28 February 2024

Bitstamp Suspends Services After Breach

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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 2013.

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.”

Click here to access the full article on The Wall Street Journal. 

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