Bitcoin Exchange Mt. Gox Targeted by Cyber Attack

Just as Bitcoin explodes beyond the $1 billion mark thanks to Europe’s debt crisis, the emerging virtual currency was dealt a setback this week after a key exchange was hit by a powerful cyber attack that caused delays.

Coupled with other recent technical glitches, this week’s distributed denial of service (DDoS) attack against Bitcoin exchange Mt. Gox cuts into one of the electronic currency’s greatest selling points: its relative safety compared with deposits in Cyprus.

In a message posted on its official Twitter account, Japan-based Mt. Gox told users Thursday night it was “experiencing a major DDoS” attack. Within hours Mt. Gox said the issue had been resolved.
The exchange didn’t respond to a request for further comment on the DDoS attack.
According to the Mt. Gox website, it is the “world’s most established Bitcoin exchange” and the only multi-currency Bitcoin trading platform.

"This attack demonstrates both the worth of Bitcoin and the value of its business availability. Now there are new risks to both,” said Carl Herberger, vice president of security solutions at Radware (RDWR).
Earlier this week payments startup Dwolla, which is also used to trade Bitcoins, suffered from an apparent DDoS attack as well.

Established in 2009, Bitcoin has emerged as a winner in the controversy surrounding Europe’s decision to “bail in” bank depositors in Cyprus to pay for a rescue of the tiny island country’s outsized banking system.
The virtual currency is built on an open-source software code and unlike traditional currencies is highly decentralized, making it appealing to those worried about the safety of the monetary system. Bitcoin also says its accounts can’t be seized by local authorities, setting it apart from bank deposits in Cyprus.

Underscoring the surge of activity in the virtual currency, one Bitcoin traded as high as $93.06 on Friday, up a whopping 125% from the beginning of March. The value of Bitcoins outstanding has also now surpassed the $1 billion threshold.

Bitcoin “is clearly having a breakthrough moment here, and a deeply surprising one given its novelty and nascent infrastructure,” Nicholas Colas, chief market strategist at ConvergEx, wrote in a recent note.
However, Bitcoin has also faced technical glitches, including one on March 12 that caused the currency’s value to briefly tumble 23% before recovering.

“Bitcoin is of course wholly dependent upon the functioning of the Internet,”said  Daniel Friedberg, a financial-services attorney at Seattle law firm Graham & Dunn who has a Bitcoin client base.
“Users of Bitcoin are not used to any ‘down time’ and have grown accustomed to being able to immediately convert the Bitcoin virtual currency into real legal tender, 24 hours a day, 7 days a week. Any disruption at all creates customer complaints,” he said.

Bitcoin isn’t alone in grappling with cyber attacks. Hacktivists have increasingly set their sets on the U.S. financial system, slowing access to the websites of big banks like J.P. Morgan Chase (JPM) and Bank of America (BAC) in recent months.

Earlier this week Wells Fargo (WFC), the largest U.S. bank by market capitalization, acknowledged its consumer banking website was the victim of a DDoS attack.


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Cyprus Crisis Boosting Unique Currency, the Bitcoin

Currency markets are keeping close track of Cyprus' banking crisis and are braced for possible repercussions, but one currency has thrived in the chaos and zoomed in value -- Bitcoins. A Bitcoin is a digital currency that is traded electronically and does not need government backing. Despite its name, there is no coin to put in your pocket.

 Two weeks ago, one Bitcoin was worth $40, then a record high. Today, it's worth $72, largely because of "incremental interest" from euro and Russian ruble holders who are terrified by the situation in Cyprus, said Nicholas Colas, chief market strategist at ConvergEx Group, a financial technology company in Manhattan.

"The best-performing currency year-to-date has no home country, no central banker and no physical scrip," Colas said. The Bitcoin is "clearly having a breakthrough moment here, and a deeply surprising one given its novelty and nascent infrastructure," he said. The Bitcoin reportedly was invented by a man who called himself Satoshi Nakamoto, and who may -- or may not -- have been a 23-year-old graduate student in cryptography at Trinity College in Dublin. He wanted people to be able to exchange money electronically and securely without a third party's involvement.

Although there are no physical coins, Walmart sells Bitcoin gift cards, and as Salon noted, WordPress and Reddit take payments in Bitcoin. Charlie Shrem, the CEO of BitInstant, a payment processor for Bitcoin exchanges and other merchants, thinks the Bitcoin is the wave of the future. "Let's say you have someone in Cyprus who badly needs money," Shrem said. "How are you going to get that person money? There's not enough cash going around. Bitcoin can and will be used as a barter, or maybe a collateral tool." He believes that people will first use Bitcoin "for its better uses" like remittance, wire transfers, donations and micropayments, before it reaches a mainstream audience.

"Imagine being able to pay five cents to read an article online instead of these ridiculous pay walls that require expensive monthly subscriptions," he said. "People will start reading the news again. Right now, you can't do that. Try sending five cents over the Internet." But Diana Furchtgott-Roth, the former chief economist for the U.S. Department of Labor and a senior fellow at the Manhattan Institute, a conservative think tank, was unimpressed. "It's a gimmick," she said.

"The Bitcoin would never work in Cyprus because Cyprus is full of insolvent loans. Putting in different currency is not going to help. They would ideally have their own currency. Whether it's digital or dollars, they need to separate from the euro and put in economic currency that will attract more investment." Colas was also hesitant about the Bitcoin's future. "Whether it succeeds or fails is hard to predict," Colas said. "We're clearly in uncharted waters. But one thing is clear: Bitcoin is one more lens with which to assess the ongoing European financial crisis."

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What Is Bitcoin? Tom Woods Talks to Erik Voorhees

What Is Bitcoin? Tom Woods Talks to Erik Voorhees

Filling in as host of the Peter Schiff Show, bestselling author Tom Woods interviews Erik Voorhees of BitInstant about Bitcoin, and takes listener calls. Visit these sites:

http://www.WeUseCoins.org
http://www.BitInstant.com

Bitcoin Value Reaches An All-Time High Compared To The Dollar

Digital currency used in place of the dollar isn't exactly a new concept, especially online.

Indeed, Microsoft has used its own points as a sort of alternate currency for Xbox 360 buyers for a number of years, while a number of cross-platform games following the same strategy for points and auction houses.

One of the most popular forms of alternate digital currency introduced in recent years is known as Bitcoin. The company has been in the news in recent months with hackers reportedly making off with about $250,000 worth of digital currency in September of last year.

More recently, Mega announced that it would be taking Bitcoin as a form of payment.

Interestingly, this week Bitcoin hit an all-time high in terms of value compared to the US dollar. Indeed, the exchange rate for the virtual currency and the US dollar climbed past $32 for the first time ever. The previous all-time high was hit in June of 2011 when the exchange rate was set at $31.9099 for the US dollar.

At its lowest point, the exchange rate was under two dollars in 2011 but the value of Bitcoin has risen over the last several months as the currency makes its way to new markets.

Despite the $250,000 virtual money heist last year, Bitcoin has remained relatively secure. Other than Mega, a number of other major websites also accept the virtual currency for payment, including Reddit and Wordpress.com.

Last year a French bank also received clearance to become a Bitcoin exchange - helping to broaden the availability for the virtual currency. To be sure, the bank became certified soon after the total circulation for the virtual currency hit the 2.5 million mark.

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