The UK-based Bitcoin exchange service, Bitstamp, has suspended its service after its security was compromised on January 4th. An estimated 19,000 BTC ($5 billion worth) was lost by the company. The value of BTC has taken a hit in the aftermath dropping from $311.5 on Friday to $257.61 on Sunday. It seems as if the long running debate between the nay sayers and champions of the currency looks set to continue this year.
Users of Bitstamp were greeted with this message when visiting the service on January 5th:
"BITSTAMP SERVICE TEMPORARILY SUSPENDED
"We have reason to believe that one of Bitstamp’s operational wallets was compromised on January 4th, 2015. As a security precaution against compromises Bitstamp only maintains a small fraction of customer bitcoins in its online system. Bitstamp maintains more than enough offline reserves to cover the compromised bitcoins."
As previously mentioned, the outage of the Bitstamp service seems to have had a wider ripple effect on the Bitcoin community, not only with the valuation falling, but also with several other services encountering issues.
Bitcoin's stumble early in the year has added more fuel to the flame for those who believe the cyrptocurrency has failed. Recode in fact published this tongue in cheek assessment of Bitcoin at the close of 2014, a few days before the latest security issue. It's understandable where this criticism of Bitcoin comes from, especially when the currency - now valued around the $270 mark - has fallen from a high of $1,100 little more than a year ago.
Defenders of Bitcoin, such as Marc Andreessen, argue that judging its success on day-to-day valuation completely misses the point and strength of the cyrptocurrency. To proponents of the currency, Bitcoin is an alternative to traditional banking, designed to bypass standard financial practice and therefore to measure its success in the same way is irrelevant. For example, take this Andreessen quote:
"The price of BTC has very little to do with the level of creativity of thinking that's going into new bitcoin apps, or their usefulness" he said.
Then again, Marc Andreesen has invested more than $50 million into Bitcoin, so his positive spin is hardly surprising. Regardless, the payments industry is entering an exciting year with potential for major innovations to take hold, and I wouldn't rule out Bitcoin playing a significant part in that just yet.
By Matthew Taylor 7th January 2015
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