- Bitcoin wallet app Blockchain suffers major security blunder
- Poor tech sees multiple accounts being created using same address
- Security lapses in electronic and digital currencies not uncommon
- Bitcoin and cryptocurrencies in infancy but are useful tools
- Physical gold offers most secure form of wealth preservation
Blockchain.com, which claims to be the maker of the most popular Bitcoin
wallet, suffered at the weekend what the Guardian describes as a “total
crypto breakdown”, highlighting once again the vulnerability of
electronic and digital currencies to human and technological error and or
hacking.
Multiple accounts were created using the same bitcoin address which meant
that many users apparently had access to the same pool of funds which led to
losses for a few.
The newspaper reports that a “series of bad development choices” in the
software “all failed in the worst way possible”. It was operating in the
typical “belt and braces” mode where if one line of defence failed another
should still be operational.
“Bitcoin wallets are typically created by randomly generating a public
address and a related private key. As a result, it is important for address
and key to be truly random, or else it may be possible to guess the private
key by looking at the public address.”
In the case of Blockchain.com, the random code was generated from two
different sources which were then combined. The first was the random number
generator on the device on which the app was being installed.
However, some Android phones failed to deliver the code to the blockchain
app which meant its random code was generated entirely from the second
source. The second source was an online service called random.org.
“But on 4 January, Random.org strengthened the security of its website,
requiring all visits to be made over an encrypted connection. The blockchain
app, however, continued to access the site through an unencrypted connection.
So rather than getting a random number, as expected, it got an error code
telling it that the site had moved.”
Blockchain then unwittingly used the same error code in creating the
address for multiple users, the devices of whom had failed to produce the
first line of random code.
“The magnitude of the error sparked shocked reactions from information
security professionals.”
Security lapses in software for managing digital and electronic currencies
are by no means uncommon. The constant march forward of technology often
means that less attention can be paid to older systems which have not yet
become obsolete.
Early last year banking giant JP Morgan was hacked. It had its system
hacked and details of 76 million customers were stolen ( Cyber
Attacks Growing In Frequency – Entire Western Financial System Is Vulnerable)
. JP Morgan use the “belt and braces” approach of two-factor authentication
but in one older overlooked system they were still using a less sophisticated
single password system.
In February, we covered the story where Russian cyber-security firm
Kaspersky lab uncovered an international hacking group who had managed to
tamper with customers accounts in order to steal possibly up to $1 billion
from over 100 banks globally (
International Hacking Group Steals $300 Million – Global Digital Banking
System Not Secure).
There have been numerous incidences in recent months where strategically
vital monetary, financial and infrastructural computer systems have been seen
to be very vulnerable to human error and malintent.
We can see the benefits of Bitcoin and crypto-currencies in the coming
years. We are particularly excited about the potential of the Blockchain
itself ( Blockchain
Promises To Be As Disruptive A Technology As The Internet )
Cryptocurrencies are a useful tool which could provide a vital degree of
short-term liquidity and means of exchange in the event of capital controls
and or a banking or currency collapse.
However, given their non-tangible nature and other risks posed to them, we
do not view them as a store of value or a safe haven asset akin to physical
gold bullion in your possession or stored in the safest vaults in the world
in the safest jurisdictions in the world.
Must Read Guides:
Essential
Guide To Storing Gold In Singapore
Essential
Guide To Gold Storage In Switzerland
MARKET UPDATE
Yesterday’s AM LBMA Gold Price was
USD 1,186.60, EUR 1,067.23 and GBP 777.60 per ounce.Today’s
AM LBMA Gold Price was USD 1,182.45, EUR 1,041.76 and GBP 766.55 per
ounce.
Gold fell $8.10 or 0.68 percent yesterday to $1,185.30 an ounce. Silver
slipped $0.25 or 1.49 percent to $16.55 an ounce.
Gold in USD – 5 Years
Gold in Singapore for immediate delivery fell 0.2 percent to $1,182.80 an
ounce near the end of the day, while gold
in Switzerland edged marginally higher.
Gold stumbled to its lowest in three weeks today despite very mixed U.S.
economic data – there is a perception amongst some market participants that
the U.S. economy is recovering and a U.S. rate hike will be occur … timing
undetermined.
Physical gold demand remains robust in China and India and this is
supporting gold near the $1,200 level.
The chart below shows the cumulative gold buying in “Chindia” since 2008.
As can be seen gold demand has been and continues to be voracious. Monthly
global gold production is shown in the bottom section highlighting the
rampant gold demand of Chindia.
U.S. weekly jobless claims are at 12:30 GMT and tomorrow’s nonfarm
payrolls figure will be watched.
Gold is moving into the quiet summer months. Demand from Asia remains
robust with premiums in China at $1.50-$2 over the global benchmark and SGE
withdrawals robust.
Greek Prime Minister Alexis Tsipras said a deal with creditors was “within
sight” after he stepped out of talks with senior EU officials in Brussels.
Tsipras said that they would make the IMF payment on Friday.
This has taken some of the safe haven
appeal out of gold bullion and moved money into other assets as market
participants see a Grexit as less of a threat. Although stock markets today
are sharply lower suggesting jitters on bond markets are spreading to
equities.
In late European trading gold is down 0.27 percent at $1,182.40 an ounce.
Silver is off 0.17 percent at $16.47 an ounce, while platinum is up 0.17
percent at $1,105.55 an ounce.
