I’ve been following the Mt. Gox security breach and subsequent
Bitcoin/USD price collapse for a little while. This is a rough
summary of events as they seem to have happened, based on available
information at the current time (June 20, early morning UTC).
My assumption is that at least some of this timeline will turn out to
be wrong, which in itself might be interesting in retrospect.
Sometime in early June: Unspecified attackers gained access to a
machine, allegedly being used by an auditor, either containing or
with read-only access to, the Mt. Gox database or some portion of
it. Whether the attackers had access to the entire database or “just”
the user table doesn’t seem known, but the important thing is that
they got a table containing, according to Mt. Gox:
- Account number
- Account login
- Email address
- Encrypted password
For accounts not accessed in the last two months (viewed by Mt. Gox as
“inactive”), the password was stored as an MD5 hash. For accounts
accessed in the last two months, the password was salted, then hashed
with MD5. Nowhere in the database were there plaintext passwords.
Exactly who had access to the database, whether it was an individual
or group, isn’t known. It seems that access to the database might
have gone through several stages: presumably from the person or group
who obtained it initially from the compromised machine, and then to
less-sophisticated people or groups. We can say with some confidence
that it started to be distributed shortly before June 17th, because on
that date somebody posted a message to a forum with some hashed
passwords that came from the database. (N.B., this is hearsay from
the #Bitcoin IRC channel, and thus fairly speculative. I haven’t
looked at a copy of the database to confirm it.)
Monday, June 13: The actual theft of Bitcoins from compromised
accounts began, according to various sources, on Monday morning.
Approximately 25k BTC were transferred from 478 accounts, according
to DailyTech (although elsewhere in the same article they claim
25,000 accounts). The destination address was
Presumably, the accounts were accessed by brute-forcing the hashed
passwords in the database. It’s not clear to me whether the accounts
were all “inactive” (and thus had unsalted password hashes, vulnerable
to a pre-computation attack), or if they were active, had salted
hashes, but were just weak and fell to a dictionary attack. It
probably would have been logical for the attackers to pursue both
routes at once: go after the old, unsalted hashes with Rainbow tables,
while at the same time performing dictionary attacks against the
salted hashes associated with accounts with significant BTC balances.
At any rate, using some combination of both routes, they eventually
found some vulnerable accounts.
The thefts seem to have gone on during the remainder of the week, with
Mt. Gox seemingly misreading the increase in theft reports as
insecurity on users’ PCs, rather than a security problem on their end.
Sunday, June 19: The Bitcoin ‘Flash Crash’.
At around 3AM Japan Standard Time, someone — my guess is not one of
the original attackers — began a massive sell-off from a single
compromised account. (One open question is whether this account was a
receiver account for stolen BTC from other hacked accounts, or just
happened to be a ‘whale’ that they managed to access.) This is where
things start to get interesting, because it’s not immediately obvious
why someone who recently came into possession of a whole lot of
Bitcoins would want to crash the price.
One theory is that it wasn’t intentional; they were hurrying, perhaps
working against other attackers who had access to the same database,
and wanted to cash out quickly. But another theory, one that I think
is more plausible, is that the sell-off was calculated to crash the
BTC price, in order to get around Mt. Gox’s $1,000 USD/day withdrawal
By dumping a large number of Bitcoins onto the market — not just once
but twice (the attacker repurchased and sold the lot of coins a second
time, supposedly) — the market price was driven down. Basically all
open bids on the order book were filled, down to ridiculously low
prices. At no point did any sort of ‘safety switch’ kick in at
Mt. Gox to halt trading; it was full-bore Black Monday mode.
And here we start to run into my limit of knowledge. If we assume
that the crash was engineered in order to get around the Mt. Gox
withdrawal limit, then when the price was very low, the attackers
should have made their move, and transferred whatever they could out
of Mt. Gox, to external Bitcoin accounts.
Mt. Gox seems to be claiming that this did not happen, and the
withdrawal limits successfully kept the total amount of BTC removed
from the exchange to some low number. If true, this would allow them
to ‘reset’ the exchange back to how it was before the flash crash,
with only limited losses — perhaps low enough that Mt. Gox could make
all users whole before resuming trading.
But if this isn’t the case, then it may not be possible for Mt. Gox to
shield all of its users from losses. After all, one of the key
features of Bitcoins is that they can’t simply be magic-ed into
existence on demand by a central authority when convenient. If the
Bitcoins have left the building, so to speak, Mt. Gox can’t just grab
them back or create new ones to replace them.
In the next few hours or days, I expect these issues to become more
clear. Also, it will be interesting to see whether the BTC/USD rate
stays at the $17 mark that Mt. Gox plans to resume trading at, or
immediately falls to some lower level, in keeping with lowered
Personally, I wouldn’t mind one bit if this marked the end of
Bitcoin’s first speculative bubble; most of my interest in Bitcoin is
as a currency, not as an instrument for speculative investment (and a
not-very-liquid one at that). The question will be whether Bitcoin’s
reputation is irretrievably damaged as a result, or if the damage is
forgotten about or limited to Mt. Gox.
Certainly more interesting and higher stakes than the usual EVE Online