Defcon, Silk Road 2.0’s Mod, Promises To Reimburse Stolen Bitcoins… Using Future Revenues

February 19, 2014 01:08 UTC

A few days ago here at CCN we reported that Bitcoin’s black mark Silk Road 2.0 had been hacked.  Defcon, in a long post to Silk Road 2.0 forums on Tor, explained that three attackers had used the transaction malleability bug to steal over 4,763 BTC directly from Silk Road’s hot wallet.  Original estimates still haven’t been confirmed but Defcon himself reports that 47% of all users had lost all of their funds.

As always, I must warn readers that the majority of things on the Deepweb are not in any way shape or form trustworthy.  It is my, and the good Government’s advice, to stay away from unregulated marketplaces.  This marks the second time that Silk Road users have had their funds in escrow stolen by either the FBI or other malicious actors.  Contrary to the first theft of users’ Bitcoins in October of 2013, Silk Road 2.0 users will be reimbursed this time around.

Defcon’s Reimbursement Plan

I’ve previously quoted Defcon as saying “centralized escrow systems can’t ever work,” and it seems that he is sticking to his guns. Below is the 7 point plan for Silk Road 2.0 going forward as presented by Defcon on Tor and Reddit.

  1. This administration will not earn any commissions until everyone is completely paid back, and will be very transparent about the progress towards this goal.
  2. The marketplace will relaunch as no-escrow. We will not re-implement escrow unless it is multi-signature and decentralized to multiple escrow providers (trusted mediators with feedback just like vendors). Never buy from a market which uses centralized escrow again. You will only get hurt no matter how honest the team is.
  3. All items will be priced at a flat 5% commission which will go directly into victims’ balances upon purchase.
  4. Vendors who lost funds: Commissions from your items will go directly into your wallet until you are completely repaid, then will be distributed to other vendors until they are repaid. Vendor bonds are considered lost funds, and we also commit to paying these back.
  5. All vendors can opt-in to give a higher percentage back on their listings, and all buyers will be presented with a “Donate” box on the shopping cart. Vendors’ donation percentage will be publicly visible.
  6. We will launch the support system immediately. Resubmit any open support requests you had which are still applicable. All previous messages will be ignored due to our inbound message volume. I have received over 1000 private messages over the past 24 hours, for example. This fresh start will allow us to stay on top of the support queue, rather than paying down a large debt incurred by previous administrators.
  7. We will still handle dispute resolution for existing escrow orders until all balances site-wide are in “Pending Balance” category. Your stolen balances and escrows will display as “Pending balance” and “Pending escrow”. Yes, like Christmas. I hoped to never have to take this approach again. All unshipped orders have been cancelled. To the vendors who have shipped orders despite no access to the portal: you are beautiful people. Try to resolve with your buyer directly, and file a support ticket if you do not receive a refund to your pending escrow balance within a month.

Skepticism from parts of the Internet

While some users may be glad at the opportunity to regain lost funds; conversely, they might resent being forced to use Silk Road 2.0 in order to do so.  The large amount of Bitcoins stolen which coupled with allegations that the theft was an inside job has led some to question whether or not Silk Road 2.0 the literal Deepweb market would fail as the iconic Silk Road 2.0.  Defcon has stated that they are actively investigating still and all signs show that it was not an inside job.

Many users are still skeptical of Silk Road 2.0

There are many projects to create a decentralized market with decentralized escrow, perhaps through implementation of multi-party signed transactions or another layer on top of the Bitcoin protocol.  If you’re interested, read CCN’s Chief Editor Kyle Torpey’s take on why Open Transactions Bazaar will be the real Silk Road 2.0.

 

For a French version of this article, check out Diana Ngo’s article in CCN’s Actualites.

Last modified: April 20, 2014 18:34 UTC

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Caleb is a graduate of the University of Virginia where he studied Economics, East Asian Studies, and Mathematics. He is currently pursuing his MSc in Digital Currency at the University of Nicosia.