When Mt. Gox filed for bankruptcy in a Tokyo court Friday, it marked the culmination of a swift downfall for one of the world's largest Bitcoin exchanges. It's was only one year ago that Mt. Gox accounted for nearly 70 percent of the virtual currency's transactions globally, according to reports.
That was all before some 700,000 or so Bitcoins went missing from the exchange recently, apparently due to a DDoS attack that allowed cyber thieves to exploit a software bug in the Bitcoin "blockchain", which is supposed to record each transaction and give it a unique ID. The bug, however, creates a small window where each ID can be changed, thus allowing thieves make it appear the transactions never occurred. This makes Mt. Gox the latest in a series of virtual currency exchanges to be hacked, such as the Silk Road 2.0 exchange, which reported $2.7 million in Bitcoins being stolen last month.
I asked Steve Marchewitz, president of SecureState, a cybersecurity consulting firm, if there was something inherently insecure about virtual currency exchanges that hacks happen so frequently.
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Marchewitz says virtual currency exchanges can be secure, just at this nascent stage in their development enough of an emphasis has not been placed on it. "Like with any other new technology, in the beginning you're trying to make the thing work, and security sometimes takes a back seat," he adds. "Right now, there's nowhere near the sophistication of security that there is needed to be for the amount of money on the line."