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Bitcoin storage firm shuttered following hack

04 Apr 2013
treasure-chest-with-gold-coins

Bitcoin wallet company Instawallet was shut down following a backdoor hack on the firm's systems. The attack put a damper on the rapid rise of the virtual currency.

Instawallet is a storage center for the Bitcoins. The firm has yet to disclose the extent of the attack. However, the company has reported that it will begin to accept reimbursement claims from its users.

"The Instawallet service is suspended indefinitely until we are able to develop an alternative architecture," Instawallet wrote on their website.

"Our database was fraudulently accessed, due to the very nature of Instawallet it is impossible to reopen the service as-is."

Bitcoins are a virtual currency that is not controlled by a single governing entity. The currency is untraceable and many of its supporters rally around its independent nature. Bitcoins can be transferred without oversight and cashed-in for real-world money.

The currency was criticised likened to a narco-currency. Federal Bureau of Investigation (FBI) officials decried the system's potential to fund illegal activities last May.

However, Bitcoin transactions are also frequently used for above board payments. Earlier this year, Reddit announced that it would allow users to make payments to the firm using Bitcoins.

As of this writing, an individual Bitcoin can be cashed for over $132. The currencies value has rocketed over recent months. Since the beginning of this year Bitcoin's value has grown exponentially.

Instawallet has reported that it will begin to accept submissions for reimbursement over the next 90 days. Anyone who submits a claim for an account holding less than 50 Bitcoins are guaranteed a reimbursement.

Claims for damages greater than 50 Bitcoins will be processed on a case-by-case basis. At current values 50 Bitcoins would be worth over $6,000.

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James Dohnert
About

James is a freelance writer and editor. In addition to ClickZ, his work has appeared in publications like V3, The Commonwealth Club, CachedTech.com, and Shonen Jump magazine. He studied Journalism at Weber State University.

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