Hack attack pushes Bitcoin to the brink

Bitcoin, an online currency beloved of libertarians and technophiles, which had been threatening to break into the mainstream, was facing the worst crisis of its two-year existence last night after hackers brought down its biggest exchange.

The attack, an apparent attempt to steal the contents of users' online accounts and convert them into real money, is the latest in a string of disasters to hit Bitcoin in the past few weeks, raising questions over whether the currency has a future.

In the UK, supporters of Bitcoin made an urgent appeal to the Financial Services Authority to regulate the largest London-based exchange, so as to reassure people that using Bitcoin is safe. "Unregulated businesses don't usual cry out for regulation," said Donald Norman, co-founder of the exchange Britcoin. "But because we are unusual, and because we are dealing with people's money, and because of all the scary stories around Bitcoin, we would like nothing more than to have a government authority looking into our accounts – especially now."

The exact nature of the attack on the Japan-based Mt Gox exchange was not immediately clear. Mark Karpeles, who runs Mt Gox, said attackers gained access to a computer that had details of all account users and their encrypted passwords. As of last night, the company was still running "intrusion tests", as rumours swirled about how much money might have been stolen in the heist.

Bitcoin was invented as an open source project in 2009 as a decentralised alternative to real world currencies. By setting an absolute limit on the amount of Bitcoins that could be created, its adherents believe, the currency could one day become a "gold standard" against which government-operated currencies could be valued. The currency could also become an easy way to conduct commerce online, away from expensive taxation, regulation and bank fees.

As of 2pm, New York-time on Sunday, the number of Bitcoins in existence were worth more than $100m (£61.7m), on electronic exchanges that valued them at $17.50 apiece. Moments later, the price appeared to crash to just pennies, because of irregular trading on Mt Gox.

The latest disaster will fuel the online debate over whether Bitcoin can become a serious currency, or is simply too volatile. As mainstream interest began to take off last month, the US dollar-value of Bitcoins surged 1,000 per cent. Earlier this month, it crashed by 30 per cent on a single day.

Hundreds of small online merchants and Bitcoin adherents have started to accept the currency as payment for goods and services, though no major retailers do.

The currency has started to attract the attention of politicians in the US after reports that Bitcoins have been used to purchase illegal drugs. Last month, US Senator Chuck Schumer called Bitcoin "an online form of money laundering used to disguise the source of money".

PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Voices
voices
Sport
Roger Federer is greeted by Michael Jordan following his victory over Marinko Matosevic
tennisRoger Federer gets Michael Jordan's applause following tweener shot in win over Marinko Matosevic
News
peopleJustin Bieber accuses paparazzi of acting 'recklessly' after car crash
Arts and Entertainment
Oppressive atmosphere: the cast of 'Tyrant'
tvIntroducing Tyrant, one of the most hotly anticipated dramas of the year
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Client Services Executive / Account Executive - SW London

£23000 - £26000 per annum: Ashdown Group: Account Executive / Client Services ...

PA to CEO / Executive Secretary

£36000 - £38000 per annum: Ashdown Group: Executive PA to CEO & Executive Dire...

Generalist HR Administrator, Tunbridge Wells, Kent - £28,000.

£25000 - £28000 per annum: Ashdown Group: Generalist HR Administrator - Tunbri...

Senior C# Developer (.NET, C#, JMS, TDD, Web API, MVC, integrat

£45000 - £75000 per annum + benefits+bonus+package: Harrington Starr: Senior C...

Day In a Page

Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?
Rachael Lander interview: From strung out to playing strings

From strung out to playing strings

Award-winning cellist Rachael Lander’s career was almost destroyed by the alcohol she drank to fight stage fright. Now she’s playing with Elbow and Ellie Goulding
The science of saturated fat: A big fat surprise about nutrition?

A big fat surprise about nutrition?

The science linking saturated fats to heart disease and other health issues has never been sound. Nina Teicholz looks at how governments started advising incorrectly on diets
Emmys 2014 review: Can they genuinely compete with the Oscars

Can they genuinely compete with the Oscars?

The recent Emmy Awards are certainly glamorous, but they can't beat their movie cousins
On the road to nowhere: A Routemaster trip to remember

On the road to nowhere

A Routemaster trip to remember
Hotel India: Mumbai's Taj Mahal Palace leaves its darker days behind

Hotel India

Mumbai's Taj Mahal Palace leaves its darker days behind
10 best pencil cases

Back to school: 10 best pencil cases

Whether it’s their first day at school, uni or a new project, treat the student in your life to some smart stationery
Arsenal vs Besiktas Champions League qualifier: Gunners know battle with Turks is a season-defining fixture

Arsenal know battle with Besiktas is a season-defining fixture

Arsene Wenger admits his below-strength side will have to improve on last week’s show to pass tough test
Pete Jenson: Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought

Pete Jenson: A Different League

Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought
This guitar riff has been voted greatest of all time

The Greatest Guitar Riff of all time

Whole Lotta Votes from Radio 2 listeners
Britain’s superstar ballerina

Britain’s superstar ballerina

Alicia Markova danced... every night of the week and twice on Saturdays
Berlin's Furrie invasion

Berlin's Furrie invasion

2000 fans attended Eurofeurence
‘It was a tidal wave of terror’

‘It was a tidal wave of terror’

Driven to the edge by postpartum psychosis