Hackers Steal $5 Million Bitcoins from Bitstamp. What You Should Know


Bitstamp, a bitcoin exchange in Europe, decided to suspend trading on Monday after one of the exchange's bitcoin storage wallets was compromised by hackers, resulting in the loss of about $5 million worth of bitcoins.

The exchange issued a warning to its users through a statement posted on its website that deposits should not be made on any addresses previously issued.

Bitstamp is known to be the third busiest exchange for bitcoins in the world, representing 6 percent of all transactions of bitcoins. The exchange said that a "small fraction" of the bitcoins of its customers is held within online systems, adding that the compromised bitcoins will be recovered by the exchange from its "cold" storage reserve, which is maintained offline.

According to Bitstamp CEO and co-founder Nejc Kodric, most of the bitcoin reserves of Bitstamp are kept in cold storage, making them safe from hackers.

An email to ZDNet by the exchange confirmed that the stolen $5 million was in the form of less than 19,000 bitcoins.

Kodric said that the bitcoins stored with Bitstamp before the suspension of its service are entirely safe, with the exchange to honor the amounts in full.

Adobe engineer Jackson Palmer, who is also the creator of the Dogecoin virtual currency, explained that hackers that compromise a server that runs a hot wallet could instantly transfer the wallet's bitcoin balance to another location.

No hackers have stepped up to claim responsibility for the incident though, in a cyberattack that calls to mind similar events that led to the fall of what was once a premier bitcoin exchange.

The incident occurs just a bit over a year from the shutdown of Mt. Gox, which was then the biggest bitcoin exchange in the world. The exchange said that hackers stole 850,000 bitcoins, amounting to almost $450 million. In addition, the exchange, which was based in Japan, allegedly mishandled the crisis, leading to its filing for bankruptcy protection.

At the peak of Mt. Gox's operations, the price for a bitcoin was around $1,240. However, after the hacking incident, the market for bitcoins plunged to only half of its peak value, then continued to decline over several months.

However, despite the volatility of the value of bitcoins, many companies have chosen to support the virtual currency which was once only used by criminals.

Examples of companies that have shown their support for bitcoins are Microsoft, which has allowed users to purchase on its Windows and Xbox store platforms using bitcoins, Dell, Mozilla and Time.

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