Silkroad closed down. Owner Arrested.

[Qoheleth]

Bitcoin is much bigger than SR, in the long run this will be a good thing!

Not really. Most (all) of the sites that accept bitcoin directly, or through a payment processor, look like bodega shops.

Counterexample: OKCupid (Alexa <1000, used by plenty of non-technical people). Also premium subscriptions on 4chan (Alexa <1000) and reddit (Alexa <100).

Long-term, this is not going to have a catastrophic effect. Short-term, well, we're seeing a crash at this very moment, and it'll probably go some distance before things level out.

[niothor]

How did they "seize" bitcoins? 

Just how they can seize your computer .

[Qoheleth]

How did they "seize" bitcoins?  

Silkroad has a government closure notice, so they obviously obtained control over its servers.

Given that, and given that Silkroad didn't use brainwallets for ops money, control over the Bitcoin private keys - and thus, the bitcoins - is trivial.

Edit: Then again, unless we've seen a huge, tens-of-thousands-of-BTC transaction in the last 48 hours, it's possible that the FBI has merely assumed the above without actually taking possession of the bitcoins. In which case, if a bailed Ross Ulbricht has access to a wallet backup...

[jimbobway]

The FBI has also seized approximately $3.6m (£2,2m) worth of bitcoins - a virtual currency.

http://www.bbc.co.uk/news/technology-24373759

The question then becomes. Will the US Government sell the BTC to pay its debts or hold?

The wallet is mostly likely password protected.  The feds can see the balance but wont be able to spend it without a password.  Either a keylogger needed to be installed or ulrich gives the password.

[Qoheleth]

The wallet is mostly likely password protected.  The feds can see the balance but wont be able to spend it without a password.  Either a keylogger needed to be installed or ulrich gives the password.

That's only the case if Silk Road didn't support instant withdrawal.

If instant withdrawal was supported, then there was a hot wallet that can't be password protected (or is password protected with a plaintext password stored elsewhere - equally useless). Of course, given that the seized BTC stash is less than 10% of the supposed commissions collected during Silk Road's operation, there's a significant chance that Silk Road has a cold password-protected wallet not covered by the reported seizure, and a near-surety that Ulbricht has other coins at some other address.

[Chronikka]

The FBI has also seized approximately $3.6m (£2,2m) worth of bitcoins - a virtual currency.

http://www.bbc.co.uk/news/technology-24373759

The question then becomes. Will the US Government sell the BTC to pay its debts or hold?

The wallet is mostly likely password protected.  The feds can see the balance but wont be able to spend it without a password.  Either a keylogger needed to be installed or ulrich gives the password.

He will definitely give the password if it gets him a plea of some sort. Thats a lot of money to just leave hanging out there and the FBI will probably want to do something with it. Especially considering there is a chance that somebody else out there knows the password and has the wallet.dat

[Qoheleth]

Watching the recent block confirmations. A lot of big transfers by fat wallets. Either some involved party is busy hauling off Silkroad's corpse, or this crash is going deeper than I expected.

[Rival]

I don't think the btc can be seized. I imagine the private key is stashed somewhere far away from any digital device he may have utilized.

If I was him I would have had the private key laser-etched into a piece of gold jewelry and stashed in a safe deposit box in some unknown country. Come back from prison 20 years later and collect your btc.

I don't think anyone will ever get at it, or at least if he was smart they never will.

[Qoheleth]

I don't think the btc can be seized. I imagine the private key is stashed somewhere far away from any digital device he may have utilized.

So your contention is that Silkroad, a website that processes tens of thousands of bitcoins worth of transactions every month, has no hot wallet?

[Rival]

I don't think the btc can be seized. I imagine the private key is stashed somewhere far away from any digital device he may have utilized.

So your contention is that Silkroad, a website that processes tens of thousands of bitcoins worth of transactions every month, has no hot wallet?

A hot wallet is only required to make payments, but is not needed to receive them.

[nobbynobbynoob]

Wow. That happened very suddenly, didn't it?

Question is, is Bitcoin now dead? Probably (hopefully) not.

[DeathAndTaxes]

So reading the complaint IF (and this is a big IF) the FBI is correct then the SR is many magnitudes larger than most predicted.

All told, the site has generated sales revenue totally over 9.5 million Bitcoins and collected commissions from these sales totaling over 600,00 Bitcoins.  Although the value of Bitcoins has varied significantly during the site's lifetime, these figures are roughly equivelent today of approximately $1.2 billion in sales and approximately $80 million in commissions.

pg 6 (section 16).  Sadly the pdf is an image not copyable text so I am not going to hand copy a larger quote.

http://www1.icsi.berkeley.edu/~nweaver/UlbrichtCriminalComplaint.pdf

On edit:  I guess that isn't as surprising as I thought.  SR has been around ~30 months.  $1.2 billion / 30 = $40 million per month.  In 2012 a study estimated volume at $10M to $15M per month.  In a followup about 6 months later sales were reported to have increased significantly and the author said $40M wasn't unlikely.  I guess just seeing it as a single aggregate figure was shocking.

[Gimmelfarb]

So reading the complaint IF (and this is a big IF) the FBI is correct then the SR is many magnitudes larger than most predicted.

All told, the site has generated sales revenue totally over 9.5 million Bitcoins and collected commissions from these sales totaling over 600,00 Bitcoins.  Although the value of Bitcoins has varied significantly during the site's lifetime, these figures are roughly equivelent today of approximately $1.2 billion in sales and approximately $80 million in commissions.

pg 6 (section 16).  Sadly the pdf is an image not copyable text so I am not going to hand copy a larger quote.

http://www1.icsi.berkeley.edu/~nweaver/UlbrichtCriminalComplaint.pdf

and who said that bitcoin economy wasn't made by silk road!!? now all we have are half-baked gambling sites and ghetto-as-shit merchants via bitpay!!

[anu]

Wow. That happened very suddenly, didn't it?

Question is, is Bitcoin now dead? Probably (hopefully) not.

Sure, Bitcoin died many times already - it is getting good at that.

[theonewhowaskazu]

I would think that Silkroad's hot wallet is encrypted as well. I mean, you'd probably just store the encryption key in memory, and just re-enter the key every time you reboot, or am I missing something? Most things aren't smart enough to get the encryption key directly from memory rather than just taking the private keys from the disk.

[Chronikka]

Watching the recent block confirmations. A lot of big transfers by fat wallets. Either some involved party is busy hauling off Silkroad's corpse, or this crash is going deeper than I expected.

Oh its a full on crash at this point. Look at the trade volume on http://bitcoin.clarkmoody.com/

[Qoheleth]

Question is, is Bitcoin now dead? Probably (hopefully) not.

Bitcoin existed before Silk Road.

It'll exist after.

Maybe we'll return to $2/coin for a while, but whatever. Even if you think the black market is necessary for a bitcoin-denominated economy to sustain itself (I don't), that just means it's an obvious niche and sooner or later someone with better identity security will step in to fill Silk Road's shoes.

and who said that bitcoin economy wasn't made by silk road!!? now all we have are half-baked gambling sites and ghetto-as-shit merchants via bitpay!!

Don't forget OKCupid (Alexa <1000), 4chan (Alexa <1000), and Reddit (Alexa <100).

[frankenmint]

If they sell it and cause a flash crash, there are plenty in the wings waiting to pick them up.

This is undoubtedly going to cause a significant drop in price. The question is for how deep and how long before it rises back up again.

like me ill swoop up as much as i can for anything under 50

[Rival]

My website has two wallets. One holds the customer accounts and balances, and the other holds the "house" profit. The private key for the house wallet does not exist anywhere in digital form. No one ever anywhere can possibly compromise the house wallet without physical access to that private key. And that key is not even in my personal possession, although I know exactly where it is. Someday I will use it, but not for many years to come.

Kind of like burying gold bricks in the desert. No one will ever find them without the map. If he thinks like I do those btc will never be recovered unless he chooses to recover them.

[Spekulatius]

Goddamit!

Just like DPR got fucked over by technology, so did I!

I had both http://www.bitcoin-tools.de/index.html AND http://namcdn.com/btcalarm/
running on Firefox AND Opera with alarms set to under 137$ and they all failed me!

Dammit.