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Bitcoin is not a fiat currency: "Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree." #wikipedia

Assuming this story isn't fabricated, this seems like it could have been avoided if he kept the wallet.dat not only encrypted, but also offline when he's not using it. This way, not only would the thief have to crack his encryption, but he'd have to do it a small and unknown window of opportunity.

Anti virus software like nod32

"Bitcoin is not a fiat currency" it most certainly is, it has value because people say it does. The point is it isn't backed by gold or silver.They say NIxon made our money a fiat currency when he stopped the backing with gold.

If a guy breaks into your house and takes all the money you left under the mattress, its not the money or the banks fault, the same goes here, its not bitcoins fault. Just make sure to store your virtual money in a safe place like you would with "real" cash. There will always be thieves as long there is something to steal. Would you leave 500,000 U$ on your front porch without anyone looking over it?

In a fiat money system, money is not backed by a physical commodity (i.e.: gold). Instead, the only thing that gives the money value is its relative scarcity and the faith placed in it by the people that use it. A good primer on the history of fiat money in the US can be found in a video provided by the Mises.org website.

What is the point of saying that bitcoins are used to fund drug trafficking? So are dollars!

"Because of the anonymity inherent in BitCoin trading, BitCoins are used to fund drug trafficking,"?
1. Bitcoins aren't anonymous and can be traced.
2. I guarantee more American dollars are spent to fund drug trafficking than anything else in the world. The fact that there are some senators out there who don't understand how this technology works isn't surprising but your from PCWorld?
Bitcoin has had information on their site explaining the vulnerability of your wallet.dat and best practices to protect it. Not following safe practices with bitcoin is no different than handing out business cards with your credit card number printed on them.

If he isn't technically smart enough to protect his file with encryption or other means, then he deserves every ounce of punishment he receives.

You don't protect $500,000? You're a goddamn idiot. That's enough money to make a person kill you and take it. That's enough money to bring all kinds of people in on a project to kill you and take it, including police officers.

Anyone who keeps that kind of money anywhere should do a good job protecting it. Use PGP for godsake.

tatuia, on 15 June 2011 - 05:23 PM, said:

Since nobody is offering a technical solution I will be the first. Store your virtual bit money in a virtual bit vault. This vault should allow you to access via a screen name connected to a PGP digital signature and password. The PGP private key generated either by you or by the vault web application should be stored in encrypted form. Your password becomes the security to your PGPkey pair securing your private key on your computer. The keypair on your computer should be encrypted, the public key distributed to the vault site or web app which will authorize you as the owner of the encrypted wallet file.

This would be simple. You simply store your $500,000 in bitcoins in a virtual bank. The virtual bank handles all the hard work of storing your file offsite in a safe place. When you need to access your file to do a transaction it simply authorizes you via your digital signature and then transmits a temporary fully encrypted copy of the file to your computer. The file stored in your temp directory or in memory stays only long enough for you to make a single transaction and then it wipes itself out of existence.

This way if your computer is hacked you can access your wallet from any computer that isn't hacked. This way if all computers are hacked you can access it from your cellphone. This isn't perfect, but it would make it so no one but the federal government would be able to steal your precious bits.

VaCeejk9yc, on 15 June 2011 - 04:20 PM, said:

He probably shouldn't have told people how much money he had either. For $500,000 a lot of people would take that opportunity in a heartbeat.

At http://forum.bitcoin...p?topic=16457.0 [bitcoin.org] the victim allinvain stated that, "a very large chunk of my bitcoin balance gone to the following address: 1KPTdMb6p7H3YCwsyFqrEmKGmsHqe1Q3jg" That just happens to be the same address for donations to LulzSec on some of their ASCII banners.... http://pastebin.com/88nGp508

This isn't the first heist of virtual currency, not by a long shot. Online games, with virtual currency directly convertable to U.S. dollars on ebay, have been subject to account hacking for many years.

savagelightmb07, on 16 June 2011 - 05:30 AM, said:

Building a virtual bank system is far more complicated than you think, is completely unnecessary, and if built the way you describe, has a gigantic security hole, which you pointed out when you said "no one but the federal government would be able to steal.." because that would include anyone who manages to steal the keys from the federal government, or buys them from a corrupt employee, or etc etc. I just encrypt wallet.dat and back it up.

JohnMontgomery0xgc, on 15 June 2011 - 05:14 PM, said:

Gold or silver only has a value because people say it does. And the value of gold and silver is based on what people will pay for it. Just like BitCoins.

CharlesPushrod5gnk, on 16 June 2011 - 09:39 AM, said:

Then they will have to infiltrate the entire federal government and chances are if they have that kind of control and access no amount of encryption is going to protect you or your money from them. They could just as easily torture you and extract the password that way, or kidnap and drug you and take it that way, or simply threaten you with arrest and take it that way.

The government implies that it would like to shut down the network and days later someone using that network is robbed of a lot of money, potentially throwing the trustworthiness of the whole scheme into question (which could effectively result in it shutting down). Coincidence?

MartinBogomolnitlxk, on 16 June 2011 - 06:27 AM, said:

You have the most interesting post in this comments section. Rather than speaking without really knowing the situation, you went out and found source material and provided it for the rest of us. +1 interwebs for you!

For everyone else, go to the bitcoin forum link that Martin supplied. It's interesting reading for the first 10-20 posts. Then tell the page to 'Display All' posts. Use your browser to search for 'Lulz'. You'll get to the most interesting part of this story.

Again, Good Job, Martin!

ThomasMc, on 16 June 2011 - 10:00 AM, said:

Gold and silver have practical uses and value beyond as a form of currency exchange. Fiat currency's sole value lies in being currency that the issuing entity has said has value.

I don't think it is right for you to report in an story and saying "assuming is not fabricated", in other words, not yourself can know if it is made up or not.

Please stick to real verifiable stories, don't waste people's time on something that can not be corroborated, nice little article, based on a forum post from someone you don't know, and this is serious journalism?

This post has been edited by malcarada: 16 June 2011 - 01:20 PM