the hack, which is only topped by the Mt. Gox and Bitfinex heists. The largest incident was the Mt. Gox debacle where $358Mn of funds disappeared from customers. The second largest hack was Bitfinex, which resulted in a loss of roughly $68Mn. Just the three largest thefts amount to approximately 774,500 BTC or roughly half a billion dollars at the time of these hacks.

The Bitcoin network itself has never been hacked and with the current technology, it is thought to be virtually unhackable. MIT Technology Review reported in November that quantum computers pose a serious threat to Bitcoin as they will be able to break the cryptographic encryption fairly easily. However, quantum computers are still not developed and when they are, all the existing encryption will be at immediate risk, not just Bitcoin.

The ecosystem’s largest weakness are the centralized institutions that hold users’ private keys. When the private keys are compromised, the bitcoins are forever taken as all the transactions are irreversible. All reputable companies now keep most of their funds in cold storage and secured vaults. Popular exchange Coinbase stores 98% of their cryptocurrencies offline.  As Bitcoin’s value continues to increase, it is becoming a more attractive target to hackers – even a relatively small amount of Bitcoin can net a fortune making this blockchain network the biggest bounty in the world.

Diar has consolidated all the publicized Bitcoin thefts and found that at least 1.43Mn BTC were previously involved in theft, which is almost 9% of all the bitcoins in existence. This is a conservative estimate as it does not include undisclosed hacks or personal hacks of smaller quantities. If the bitcoins from Silk Road that were seized by the FBI were to be included, the amount would be more than 1.6Mn or about 10% of the existence. And according to a recent research from Chainalysis, a blockchain analysis company, at least 2.78Mn to 3.79Mn bitcoins are lost. These figures do not include hacked or stolen bitcoins. If the conservative estimate of lost bitcoins (2.78Mn) is subtracted from the bitcoins in existence, at most, 13.95Mn BTC are currently in circulation. Assuming that there is no overlap of lost and stolen Bitcoin, that would mean that a little under 12% of bitcoins in circulation were involved in theft or involuntarily appropriated.

Data Table: Stolen Bitcoins 10% of Current Supply

Period Description Type BTC Stolen USD Value (Date of Theft)
Jun-11 Allinvain (user) User hack 25,000 $ 500,000
Jul-11 MyBitcoin Wallet 78,739 $ 1,023,607
Oct-11 Bitcoin7 Exchange 5,000 $ 22,500
Feb-12 Andrew Nollan Scam Scam 2,211 $ 10,834
Mar-12 Linode Cloud provider 46,703 $ 210,164
Apr-12 Tony76 Silk Road Scam Scam 30,000 $ 160,500
Apr-12 Betcoin Betting site 3,172 $ 15,638
May-12 Bitcoinica Exchange 18,547 $ 92,735
Jul-12 Mt. Gox Exchange 1,852 $ 14,816
Jul-12 Bitcoinica Exchange 40,000 $ 320,000
Jul-12 BTC-E Exchange 4,500 $ 36,000
Aug-12 The Bitcoin Savings and Trust Scam 265,678 $ 2,922,458
Sep-12 Cdecker (user) User hack 9,222 $ 114,353
Sep-12 Bitfloor Exchange 24,086 $ 264,946
Oct-12 Trojan horse Virus 3,500 $ 41,650
Dec-12 BitMarket.eu Exchange 18,788 $ 253,638
Mar-13 Bitcoin Rain Scam 4,000 $ 344,000
May-13 Vircurex Exchange 1,454 $ 162,848
Oct-13 Silk Road Asset forfeiture 171,955 $ 17,195,500
Oct-13 BASIC-MINING Mining company 2,131 $ 332,436
Nov-13 Bitcash.cz Exchange 484 $ 169,400
Nov-13 PicoStocks Exchange 5,896 $ 6,633,000
Nov-13 Inputs.io Wallet 4,100 $ 1,160,300
Nov-13 BIPS Payment processor 1,295 $ 1,010,100
Dec-13 CryptoLocker Ransomware 1,600 $ 380,800
Feb-14 Mt. Gox Exchange 650,000 $ 357,500,000
Mar-14 Poloniex Exchange 97 $ 64,020
Mar-14 CryptoRush Exchange 950 $ 551,000
Mar-14 Flexcoin Wallet 896 $ 595,840
Aug-14 BitNZ Exchange 39 $ 22,230
Oct-14 Mintpal Scam 3,894 $ 1,518,660
Jan-15 Bitstamp Exchange 18,886 $ 5,193,650
Jan-15 796 Exchange Exchange 1,000 $ 235,000
Jan-15 LocalBitcoins Exchange 17 $ 3,910
Feb-15 BTER Exchange 7,170 $ 1,684,950
Feb-15 KipCoin Exchange 3,000 $ 735,000
Mar-15 AllCrypt Exchange 42 $ 12,180
May-15 Bitfinex Exchange 1,581 $ 379,440
Jan-16 Cryptsy Exchange 13,000 $ 5,005,000
Mar-16 CoinTrader Exchange 81 $ 33,210
Apr-16 ShapeShift Exchange 469 $ 201,201
May-16 Gatecoin Exchange 250 $ 113,250
Aug-16 Bitfinex Exchange 119,756 $ 67,662,140
Oct-16 Bitcurex Exchange 2,300 $ 1,587,000
Apr-17 Yapizon Exchange 3,816 $ 4,903,560
May-17 WannaCry Ransomware Ransomware 52 $ 88,740
Oct-17 OKEx Exchange 600 $ 2,642,400
Dec-17 NiceHash Mining company 4,736 $ 62,752,000
Total 1,602,545 $ 546,876,603
Excluding Silk Road 1,430,590 $ 529,681,103

Stolen BTC in US Dollar Value on Date of Theft

Total Stolen Bitcoins 

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