There's a £60m Bitcoin heist going down right now, and you can watch in real-time

Sheep Marketplace closed down over the weekend after someone got away with 96,000 bitcoins - and angry users are chasing him around the internet.

One of the largest heists in bitcoin history is happening right now. 96,000 bitcoins - that’s roughly £60m as of the time of writing - was taken from the accounts of customers, vendors and administrators of the Sheep Marketplace over the weekend.

Sheep was one of the main sites that came to replace the Silk Road when it closed in October, but it too has now closed as a result of this theft. It’s a little hard to work out exactly what’s happened, but Sheep customers have been piecing it together on reddit’s r/sheepmarketplace.

Here's what happened: someone (or some group) managed to fake the balances in peoples’ accounts on the site, showing that they had their bitcoins in their wallets when they’d actually been transferred out. Over the course of a week the whole site was drained, until the weekend when the site's administrators realised what was happening and shut everything down.

Originally it was thought that only 5,200BTC - or £3m - was taken, with a message posted on Sheep's homepage blaming a vendor called "EBOOK101" for finding and exploiting a bug. However, over the weekend it became clear that the amount stolen was much, much larger.

In a normal robbery that money would be gone by now, but it isn't. Bitcoin is pseudonymous, not anonymous, and bitcoins can’t just disappear. It works because each and every transaction is public and visible to each and every other person using the Bitcoin network, and a person is only as anonymous as their link to their wallet.

A couple of reddit users realised that the sheer size of the heist makes “tumbling” the coins - the normal method of laundering bitcoins - impossible, as long as they kept on their toes. Someone with bitcoin can send some to a tumbler like bitcoinfog, where it will be split into smaller subdivisions and mixed with other bitcoins from other places, recombining and splitting again several times over until the whole amount eventually comes out the other end, theoretically in such a way that it’s impossible to track. Silk Road’s in-built tumbler successfully foiled the FBI, allegedly.

However, reddit user TheNodManOut managed to track where the first bunch of transfers out of Sheep went, and from there and silkroadreloaded2 worked out which tumbler that the thief was using. Here’s how silkroadreloaded2 describes what’s happened since (“Tomas” is the alleged owner of Sheep, and one of the suspects for many users):

All day, we've been chasing the scoundrel with our stolen bitcoins through the blockchain. Around lunchtime (UK), I was chasing him across the roof of a moving train, (metaphorically). I was less than 20 minutes, or 2 blockchain confirmations, behind "Tomas".

He was desperately creating new wallet addresses and moving his 49 retirement wallets through them, but having to wait for 3 or 4 confirmations each time before moving them again. Each time I caught up, I "666"ed him - sent 0.00666 bitcoins to mess up his lovely round numbers like 4,000. Then,all of a sudden, decimal places started appearing, and fractions of bitcoins were jumping from wallet to wallet like grasshoppers on a hotplate without stopping for confirmations.

Shit!

He was tumbling our stolen bitcoins a second time, and a tumbler is unbeatable....

Unless you guess which one it is, nearly all the coins belong to the person you're tracking, jump in with him, and get jumbled up through the same wallets using the same algorithm. I was hopping from foot to foot shouting "come on!" at my laptop, waiting an age for 6 blockchain confirmations to get 0.5 btc into "bitcoin fog". My half a bitcoin got sliced and diced through loads of wallets and I followed the biggest chunk with blockchain.info - along with 96,000 stolen ones!

Or, in other words:

He gathered 96,000 in one pot, then split it into about 50 smaller ones. then he saw me 666ing them all. Imagine a sports stadium with 96,000 people in it, each with $1000.

He sent them all via different routes all over the world, but the same 96,000 people then arrived at a different stadium and he went to bed.

Now there are 96,001, and I just phoned you on my mobile to tell you where the stadium is.

A major problem with tumblers is that they only work with lots of bitcoins coming and going from a lot of different sources - if a tumbler is taking in 96,000 bitcoins, those will massively outnumber all other bitcoins being tumbled and it’ll be easy to spot them coming out the other end. Mix in a little of your own with all those other ones and you'll find out the wallet addresses that the tumbler uses, and it should be easy to spot large transactions splitting off from there.

The fascinating consequence of this is that you can see the stolen bitcoins on the public blockchain, and as long as there are people keeping tabs on it there’s going to be no way for the thief to cash in on their haul. Considering how people rely on tumblers to maintain anonymity when buying illegal stuff online, this unusual loophole is something of a revelation.

Right now, as you’re reading this, you can watch as the the thief starts trying to move their bitcoins on again - it’s currently down to 92,000 bitcoins and dropping as smaller chunks begin going out. Selling those bitcoins and turning them into cash is going to be extremely difficult, as the major Bitcoin exchanges all demand proof of identity (specifically to avoid charges that they're involved in money laundering), and if they're broken down into smaller quantities to sell via a site like localbitcoins.com a paper trail will still be generated. As soon as it's possible to link one real-life bank account or identity to any bitcoins from that stash, it will be possible to work out their real-life identity.

This counts as one of the largest robberies in history at Bitcoin's current market value, ranking in the same company as real-life thefts like the $108m diamond theft at the Harry Winston store in Paris in 2008. 96,000 bitcoins also places the thief as one of the wealthiest Bitcoin millionaires on the current rich list (but bear in mind that few serious Bitcoin players keep their currency in just one wallet) - and all without having to go to the trouble of wearing balaclavas or threatening someone with a gun.

Let's watch and see what happens next.

Some fan-made physical bitcoins. (Photo: antanacoins/Flickr)

Ian Steadman is a staff science and technology writer at the New Statesman. He is on Twitter as @iansteadman.

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Why Twitter is dying, in ten tweets

It's ironic that the most heated discussions of the platform's weaknesses are playing out on the platform itself. 

Twitter has been dying since 2009, and commentators have pre-emptively declared it deceased pretty much every year since. To declare that it's on the downturn has become a bit of a cliché. But that doesn't mean that it isn't also, well, true.

Grumbling among users and commentators has grown to a roar over the past few days, thanks in part to a Buzzfeed report (refuted by Jack Dorsey, Twitter's CEO) claiming the service will move away from a chronological timeline and towards an algorithmic one. Users coined the hashtag #RIPTwitter in response, and, tellingly, many of their complaints spanned beyond the apparently erroneous report. 

They join a clutch of other murmurings, bits of data and suggestions that things are not as they should be in the Twitter aviary. 

Below is one response to the threat of the new timeline, aptly showing that for lots of users, the new feed would have been the straw that broke the tweeters' backs:

Twitter first announced it was considering a new 10,000 character limit in January, but it's yet to be introduced. Reactions so far indicate that no one thinks this is a good idea, as the 140 character limit is so central to Twitter's unique appeal. Other, smaller tweaks – like an edit button – would probably sit much more easily within Twitter's current stable of features, and actually improve user experience: 

While Dorsey completely denied that the change would take place, he then followed up with an ominous suggestion that something would be changing:

"It'll be more real-time than a feed playing out in real time!" probably isn't going to placate users who think the existing feed works just fine. It may be hard to make youself heard on the current timeline, but any kind of wizardry that's going to decide what's "timely" or "live" for you is surely going to discriminate against already alienated users.

I've written before about the common complaint that Twitter is lonely for those with smaller networks. Take this man, who predicts that he'll be even more invisible in Twitter's maelstrom if an algorithm deems him irrelevant: 

What's particularly troubling about Twitter's recent actions is the growing sense that it doesn't "get" its users. This was all but confirmed by a recent string of tweets from Brandon Carpenter, a Twitter employee who tweeted this in response to speculation about new features:

...and then was surprised and shocked when he received abuse from other accounts:

This is particularly ironic because Twitter's approach (or non-approach) to troll accounts and online abusers has made it a target for protest and satire (though last year it did begin to tackle the problem). @TrustySupport, a spoof account, earned hundreds of retweets by mocking Twitter's response to abuse:

Meanwhile, users like Milo Yiannopolous, who regularly incites his followers to abuse and troll individuals (often women and trans people, and most famously as part of G*merg*te), has thrived on Twitter's model and currently enjoys the attentions of almost 160,000 followers. He has boasted about the fact that Twitter could monetise his account to pull itself out of its current financial trough:

The proof of any social media empire's decline, though, is in its number and activity of users. Earlier this month, Business Insider reported that, based on a sample of tweets, tweets per user had fallen by almost 50 per cent since last August. Here's the reporter's tweet about it:

Interestingly, numbers of new users remained roughly the same – which implies not that Twitter can't get new customers, but that it can't keep its current ones engaged and tweeting. 

Most tellingly of all, Twitter has stopped reporting these kinds of numbers publicly, which is why Jim Edwards had to rely on data taken from an API. Another publication followed up Edwards' story with reports that users aren't on the platform enough to generate ad revenue:

The missing piece of the puzzle, and perhaps the one thing keeping Twitter alive, is that its replacement hasn't (yet) surfaced. Commentators obsessed with its declining fortunes still take to Twitter to discuss them, or to share their articles claiming the platform is already dead. It's ironic that the most heated discussions of the platform's weaknesses are playing out on the platform itself. 

For all its faults, and for all they might multiply, Twitter's one advantage is that there's currently no other totally open platform where people can throw their thoughts around in plain, public view. Its greatest threat yet will come not from a new, dodgy feature, but from a new platform – one that can actually compete with it.

Barbara Speed is a technology and digital culture writer at the New Statesman and a staff writer at CityMetric.