$1.2M Heist Doesn’t Bode Well For Bitcoins as Secure Currency

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One of the biggest concerns with Bitcoins of late has been the insecurity and raiding of online wallets. According to a list in BitcoinTalks Forum, there have been more than 30 Bitcoin heists of varying levels of severity since 2011.

Most recently, was a robbery of the online wallet Inputs.io, totaling a whopping $1.2M. Inputs.io founder, who goes by the handle TradeFortress, said on a BitcoinTalks Forum, “I do not recommend storing any Bitcoins accessible to computers connected to the internet.”

That’s pretty alarming since Bitcoins are digital currency. Apparently, the compromised server was one that had been hacked before. TradeFortress told WIRED in an email interview that the attack came through “a compromising chain of email accounts” through which the hacker was able to reset the Linode server password.

Unfortunately for those whose Bitcoins were stored using Inputs.io, the online wallet provider doesn’t have enough coin to repay everyone what was lost. According to WIRED, TradeFortress has been issuing partial refunds using his personal stash and remaining cold storage coins. While TradeFortress was able to track down the origin of the attack, since Bitcoins are hard to trace, it’s unlikely the hacker will be brought to justice.

This doesn’t bode well for the digital currency, which some entrepreneurs are pushing as the tool for increased security for digital transactions. While it may be true that Bitcoins can be stored offline, when it comes to mass use, the likelihood is that most consumers just aren’t savvy enough to handle such an ephemeral form of currency.

I’m curious if this will fuel the push for increased regulation or if these kinds of security breaches will discourage the growth of Bitcoins as a legitimate currency for the masses. Seems to me, consumers are well used to jumping the hoops related to online purchases and Bitcoins have a long way to go before they can go mainstream.

Photo credit:  zcopley

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