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Stakes rise for bitcoin backers as hackers attack

Philip Pearlman
Philip Pearlman
Daily Ticker

Over the last week, thefts have been reported at three different bitcoin sites, one of which was the first exchange and at one time the largest.

Mt. Gox had $400 million stolen and the exchange filed for bankruptcy last Friday. Flexcoin had $600,000 in bitcoin stolen and the tiny exchange, Poloniex, had 12% of its assets, or $50,000 stolen.

Related: Bitcoin needs to grow up if it wants to survive Mt. Gox collapse

All of this occurred electronically as hackers are probing for vulnerabilities, discovering them and going in for the kill.

These events have a number of implications for bitcoin as a technology, a currency and an industry, some of which might seem counterintuitive.

First, seeing the price of bitcoin remain buoyant in the wake of such events, speaks to its resilience. There is still demand for the currency despite the wounds.

Second, these thefts raise the stakes for the largest and most established bitcoin-focused companies. For example, Coinbase, a bitcoin exchange and provider of merchant tools, is backed by elite venture firms including Andreessen Horowitz and Union Square Ventures. The San Francisco-based company faces greater risk but also greater reward.

Given that Coinbase stores a large amount of bitcoin, hackers stand to gain more if they are able to compromise the site's infrastructure and so they are undoubtedly making all types of attempts to steal from it. In addition, financial backers including Marc Andreessen are publicly praising its relative safety and reliability. So, if Coinbase is compromised, it might well have a much larger negative impact on the currency than we saw with Mt. Gox.

If, on the other hand, Coinbase remains safe for those who keep their bitcoin there, it stands to become a bona fide leader of a burgeoning industry and the company and its backers will reap the financial gain.

Related: Americans hate big banks, but can’t quit them

Finally, with every attempt to hack into bitcoin operations, security officers at these companies learn more about the potential vulnerabilities inherent in running these types of operations which might potentially make them more secure as Coinbase and others study and adapt to the threats.

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