2/25/2014 Bitcoin Heists Test Currency’s Legitimacy | WebProNews

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[ Life ] In startling news Tuesday morning, one of

the world’s largest bitcoin exchanges, Mt. Gox, ceased

existing, leaving millions of dollars worth of bitcoins

unaccounted for.

The Tokyo-based exchange company has stated that

a security leak that has been present since September

has violated the integrity of some 700,000 accounts,

totaling approximately $350 million in stolen currency.

Due to this huge loss of bitcoins, the value of the

cyber-currency has plummeted drastically in the last 2

hours, losing nearly 20% of its value on the open-

market.

In order to save some legitimacy and ethos for the

currency, 6 of the world’s leading bitcoin exchanges

have released a statement claiming that the heist was

a result of negligent actions of Mt. Gox and is not

representative of an inherent security flaw in the digital

currency itself:

“This tragic violation of the trust of users of Mt.Gox was the result of one company’s

abhorrent actions and does not reflect the resilience or value of bitcoin and the digital

currency industry. There are hundreds of trustworthy and responsible companies involved

Bitcoin Heists Test Currency’s LegitimacyBy Brian Powell · 3 hours ago · 0 Comments

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RELATED ITEMS BITCOINS BOTNET CURRENCY HACKERS HEISTS MT. GOX SILK ROAD

in bitcoin. These companies will continue to build the future of money by making bitcoin

more secure and easy to use for consumers and merchants. As with any new industry,

there are certain bad actors that need to be weeded out, and that is what we are seeing

today… We are confident, however, that strong Bitcoin companies, led by highly

competent teams and backed by credible investors, will continue to thrive, and to fulfill the

promise that bitcoin offers as the future of payment in the Internet age.”

The Mt. Gox incident is simply the most recent scandal bitcoins have faced over the past year.

Earlier this month, another heist was uncovered which involved the use of a “Pony” botnet to steal

the account information for 700,000 accounts. The information from these accounts allowed

hackers access to 85 private wallets with a total of approximately $220,000. A botnet is a form of

Trojan malware which infects thousands of host computers, which then take commands from a

central computer.

The goal of these computers is to hack into the private information owners have stored, granting

the hackers access to the private key numbers which are used to access the virtual wallets

bitcoins in which bitcoins are stored. Ziv Mador, security research director with Trustwave, stated

that “It is the first time we saw such a widespread presence of this type of malware. It was on

hundreds of thousands of machines.”

While this may have been the first time malware has been used on such a scale to steal bitcoins,

it is not the first time bitcoins have been stolen by hackers. Last year, in fact, over $1 million in

bitcoins were stolen by hackers who were able to reset an exchange site’s password through an

email recovery scheme.

These latest large-scale bitcoin heists, added to the two Silk Road busts which have occurred so

far, make many question whether or not bitcoins are a viable form of currency. Campbell Harvey,

a professor at the Duke University who specializes in financial markets and global risk

management, believes that the recent news coming from Mt. Gox “reminds us of the downside of

decentralized, unregulated currencies. There is no Federal Reserve or IMF to come to the

rescue. There is no deposit insurance.” However, he goes on to add that this “doesn’t mean the

end of the road” for bitcoins as “increasingly sophisticated investors” will seek solutions which

“raise both quality and confidence” of bitcoin exchanges.

While Harvey may be optimistic, those at Mt. Gox are not. In a leaked “Crisis Strategy Draft” plan,

executives at Mt. Gox state, “The reality is that MtGox can go bankrupt at any moment, and

certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance

in the public eye, the likely damage in public perception to this class of technology could put it

back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing

hyperbolic, this could be the end of Bitcoin, at least for most of the public.”

Until the world knows the answer to whether or not bitcoins are a secure investment or not, one of

two actions should be taken: 1) Either store bitcoins in an offline wallet; or 2) Cash those puppies

in and don’t look back. Considering the wildly fluctuating value of the currency and the increased

security-risks of late, option two is looking better and better everyday.

Image via Wikimedia Commons

About Brian PowellBrian Powell is a contract writer for WebProNews. In his day job, he is a teacher andtutor for The Princeton Review. He also serves as an assistant coach to TransylvaniaUniversity's Speech and Debate team. Google+View all posts by Brian Powell →

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