The Immaturity of the Bitcoin Economy – Bitomat.pl Technical Failure

The Polish Bitcoin exchange, bitomat.pl, suffered a “technical problem” where they lost 17,000 Bitcoins from their servers.  This caused the failure of the exchange.  Mt.Gox is acquiring bitomat.pl and will integrate their user database into the Mt. Gox Bitcoin exchange.  Mt. Gox will also release a Polish language version of their exchange.

It’s pretty clear that we need commercial, venture-capital backed development in the Bitcoin economy.  Many of the existing exchanges have been hacked, and we have seen attacks against the very way that Bitcoins are verified (see the Mybitcoin.com debacle).

I’ve heard people in the community praising sites that use HTTPS as “secure”. This illustrates the fundamental lack of knowledge that people in the community have regarding modern hacking and cyber crime.

I’ve been involved with mitigating Internet crime against banks and payment processors since 2003. The measures that are being taken by existing Bitcoin services are orders of magnitude too simple to defeat the attackers that are going to be focusing on this economy. We’ve seen early glimmers of Bitcoin malware, but today hackers do not need to resort to such sophisticated measures. They can use rudimentary security and web application attacks to breach many Bitcoin services, and steal the stored coins.

We need to see a major shift in the security capabilities of Bitcoin services in order to ensure a scalable thriving economy. As it grows, so will the interest of the cyber crime community. And so will the attacks and their sophistication.

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About Dave

I have been into financial cryptography and alternative electronic currencies since the mid 1990s. I have attended the Financial Cryptography conference, and have invented patents in the fields of cryptography and security. I've built systems for Visa, the US Federal Reserve, NASD, and hundreds of banks around the world.

Posted on August 17, 2011, in Uncategorized. Bookmark the permalink. Leave a comment.

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