$1 Million Heist Reminds Us That Bitcoin Is Neither Safe Nor Secure

$1 Million Heist Reminds Us That Bitcoin Is Neither Safe Nor Secure

Let’s play a little game called Good Idea/Bad Idea. Round one: saving money. That’s a good idea! Round two: saving thousands of dollars in a Bitcoin wallet that’s highly susceptible to hackers and heists. As the customers of Bitcoin payment processor BIPS will tell you, that’s a bad idea.

A bunch of cybercriminals just broke into BIPS and stole 1295 Bitcoin. At the present exchange rate that’s about $US1 million. These Bitcoin didn’t belong to BIPS either but rather to many of its 20,000 customers. According to postings in a Bitcoin forum, one customer lost about $US73,000 worth of the cryptocurrency in the series of Distributed Denial of Service (DDoS) attacks that took place between November 15 and 17. You can buy a house for that amount of money in many parts of the country.

After the breach, BIPS chief executive Kris Henrickson didn’t exactly instill confidence in his service. “Attacks are not isolated to us, and if you are storing larger amounts of coins with any third party, you may want to find alternative storage solutions as soon as possible,” he told his customers. “Web Wallets are like a regular wallet that you carry cash in and not meant to keep large amounts in.” One customer pointed out in a reply that Henrickson’s company did, in fact, claim to be secure: “In fact, your website said: ‘Your data is secure at BIPS.’ So yeah, I felt pretty goddamn secure leaving my BTC balance there.”

There’s an easy lesson to learn here: Don’t store your Bitcoin on the internet — especially as the exchange rate continues to skyrocket (and subsequently crash). As much as companies like BIPS might talk up their security, it’s become glaringly obvious that the cryptocurrency is an easy and much sought-after target for hackers. These kinds of breaches happen all the time. In fact, just a week before the BIPS hack, an attack on the Bitcoin wallet company inputs.io led to $US1.2 million in stolen Bitcoin. Wired went with the headline: “$1.2M Hack Shows Why You Should Never Store Bitcoins on the Internet.”

If you do decide to put your life savings in Bitcoin — despite its volatility and lack of security — the best thing you can do is store those magical codes on a computer that’s not connected to the internet. Or, even better, print them out on paper, the kind made from trees. [Mashable]

Picture: Flickr / antanacoins