Since there are two threads running but you asked for proposals on how to deal with the issues at hand in this thread I thought I should post my suggestions from the other thread
https://bitcointalk.org/index.php?topic=499580.msg5534025#msg5534025 here as well.
From my personal experience and 25 years of business experience,
if I was the owner of Poloniex this is what I would do now:1. Post the stolen balance on each users account so they know what is owed to them. (He has already said he will do this, before it was even suggested)
2. Post a new document on the website detailing all events regarding the hacking of the site and the resulting theft.
I mean things like:
a) The exact time the attack happened.
b) The IP address of the hacker.
c) The exact amount of BTC stolen and the address it was sent to. I know this information is floating around, but I would like to see it posted on the site from Tristan himself.
d) Any other information pertinent to the attack and outlining his proposals for how he plans to deal with the situation.
e) Link this document from the home page so that all users understand what is going on and what is being proposed and/or done.
f) Keep this document updated with new information as it is decided, rather than relying on all his users to have to go through pages and pages with posts on an external forum...
3. Calculate exactly how much BTC he will need to do all of the following (and then add an extra 15% for safety):a) Reimburse all the stolen BTC from his customers. b) Hire 2-3 excellent programmers/security experts to help him do an extensive review of his code and operating procedures and come up with solutions to improve the security of the site. (I would suggest trying to get people like Mike Hearn:
https://bitcointalk.org/index.php?action=profile;u%3D2700 involved). Judging from some of the comments in this thread it appears as if Poloniex is making some serious mistakes when it comes to security, even in regards to the patches that are currently being implemented.
c) Setup an initial "
insurance fund" of let's say 100 BTC (to start with, this will grow, see below) that is kept in cold storage and requires multignatures to release any money from cold storage (Tristan and one more person out of two trusted individuals from the Bitcoin community).
d) Hire a security expert on an ongoing part time basis who will constantly monitor the site and look for any unusual behaviour, as well as keep himself informed of all other hacks and security breaches on other exchanges. This person will setup SMS and email alerts for him and Tristan to immeditaly get informed of anything suspect happening on the site, and constantly monitor and try to improve the security on the site so that Tristan can focus mainly on the building the business.
4. Once he has calculated the funds required to do all of the above, (which I am guessing could be in the 200-300 BTC range), calculate what would be a reasonable percentage of the exchange for Tristan to sell in an IPO, in order for investors to get a decent ROI on their investment.
I don't think this has to be overly generous in order to be successful, assuming that Tristan can show that he is willing to build this business into something big...
Here is a sample calculation of what I mean:a) Let's say that the average daily turnover on the exchange is currently around 500 BTC and the fees are only bringing in 30 BTC per month. The IPO document may very well state that in order for them to get a good return the exchange has to grow to 2000 BTC turnover and 120 BTC monthly income.
Let's see how an IPO where 40% of the Poloniex is sold in order to raise 200 BTC could look, (assuming that investors believe the exchange can grow to 2000 BTC per month turnover, which I do):
Monthly income: 120 BTC
Monthly operational costs (with new security measures in place, Cloudflare, part time security expert, secure hosting etc.): 60 BTC/month
Monthly return to owners (including Tristan): 60 BTC, of which 40% or 24 BTC/month in this scenario goes to the investors as dividend.
Monthly dividend on a 1 BTC investment (assuming the site can grow to 2000 BTC/month turnover) would be: 0.12 BTC
It would take less than 9 months for an investor to get the entire investment back in the above scenario. If you also assume that Poloniex is still standing and successfully operating in 9 months the value of the shares might also have increased to 1,5 BTC (or more) by that time.
5. In regards to the "
insurance fund" mentioned above I suggest that this is something volountary and only for those users who want to take part in it, since it is not a standard feature on any of the current Crypto exchanges as far as I know.
Each user of the site would have the possibility to opt-in to take part of insurance feature anytime they want to, but there would be certain conditions.
Your entire funds may not be insured for example. The total of the fund kept in cold storage will be shown on the "insurance page" and also the amount of BTC that is currently being insured with a percentage shown. So it may very well be that only 55% of your funds are currently insured, but at least then you know that even in a worst-case-scenario where Poloniex is hacked that is the maximum you could lose, quite different from MtGox for example...
There would be conditions imposed on the insured accounts and every insured user would have to follow certain security procedures in order to take part in the insurance scheme.
I mean things like the following:a) Insured users would have to pay a 50%-100% premium on all trading fees, (0,3% instead of 0,2%).
b) Or perhaps an average of their BTC holdings would be calculated each night and a small percentage of that would be deducted as an insurance fee? This would help reduce the number of people who hold large balances on their accounts for long periods of time without trading it, which would also reduce liability for the site in case of an attack.
b) Every insured user would be required to use 2-factor authentication and a minimum 12 character password.
c) Perhaps insured users would be required to submit the IPs (or at least the IP ranges) that they wish to use to login to their accounts.
d) Whatever other security measures can be implemented to make it as secure as possible.
It is clear that after two successful attacks against Poloniex it will continue to be a prime target for hackers and thieves. Tristan needs to have security as the #1 concern for Poloniex from here on, because regardless of how honest he is and how much integrity he has Polniex may not survive another attack...user confidence
will disappear eventually.
The fact that he has been transparent and forthcoming about the mistakes and what happened, as well as pragmatic in his way of solving it, tells me that there is a good chance this could turn into a great business, but
only if he takes the right steps from here
and puts security at the forefront of everything from here on...Tristan, bring in the right people to help you secure the site. You have our confidence that you are honest and trustworthy. Now show that you are also capable of admitting your own weaknesses and bring in the right people to help you.
Just imagine how good we would feel
if people like Mike Hearn who said this upthread:
busoni, you need to shut down Poloniex now and try to make your users whole from your own funds and debt. Do not continue trying to run an exchange. Your post mortem indicates that you do not have sufficient programming ability to handle other peoples money - no mention was even made of database transactions, which are a basic "database programming 101" topic. Your proposed fix of checking for negative balances is wrong and indicates that your code is almost certainly riddled with other exploitable bugs.
Please do the right thing and refund everyones outstanding balances, then wind up your operation.
Imagine if he would come back after your have done the improvements to security and reviews the site and says something along the lines of:
"Yes, there have been some good improvements, and the site actually looks pretty secure now."
Mike is a security specialist at Google so obviously his demands for what is secure and what is not are going to be fairly high... These are the type of people you need to ask for help in securing Poloniex and making it into one of the top Cryptoexchanges.
I believe in you and I think you can do it!
Good luck!
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