The bad news is that three Bitcoin thefts made headlines this week.
The slightly better news is they tell us two important things about the state of Bitcoin.
The hook of the first heist was how mind-bogglingly simple the scheme was: A guy called tech support pretending to be James Grant, the head of Canadian Bitcoins, and was subsequently able to gain access to a wallet containing $US100,000 worth of Bitcoin.
The fault clearly lay with with the tech support firm, which is in fact owned by Canadian telecom giant Rogers Communications, and in itself should not undermine confidence in the viability of the digital currency.
The other two thefts were more straightforward: A digital currency exchange based in Palau called CoinEX was hacked and robbed of all its Bitcoin. And Polish exchange BitCurex lost between 10% and 20% of its Bitcoins.
But there was some decently heartening news for users of the sites:
all three burglarized firms promised to reimburse any affected users out of their own pocket. This now seems to be industry practice — something that was not the case in earlier years. “I believe it is the responsibility of any business that deals in the Bitcoin space to have sufficient security and policies in place that should something happen, they can cover the loss without any affect to the customers,” (the real) James Grant told BI by email. He added, “Because we have sufficient cold storage, and distributed storage in place for our bitcoins, only a a small portion are ever at risk from a single attack vector.” The wallet industry leader, Coinbase, only keeps amounts it is able to fully reimburse customers for in “hot” or online vaults.
At the same time, it seems clear that Bitcoins remain tremendously attractive to thieves. Not because the Bitcoin code itself can be hacked, but because the cryptocurrency is so young — and entirely digital. That makes it a ripe piece of meat for anyone with the requisite skills and an acquisitive bent. The Guardian’s Alex Hern recently went down the list of every Bitcoin hack in history, counting at least a dozen since June 2011, or one every 2.5 months. That is not exactly a standard rate for other currencies or commodities. And (with the exception of Gox) the market no longer responds very much to new robberies, each one adds an incremental level of doubt in the mainstream about
Those fully committed to Bitcoin as a business — not just as a token of a libertarian movement — are now embracing increased regulation in a further attempt steer the currency away from those kinds of headlines.
Given that the robbery rate appears to show no sign of slowing, however, mainstream investors interested in the currency will have to decide whether the word of the firms they use — strong as it is — is still enough.