One of the largest online bitcoin exchanges has temporarily
suspended services after losing some 19,000 bitcoins ($5.1 million) in what the
company said was a breach of its systems, reviving concerns about the security
of the digital currency. Slovenia-based Bitstamp said some of its “operational
wallets” were compromised on Jan. 4 and urged customers to no longer make
deposits to previously issued bitcoin deposit addresses. The alleged
cyberattack comes less than a year after the collapse of Tokyo-based exchange
Mt. Gox, which initially said hackers had stolen 800,000 bitcoins—200,000 of
which were later recovered—worth almost $500 million at the time.
The alleged breach is stirring skeptics to argue that
bitcoin remains too insecure for mainstream use. Launched in 2009, bitcoin is
an electronic currency created on computers and traded among people who store
it in digital wallets. Despite volatility in the bitcoin price, which has
fallen 75% from a peak around $1,150 in early December 2013 to about $283 in
recent trading, mainstream adoption of bitcoin has continued. In 2014, various
businesses, including Microsoft Corp. and Dell Inc., announced they
would accept it in payment for certain goods and services, often hedging the
risk of holding the digital currency by quickly converting it into dollars.
After a sharp three-day decline in bitcoin’s price that some
analysts connected to Bitstamp’s problems, the market stabilized Tuesday.
Questions swirled among bitcoin users on Twitter and other public forums about
the exchange. However, leading businessmen who back bitcoin ventures spoke out
mostly in defense of the company’s management, while seeking to assure people
that their own operations were secure.
There has been a surge of venture funding for bitcoin projects,
spurred in part by innovations that use the digital currency’s core software
for applications that aim to bypass middlemen in various commercial activities.
According to news service Coindesk, new venture capital invested in bitcoin
startups reached $315 million last year, more than tripling from $93 million in
But Jeffrey Robinson, whose recently published book “BitCon”
harshly critiques the bitcoin movement, said Bitstamp’s emergence as Mt. Gox’s
successor showed that bitcoin enthusiasts are “delusional.”
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