Bitcoin hack prevents withdrawals

By Danielle Middleton topicIcon Internet News

Bitcoin is target of denial of service attacks

Virtual currency Bitcoin, has been hit by a series of denial of service (DoS) attacks affecting customers' withdrawals.

The attacks have come from unknown hackers who have sent mutated lines of code into the program running the virtual currency. Two Bitcoin exchanges have been affected by the hacks so far.

Jinyoung Lee Englund, spokewoman for the Bitcoin Foundation said in a statement to Reuters: "Whoever is doing this is not stealing coins, but is succeeding in preventing some transactions from confirming. It's important to note that DoS attacks do not affect people's bitcoin wallets or funds."

Bitcoin value takes a turn

This is the latest in a string of unfortunate incidents for Bitcoin, whose price dropped more substantially on Monday than it had done for over two months when news of an alleged defect was released. Bitcoin value fell from $700 (£427) to $540 (£328) after one of the world's largest exchanges, MtGox suspended withdrawals when it suspected a flaw in the currency's underlying software.

The Tokyo based exchange stated that although Bitcoin wallets would not be affected by the defect in the software, the fault did make it possible for the Bitcoin network to be used to alter transaction details 'to make it seem like a sending of bitcoins to a Bitcoin wallet did not occur when in fact it did occur.'

MtGox has said that the halt on withdrawals is currently indefinite.

New regulations

One reason for the continued fluctuation of Bitcoin shares around the globe, is the currency's lack of regulation. Benjamin Lawsky, superintendent of New York's Department of Financial Services commented on the subject at the New America Foundation in Washington: "Our objective is to provide appropriate guard rails to protect consumers and root out money laundering without stifling beneficial innovation."

This will include a "BitLicense" which will be issued to businesses handling virtual currencies, and will make New York the first US state to enforce regulations on alternative tender.

Adrian Mursec, Head of Development at theEword said: "To many investors, Bitcoin is attractive because it remains unregulated and fluctuations in value are solely down to demand. However, whether it becomes a legitimate currency is dependent on consumer faith on a large scale which won't be achieved until there is the security of regulation in place.

"The denial of service hack and subsequent plummeting share price, is just one example of how insecure the currency remains."