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The value of Bitcoin has dropped sharply after MtGox – one of the largest trading exchanges – said there was a flaw in the virtual currency’s underlying software.
MtGox said it had halted transfers to external Bitcoin addresses on Friday after detecting “unusual activity”.
It said an investigation had revealed it was possible for thieves to fool the transaction process so that double the correct amount of bitcoins would be sent.
Bitcoins fell from $700 to $540.
The Tokyo-based firm said it was now working with the Bitcoin core development team to “mitigate this issue”, which it said was not limited to its own Bitcoin-wallet system.
The value of Bitcoin has dropped sharply after MtGox said there was a flaw in the virtual currency’s underlying software
A Bitcoin wallet is the place where Bitcoin addresses – the virtual post-boxes where each bitcoin is stored -are kept.
It added that cash withdrawals and transfers of bitcoins to – rather than from – Bitcoin Wallets were unaffected.
MtGox said in a statement: “A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a Bitcoin wallet did not occur when in fact it did occur.
“Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent.”
Gavin Andresen, chief scientist at the Bitcoin Foundation – which oversees and develops the Bitcoin software – denied the problem was its fault.
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Two Bitcoin exchange operators have been arrested in the US.
The Department of Justice said Robert Faiella, known as BTCKing, and Charlie Shrem from BitInstant.com have both been charged with money laundering.
The authorities said the two operators engaged in a scheme to sell more than $1 million in Bitcoins to users of online drug marketplace the Silk Road.
Silk Road site was shut down last year and its alleged owner was arrested.
Robert Faiella, known as BTCKing, and Charlie Shrem from BitInstant.com have both been charged with money laundering
Charlie Shrem, 24, was arrested on Sunday at New York’s JFK airport. He was expected to appear in court on Monday, prosecutors said.
Robert Faiella, 52, was arrested on Monday at his home in Cape Coral, Florida.
Bitcoin exchanges are services that allow users to trade bitcoins for traditional currencies.
Charlie Shrem is accused of allowing Robert Faiella to use BitInstant to purchase large quantities of Bitcoins to sell on to Silk Road users who wanted to anonymously buy drugs.
The authorities said Charlie Shrem was aware that the Bitcoins were being used for such purchases, and therefore he was in violation of the Bank Secrecy Act.
The Act requires financial institutions in the US to alert authorities to any suspicious activity that may suggest money laundering is taking place.
Charlie Shrem is a founding member and the current vice chairman of the Bitcoin Foundation, a trade group set up to promote Bitcoin as an alternative currency.
Last year, Charlie Shrem set up a bar in New York that accepted Bitcoins.
BitInstant was one of the largest Bitcoin exchanges on the internet.
However, the service has been inaccessible for some time, explained Mike Hearn, another board member at the Bitcoin Foundation.
BitInstant’s investors include Tyler and Cameron Winklevoss – the twins who previously sued Mark Zuckerberg claiming he had stolen their idea for Facebook.
Kanye West has filed a lawsuit to stop production of Coinye West digital currency, saying they unjustly cash in on his fame.
The lawsuit, filed on Tuesday in Manhattan, seeks to stop companies and unidentified people from exchanging the digital currency.
It is also asking for damages for hurting the rapper’s reputation.
However, its makers appear to have backed down from a court case after a message was posted on Twitter.
“#BLAMEKANYE Coinye devs have dispersed. New ownership, better things coming,” the @CoinyeCoins tweet said.
One of the websites linked with Coinye also posted a message on its homepage reading: “Coinye is dead. You win, Kanye.”
Kanye West has filed a lawsuit to stop production of Coinye West digital currency
Kanye West’s lawsuit says the creators of the digital coins “brazenly admit” they used his name and likeness to associate their new currency with the rapper.
Its creators used a cartoon image of a coin featuring the musician in large sunglasses.
The lawsuit also claims the people behind the currency boasted it couldn’t be stopped whether it “looks like a dollar, a dog or a cartoon picture of a rapper”.
Coinye West, also known as crypto-currency, is similar to Bitcoin, a paperless currency people can use like cash anywhere in the world.
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Elliptic Vault, a Bitcoin storage service that insures deposits of the digital currency against loss and theft, has launched in London.
Elliptic Vault uses “deep cold storage”, where private encrypted keys to Bitcoins are stored on offline servers and in a secure location.
The facility’s founders say they are the “first in the world” to offer insurance for Bitcoin owners.
Stolen Bitcoins cannot be recovered as all transactions are irreversible.
Online wallets used to store Bitcoins have been subject to a number of cyber-attacks and some users have also suffered from accidental loss.
James Howells lost about $7.5 million when he threw away his hard drive, forgetting that he had Bitcoins stored on it.
Unlike money stored in a conventional bank, Bitcoins are not insured and there is no way of retrieving them once they are gone.
But convincing an insurance firm to trust the nascent currency was not an easy task.
The company is underwritten by Lloyd’s of London, which will give people “more faith in the Bitcoin system”, according to Emily Spaven, managing editor of CoinDesk, a digital currency news site.
Elliptic Vault uses “deep cold storage”, where private encrypted keys to Bitcoins are stored on offline servers and in a secure location
Insurance payouts will be calculated using the Bitcoin to US dollar exchange rate at the time a claim is made.
Elliptic’s focus is on storing Bitcoins as securely as possible, using “deep cold storage” techniques.
Bitcoin keys are encrypted and stored offline. There are multiple copies, protected by layers of cryptographic and physical security.
The copies are accessible only via a quorum of Elliptic’s directors.
Elliptic’s launch comes as Bitcoin has been making news around the world, with governments deciding how to legislate for the currency.
Singapore has become one of the first countries to issue guidance on taxation for Bitcoin businesses, although it also said it was monitoring transactions to detect illicit financing by criminals and terrorists.
Bitcoin was less fortunate in China, where the largest online marketplace, Alibaba Group’s Taobao, said it would ban virtual currencies.
In December, the country’s central bank ordered financial institutions to halt Bitcoin-related services and products.
There was a breakthrough for the currency in the US, however, where Overstock.com became one of the first major online retailers to accept Bitcoin on Thursday.
Bitcoin is often referred to as a new kind of currency, but it may be best to think of its units being virtual tokens rather than physical coins or notes.
Like many assets its value is determined by how much people are willing to exchange it for.
To process Bitcoin transactions, a procedure called “mining” must take place, which involves a computer solving a difficult mathematical problem with a 64-digit solution.
For each problem solved, one block of bitcoins is processed. In addition the miner is rewarded with new bitcoins.
Bitcoin is often referred to as a new kind of currency, but it may be best to think of its units being virtual tokens rather than physical coins or notes
This provides an incentive for people to provide computer processing power to solve the problems.
To compensate for the growing power of computer chips, the difficulty of the puzzles is adjusted to ensure a steady stream of about 3,600 new bitcoins a day.
There are currently about 11 million bitcoins in existence.
To receive a bitcoin a user must have a Bitcoin address – a string of 27-34 letters and numbers – which acts as a kind of virtual postbox to and from which the bitcoins are sent.
Since there is no registry of these addresses, people can use them to protect their anonymity when making a transaction.
These addresses are in turn stored in Bitcoin wallets which are used to manage savings.
They operate like privately run bank accounts – with the proviso that if the data is lost, so are the bitcoins owned.
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Bitcoin’s value has topped $1,000 again after social gaming firm Zynga said it would start accepting the virtual currency as a payment option.
Zynga is perhaps the most significant video games firm to accept bitcoins to date.
The virtual currency has been gaining in popularity but its value has been highly volatile in recent weeks.
It peaked at $1,250 in November last year, but fell sharply in December after China restricted trade.
According to the South China Morning Post, the value of a single Bitcoin fell to as low as 2,560 yuan ($421) in December, after China’s move.
On Monday, a single Bitcoin was trading close to $1,030 on MTGox, one of the virtual currency’s major exchanges.
Zynga follows Ouya, the Android-based video games console-maker, which began accepting payments for its hardware in bitcoins last month.
Zynga is the most significant video games firm to accept bitcoins to date
The Humble Bundle – an organisation selling a changing selection of indie games – also began accepting bitcoins in 2013.
Supporters of Bitcoin, which is not backed by a central bank, have been pushing for its increased usage.
Its popularity and value surged last year after a US Senate committee described virtual currencies as a “legitimate financial service”.
Zynga said it had tied up with BitPay, a Bitcoin payment service, to allow users to purchase virtual goods in some of its games using the facility.
“In response to Bitcoin’s rise in popularity around the world, Zynga, with help from BitPay, is testing expanded payment options for players to make in-game purchases using Bitcoin,” the company said in a post on Reddit.
Concerns over the use and risks associated the virtual currency have also grown.
Bitcoin became popular, in part, due to it being difficult to trace transactions that use it. The currency has been linked to illegal activity online.
Last month, the European Banking Authority warned the public about the potential risks of using bitcoins.
“Currently, no specific regulatory protections exist in the European Union that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business,” the EBA said.
China, the world’s second largest economy, has also banned its banks from handling Bitcoin transactions, saying they had no legal status and should not be used as a currency.
At the same time, there have been concerns that the rise in Bitcoin’s value has been triggered by speculators looking to cash in on its popularity.
Alan Greenspan, former Federal Reserve chairman, has called the rapid rise a “bubble”.
A new virtual currency inspired by Kanye West is set to be launched, and has been dubbed Coinye West.
The rapper is not involved and has yet to comment on Coinye West’s inception.
Coinye West will follow in the footsteps of Dogecoin, another virtual currency based on the popular Doge meme.
The value of Bitcoin, the most famous virtual currency, peaked at over $1000 at the end of 2013, but is currently worth around $850.
Various alternatives to Bitcoin have sprung up, such as Litecoin, Namecoin and PPCoin.
Virtual currencies are often linked to the purchase of illegal items, namely drugs, thanks to transactions being extremely difficult to trace.
However, more humorous currencies like Dogecoin are used for more tongue-in-cheek transactions.
One user, posting on Dogemarket, a section on popular link sharing site Reddit, offered Dogecoins in exchange for ideas to name a company.
Coinye West will be launched on January 11
“I thought the whole Dogecoin thing was interesting,” said Jeremy Bonney, from virtual currency news site Coindesk.
“It grew into something somewhat legitimate. There are people that genuinely believe in it out there.”
The makers of Coinye West have lofty ambitions for the currency which they described as a “cryptocurrency for the masses”.
Speaking anonymously to music site Noisey, they said: “I can picture a future where Coinye is used to buy concert tickets, with cryptographically verified virtual tickets, and other ideas I can’t give away just yet.”
They said they planned to give away a number of Coinye to early users when the currency launches on January 11.
“It will get people who are on the fence interested and help them to start using the currency, and we hope they’ll share it with their friends, too.”
However, one Bitcoin expert urged caution in investing in new virtual currencies that were as yet untested in public use.
“There’s been a number of people who have put out ‘joke’ currencies in the past,” said Johnathan Turrall, chief technology officer at Metalair, a cryptocurrency start-up based at the University of Sussex.
“There were some coins in the past that seemed to be a <<pump and dump>> operation.
“In one case, the original developers launched on obscure websites, but when they took it mainstream, and the price spiked, they sold up and disappeared. Estimated earnings in one instance were $800,000.”
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Bitcoin value has fallen to less than half, following reports of fresh action by Beijing to restrict trade in the virtual currency.
BTC China has said that local payment companies have been blocked from providing it with clearing services.
It means that the firm – the world’s biggest Bitcoin exchange in terms of trading volumes – can no longer accept yuan-based deposits.
Bitcoin value has fallen to less than half, following reports of fresh action by Beijing to restrict trade in the virtual currency
Prices tumbled following the news.
One bitcoin was trading for as low as 2,560 yuan ($421), according to the South China Morning Post.
That compares with an all-time high of 7,588 yuan ($1,250) in late November.
Exchanges in other countries also reported drops, with Japan-based MtGox seeing the exchange rate for one bitcoin fall from $717 to as low as $480 in Wednesday’s trade.
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China has banned its banks from handling Bitcoin transactions.
The ban came in a notice issued by the People’s Bank of China, financial watchdogs and the nation’s IT ministry.
Bitcoins are a “virtual good”, have no legal status and should not be used as a currency, it said.
The decision comes after bitcoins’ rapid rise in value was called a “bubble” by Alan Greenspan, former US Federal Reserve chairman.
The ban was imposed because bitcoins were not backed by any nation or central authority, said the notice.
It added that it was planning to step up its efforts to curb the use of bitcoins to launder cash.
China has banned its banks from handling Bitcoin transactions
Individuals were still free to trade in bitcoins but should be aware of the risks involved, said the People’s Bank of China (PBOC), adding that it planned to formalise the regulation of exchanges that dealt in the digital cash.
Experts told Reuters the PBOC was moved to make its decision because Chinese nationals were heavily involved in trading the virtual currency. Many believe this is because it helps them avoid controls on trade in the yuan.
The value of bitcoins traded on Chinese exchanges fell after the announcement was made.
Interest in the virtual currency has seen its value soar in recent weeks.
On November 28, the value of one Bitcoin surpassed $1,000 for the first time.
The swift rise in value led Alan Greenspan to say the exchange rate for the virtual currency was “unsustainably high” in an interview with Bloomberg.
“It’s a bubble,” he said, going on to question the financial value people had pinned on Bitcoin.
“You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is,” he said.
“I haven’t been able to do it. Maybe somebody else can.”
Bitcoin’s value has surpassed $1,000 for the first time, MTGox announces.
MTGox is one of the virtual currency’s major exchanges.
Bitcoin’s value has been rising rapidly since a US Senate committee hearing earlier this month.
Confidence grew after the committee described virtual currencies as a “legitimate financial service”.
Bitcoin’s value has surpassed $1,000 for the first time
Bitcoin has become popular in part due to it being difficult to trace transactions.
The currency is often linked to illegal activity online.
Customers using the Silk Road – a website selling illegal drugs that was shut down last month – would pay for goods using Bitcoin.
Many worried the crackdown would cause the value to plummet, but instead growing confidence that regulators will not imminently seek to ban the currency has seen its price soar.
Enthusiasts say it is a highly efficient way of handling global money transfers.
“For Bitcoin to go from zero to $1,000 in just five years has been amazing to watch,” said Mike Hearn, a Bitcoin developer.
“It’s easy to forget that Bitcoin’s true value is not in an arbitrary exchange rate, but in its ability to enable new applications and services which aren’t possible with today’s payment networks.”
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Bitcoin’s value has soared to over $900, after a US Senate committee hearing.
The committee was told that virtual currencies were a “legitimate financial service” with the same benefits and risks as other online payment systems.
The Homeland Security and Governmental Affairs Committee is exploring the “promises and risks” of Bitcoin for “government and society at large”.
The virtual currency has more than trebled in value since October.
The Senate hearing was prompted by the closure of the Silk Road website in October. The site, which sold drugs and other illegal goods, was shut down by the FBI.
Users of the site were required to pay for their transactions using bitcoins.
Representatives from the Department of Justice and financial regulator the Securities and Exchange Commission have been asked to provide their views about virtual currencies to the committee and submissions have been received from the FBI and the US Federal Reserve.
“Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us,” the chair of the committee, Senator Thomas Carper, said in opening remarks.
Bitcoin has more than trebled in value since October 2013
The FBI, in a letter to the committee released on Sunday, said that it recognized virtual currencies offered “legitimate financial services” but they could be “exploited by malicious actors”.
Jerry Brito, senior research fellow at George Mason University told Bloomberg: ”Two years ago it was alarm when Silk Road first came on the scene.
”Since then, Congress has been educating itself and understands that there are great potential benefits, and like any new technology there are going to be some challenges. But they see there is a balance to be struck here and they are generally positive on the technology.”
Trade in Bitcoin is small compared with that in countries’ official currencies. But since its creation in 2008, Bitcoin has become a popular way to pay for things online. There are currently more than 12 million bitcoins in existence according to Bitcoincharts, a website that provides financial information about the currency.
On one exchange site, Mt. Gox, the value of the currency rose to $900 on Monday before falling back to $727. This compares with a price of $200 in late October.
The closing down of Silk Road and hearings in front of US government committees have led some to believe that prices are increasing as investors think Bitcoin will gain more mainstream acceptance.
“Lots of factors are driving the price action in Bitcoin, including pure speculation,” said Garrick Hileman, an economic historian at the London School of Economics.
“Regulatory interest in Bitcoin also traditionally has a positive effect on the price of Bitcoin,” he added.
Jan Lambregts, head of financial market research at Rabobank, which does not trade in Bitcoin, said regulators were right to get involved.
“Looking at it from a distance, it very much looks like it could be a speculative bubble. It’s a small market, with a lot of interest in it, which is inflating and distorting the price,” he said.
“But you can see the concerns for governments – this is a currency outside their normal domain and which is not influenced by central banks.
“It may all be relatively small-scale now, but decisions taken now could have wider repercussions were such virtual currency experiments to be expanded in the future,” he added.
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An Australian man who ran an online “wallet service” for storing Bitcoins has claimed hackers stole virtual currency from his site worth more than one million Australian dollars.
The Australian man said 4,100 Bitcoins (US$1.04 million) were taken in two separate attacks.
He said he would not report the theft to police as Bitcoin transactions are virtually impossible to trace.
This has led some users to speculate whether it was an “inside job”.
An Australian man claimed hackers stole Bitcoin from his site worth more than one million dollars
In a radio interview with ABC News the man, who only used his online name TradeFortress, denied being involved.
The Bitcoin virtual currency is increasingly used to pay for things online.
According to the Sydney Morning Herald, the theft occurred on October 27 but users were only alerted this week via a message he posted on the wallet service’s website.
“I know this doesn’t mean much, but I’m sorry, and saying that I’m very sad that this has happened is an understatement.
“Please don’t store Bitcoins on an internet-connected device, regardless if it is your own or a service’s.”
Bitcoin is the most well known of a handful of virtual currencies. The currencies are developed through a computer process called “mining” and can be traded on exchanges or privately between users.
Ross Ulbricht, the alleged mastermind behind the online illegal drugs marketplace Silk Road, is too dangerous to be bailed, US prosecutors have said.
Ross Ulbricht, 29, was arrested this week and is charged with being the administrator of Silk Road site which has now been shut down.
He is also accused of trying to arrange the killing of one of the site’s users.
Ross Ulbricht was arrested this week and is charged with being the administrator of Silk Road site which has now been shut down
“We deny all charges and that is the end of the discussion at this point,” Ross Ulbricht’s lawyer said.
Ross Ulbricht appeared in a San Francisco court on Friday wearing a green T-shirt under red jail clothes and had his ankles shackled.
A request from Ross Ulbricht’s legal team for his bail hearing to be pushed back was granted – it will now take place on October 9.
Federal magistrate Joseph Spero asked Ross Ulbricht’s lawyer Brandon LeBlanc whether seeing the criminal indictment that included a murder-for-hire charge had “changed his calculus” on whether he thought Ulbricht would be granted bail.
As part of its criminal complaint, the FBI alleged that Ross Ulbricht had sought to pay a Silk Road user to kill another user who had threatened to expose details of the site’s users.
Prosecutors opposed the delay, arguing that Ross Ulbricht represented a danger to the community, and that there was a high likelihood that he may attempt to flee.
The Silk Road was a well-known destination on Tor, a so-called “dark web” service that anonymizes users, making it much more difficult for authorities to track locations.
The Silk Road sold a range of items, but was most famous for offering a host of illegal drugs, paid for using virtual currency Bitcoin.
Bitcoin value has dropped after the closure of the clandestine Silk Road online marketplace.
The FBI seized bitcoins worth approximately $3.6 million on Tuesday.
The price of a bitcoin, a virtual currency for use online, fell steeply after the arrest of suspected website administrator Ross Ulbricht.
Investor confidence may have been shaken by the association of bitcoins with illegal activity, according to a security expert.
“When there’s a big bust, that’s going to knock people’s confidence in investing,” said Rik Ferguson, a senior researcher at security company Trend Micro.
“The more a currency is associated with illegal activity, the more people will be nervous about using it,” he said.
Bitcoin value has dropped after the closure of the clandestine Silk Road online marketplace.
Silk Road, which allowed users to trade in illegal drugs, required transactions to be made using the virtual currency.
News of the closure was followed by a rapid drop in the price of bitcoins, according to figures from the Mt. Gox bitcoin exchange.
The going rate for bitcoin dropped from more than $140 to around $110, before climbing back up to $123.
Investors may have been concerned about the FBI’s ability to confiscate bitcoins, said Rik Ferguson.
“Knowing that a currency could be seized or shut down could pressure people to look for alternative investment vehicles,” he said.
The FBI seized the virtual currency by getting hold of encryption keys for the bitcoins, according to Jerry Brito, George Mason University’s technology policy director.
The keys were made available through seized computer equipment, Jerry Brito said in a blog post.
The FBI then transferred the bitcoins to an address controlled by the US government, according to the seizure order.
Hack attacks hitting online services and exchanges dealing in Bitcoins led to a drop in the value of the virtual currency.
Trading on the MTGox exchange, which handles most trades in Bitcoins, was sluggish yesterday as the site fought off an attack.
The attack helped to force a swift fall in the price of Bitcoins.
In addition, the Instawallet website – where people store Bitcoins – is offline indefinitely after an attack.
Hack attacks hitting online services and exchanges dealing in Bitcoins led to a drop in the value of the virtual currency
The value of Bitcoins surged to a new high this week with each one worth about $142. Barely a week ago, each virtual coin was worth only $90.
But Bitcoins dropped sharply in value as the MTGox exchange came under a sustained attack by hackers. The vast majority of trade in Bitcoins takes place via the site.
In a tweet on its Twitter feed, MTGox said it was fighting off a distributed denial-of-service (DDoS) attack, which involves a site being bombarded with huge amounts of data. The attack was one of several against the site this week.
The attacks, coupled with a spike in trading volumes, combined to cause delays in trades being confirmed and led the value of Bitcoins to drop sharply to about $120.
The attacks could be the work of malicious hackers who were trying to “game” the exchange and manipulate the value of Bitcoins so they could cash in, MTGox said in an interview with ComputerWorld. Attackers are thought to be working to a cycle in which they sell Bitcoins when values are high, then mount an attack that forces prices to crash, buy up the cheaper coins and then let the value climb again.
MTGox said it did not know when or if the attacks would cease but said Bitcoin owners should not panic and sell off as values fluctuated. A spokesman for the exchange added that it was in the middle of rebuilding its trading technology but the new system, which would do a better job of handling the high volume of trades, would not be ready until the end of this year.
In a separate development, Instawallet has shut down “indefinitely” after hackers “fraudulently accessed” its core database. In a statement posted on the Instawallet site it said it planned to open a claim process shortly so people could reclaim their Bitcoin balance.
Botnet miners, or cyber-thieves, are attempting to cash in on the rising value of the bitcoin virtual currency.
Bitcoins have almost tripled in value in a month. In late February one bitcoin was worth $33 but now each one sells for about $90.
Thieves who run networks of hijacked PCs are increasingly using these machines to create or “mine” the coins.
However, bitcoin miners say thieves will struggle to keep up, as coin-generating technology becomes more sophisticated.
Botnet miners, or cyber-thieves, are attempting to cash in on the rising value of the bitcoin virtual currency
As a virtual currency, bitcoins depend on a wide network of closely connected computers to log who holds the coins and where they are spent.
That network also shares information about who is “mining” the coins.
Mining involves solving a hard mathematical problem and miners typically use large numbers of computers to speed up the number crunching involved.
“Botnet mining is fundamentally theft of private property, illegal and unethical,” said Jeff Garzik, a bitcoin developer, adding that bitcoin miners had battled botnets for years, seeing them as a “cost and a burden” they just had to deal with.
Many cyber-thieves who control botnets, large networks of home PCs compromised with a virus, were using them as a dedicated mining pool in a bid to generate bitcoins for themselves, said Derek Manky, senior security strategist at Fortinet.
The operators of one of the biggest current botnets, known as ZeroAccess, had recently ramped up their efforts to use machines they control to mine bitcoins, he said, adding that millions of infected PCs were unwittingly enrolled in the criminal network.
“ZeroAccess has employed an affiliate model,” he said.
“They pay other people to install malware for them.”
The operators of ZeroAccess were making so much money that they were paying high prices for each infection. Current rates ran at about $100 for every 1,000 infections, said Derek Manky.
As well as mining bitcoins, PCs enrolled in ZeroAccess were also being used to poison search results – to cause users to unwittingly click on booby-trapped web pages – or fraudulently click on adverts to generate revenue.
“ZeroAccess has been extremely profitable,” said Derek Manky.
The wider bitcoin community was aware of the efforts botnet owners were making to produce their own cash, said Derek Manky.
“They try to detect and remove these transactions but it’s a bit of a cat and mouse game,” he said.
“The operators of ZeroAccess know about that and just change their tactics.”
However, said Jeff Garzik, criminal participation in bitcoin mining was likely to get much less profitable as professional miners turned away from using desktop PCs to generate the coins.
Increasingly, he said, professional miners were using custom-made chips, called Asics (Application-Specific Integrated Circuits), to mine because such processors worked faster.
“It is theorized that the current shift in bitcoin mining to <<Asic>> miners – the fastest and most advanced generation – will simply make it unprofitable for botnet miners,” said Jeff Garzik.
Vitalik Buterin, technical editor at Bitcoin Magazine, said the rise of Asic mining meant cyber-thieves would soon be pushed out.
Currently only about one-third of all professional miners were using Asics, but as that proportion grew, the number of bitcoins that could be generated with a botnet would shrink, said Vitalik Buterin.
“The fact that botnets are (somewhat) viable now is basically an aberration resulting from the massive price increase that has not yet been matched by increased mining activity,” he said.
“Once Bitcoin stabilizes again the botnets will rapidly crawl back into the shadows.”
Canadian entrepreneur Taylor More is hoping to be the first person to sell his house for virtual currency Bitcoins.
Taylor More listed his two-bedroom Alberta bungalow, asking 405,000 Canadian dollars ($395,000) – or the equivalent in Bitcoins.
The man says the first reaction of his family was that of a shock.
Bitcoins are now a widely used alternative payments system and one Bitcoin is currently worth about $59.
“Bitcoins are really hard to get your hands on if you want to get them in large quantities,” said Taylor More.
“I have a couple projects that I want to get started, and they will take a lot of Bitcoins.”
Taylor More did not get into detail on his new venture, only saying that it should “get Bitcoins more mainstream”.
Canadian entrepreneur Taylor More is hoping to be the first person to sell his house for virtual currency Bitcoins
Unlike other currencies, Bitcoins are not issued by a central bank or other centralized authority.
Bitcoins first appeared in 2009 and are closely linked to the global network of computers which supports the currency and its users.
People generate or “mine” Bitcoins by participating in that network – for instance, by solving a complicated mathematical problem using their computer.
A growing number of web stores and online firms accept Bitcoins as payment.
Bitcoins can be exchanged for “real” money, and they can be used to make transactions that are difficult to trace, offering privacy to their users.
The currency has been adopted by Wikileaks and other sites to receive donations.
“It’s an instant form of payment, and there’s very low cost transfer fees,” said Taylor More.
“When you send money internationally it takes a week or more to do and costs hundreds of dollars, so I see this as something we’ve needed, an online virtual currency to make payments fast and easy.”
The use of Bitcoins has been slowly spilling from the online into the physical world – for example, it is now possible to use the currency to buy pizza.
Safeguards built into the bitcoin software are about to be triggered as the number of bitcoins in circulation hits a key milestone.
This means bitcoin “miners” will have to work twice as hard to be rewarded with the same number of coins.
The change comes as competition to create the coins gets more intense with the release of custom mining chips.
Since the creation of the bitcoin network in early 2009, bitcoins have grown to become a very widely used digital currency. An increasing number of online shops and businesses accept bitcoins as payments and currently each bitcoin is worth about $12.
As a digital currency, bitcoins are not issued by a central bank or national mint. Instead they are created by the system’s network when a specific amount of computer work, known as a “block” has been completed. Fifty bitcoins are released when that block is done and the work, which involves solving a hard mathematical problem, is completed.
The protocol that defines this block-to-coin ratio reduces the reward given for finding each block every time 210,000 blocks have been found. According to statistics gathered about the bitcoin network, the 210,000 figure looks set to be passed on 28 November. Then, instead of getting 50 bitcoins per block, miners will get only 25.
Safeguards built into the bitcoin software are about to be triggered as the number of bitcoins in circulation hits a key milestone
“The main reason to do this is to control inflation,” said Vitalik Buterin, a journalist at Bitcoin Magazine. Controlling the rate at which coins were created, he said, meant there would never be a surge or shortfall in the number of bitcoins in circulation, either one of which could rapidly change the value of each coin.
It addition, he said, it was a hedge against technological innovation. In the early days of bitcoins, many people used desktop computers to do the hard sums. Then they started to use banks of graphics cards that could do the maths very quickly to speed up the rate at which blocks of work were completed.
Vitalik Buterin said some miners were now using even more specialized hardware to do the mathematical work and firms were starting to produce custom-made chips that stepped up the pace of work even more.
However, he said, the creators of bitcoins had foreseen these changes and built in controls to keep the numbers of blocks completed relatively constant.
“The protocol always calibrates difficulty to make up for increased mining power,so the speed at which people are finding blocks isn’t going to go up by much no matter what.”
Cyberthieves who stole more than $250,000 in digital money bitcoins are still sitting on the cash.
The haul, in what is known as bitcoins, was stolen in a raid on the BitFloor online currency exchange this month.
BitFloor boss Roman Shtylman said transaction-tracking technology in the bitcoin system showed the money had not been spent.
The robbery forced BitFloor to close but Roman Shtylman said he was working on ways to relaunch the exchange.
Cyberthieves who stole more than $250,000 in digital money bitcoins are still sitting on the cash
Although bitcoins can be used to buy and sell, the digital currency is not minted by a nation. Instead bitcoins are “mined” by people getting their computer to perform a complicated and time-consuming mathematical problem.
Bitcoins are spent by assigning the private key associated with them to someone else. The robbery on BitFloor got hold of the private keys of many of the exchange’s customers, thereby handing control of those bitcoins to the robbers.
Because all transactions with bitcoins are public, said Roman Shtylman, everyone who used the coins knew that the thieves had yet to start spending their ill-gotten gains.
Digital detective work carried out soon after the theft showed that it was carried out via an IP address based in Moscow, he said. No transactions had been recorded using the stolen coins since they had been taken.
“They have not been moved,” Roman Shtylman.
“We may not know who the person is but we can see what they are doing with the fund.”
He speculated that the thieves were sitting on their pile of digital cash because the money was still “hot”. The thieves may be looking at ways to launder the money, he said, by putting it into bitcoin wallets they controlled and then converting it into other, real-world, currencies.
Roman Shtylman said a crime report about the theft had been filed with the FBI, which was believed to be investigating.
Prior to the raid BitFloor was the largest bitcoin exchange in America and the fourth-largest in the world. Roman Shtylman said he was now looking at how best to relaunch BitFloor.
“Given the amount of money involved it will take time to solve these problems and find ways to pay people back,” he said, adding that most of the currency traders who used BitFloor were sticking with him.
“A lot of people want to see the exchange return and continue trading,” he said.
BitFloor, one of the biggest Bitcoin currency exchanges, has been taken offline after 24,000 units ($250,000) of the virtual currency were stolen from its computer servers.
Bitcoins can be used for online money transfers and trades, and the currency uses cryptography to protect it.
But BitFloor’s founder, Roman Shtylman, said he had kept unencrypted “keys”, which the thief accessed and used to take the money.
BitFloor’s future is now in doubt.
Roman Shtylman said his New York-based service was the biggest of its kind in the US and the fourth largest in the world.
BitFloor, one of the biggest Bitcoin currency exchanges, has been taken offline after 24,000 units ($250,000) of the virtual currency were stolen from its computer servers
Unlike other currencies, Bitcoins are not issued by a central bank or other centralized authority. Instead they are created in a process called “mining”, in which coins are issued to a user when they solve a complicated mathematical problem using their computer.
The complexity of the problems is determined by the number of “miners”, to ensure there is not a flood of new currency.
Most people using Bitcoins do not create cash in this manner, but rather use currency exchanges – such as BitFloor – to purchase them.
Part of the attraction is they can be used to make transactions that are difficult to trace, offering privacy to their users, and the currency has been adopted by Wikileaks and other sites to receive donations.
Effectively Bitcoins are a very long meaningless string of digits that only have value if their owner uses a shorter related number, known as a private key, to spend them.
The key identifies the address the currency is stored at, allowing the currency to be accessed and transferred to a new owner, who then stores it at a new address safeguarded by a different key.
It is therefore critical that a user protects their keys to secure their Bitcoins – and the Bitfloor exchange used encryption to protect its store.
But Roman Shtylman acknowledged on a forum that he had recently carried out an upgrade of his systems and stored an unencrypted copy of the keys during the process, which the thief took advantage of.
“I realize this is a very serious mistake,” he wrote.
He added the thief had taken the vast majority of the currency that he had been holding at the time, meaning he could not cover all his users’ account balances. However, Roman Shtylman added that account details had not been compromised.
“As a last resort, I will be forced to fully shut Bitfloor down and initiate account repayment using current available funds,” he wrote.
“I still have all of the logs for accounts, trades, transfers. I know how much each user currently has in their account for both US dollars and Bitcoins. No records were lost in this attack.”
This is not the first attack on a Bitcoin exchange.
UK-based Bitcoinica was hacked twice this year and subsequently sued by several of its users after they had alleged it was not able to honor their withdrawal requests. The firm has since ceased operations for what it terms “a transition period”.
Last year another exchange, Japan’s MtGox, suspended operations for several days after one of its accounts was compromised causing the currency to plummet in value. The service acted to compensate users who had been caught up in the sell-off.
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