A dramatic dip in the value of Bitcoin is not fallout from a distributed denial of service (DDOS) attack, said Tokyo-based Bitcoin exchange Mt. Gox in a Facebook post overnight Wednesday. But there was indeed a DDOS attack.
Mt. Gox initially claimed its issues were the result of a huge spike in new users. "We were not a victim of a DDOS but instead victim of our own success. Indeed the rather astonishing amount of new accounts opened in the last few days added to the existing accounts, plus the number of trades made a huge impact on the overall system that started to lag. As expected in such a situation, people started to panic, and started to sell Bitcoin in mass [panic sale], resulting in an increase in trades that ultimately froze the trade engine," said Mt. Gox, which did not attribute its Facebook post to a specific person.
A Bitcoin exchange such as Mt. Gox facilitates the exchange of bitcoins for other currencies. Bitcoin is a digital currency designed to have many of the traits of cash, such as anonymity.
The number of new accounts opened at Mt. Gox increased from 60,000 for March to 75,000 new accounts created during the first few days of April alone, and about 20,000 new accounts are currently opened daily, Mt. Gox said.
"Due to these facts we have been busy working on improving things since last week and our team has been working around the clock to improve Mt. Gox to catch up with the demand. We will continue to release several updates," the company said.
In a separate Facebook post, Mt. Gox reported the updates were complete, but also said the company was now under a DDOS attack. Mt. Gox did not return a request for comment by deadline.
Bitcoin companies are often hit with DDOS attacks, and are a target for other types of fraud, given the anonymous nature of bitcoin payments. To execute a DDOS attacks, attackers repeatedly access a website in an attempt to overwhelm it and knock it offline.
Mt. Gox was hit by a DDOS attack earlier this month, and also reported recent lags in trading. Coinbase, a company that helps merchants accept bitcoin payments, recently apologized for exposing customers' email addresses. Instawallet, another Bitcoin exchange, on April 11 remained shut down following a security breach disclosed earlier in the month. Other exchanges such as Bitcoinica have also been hit by attackers.
Despite the security threats, Bitcoin companies have been growing in popularity, attracting attention from investors and talent from executives from more traditional payments companies. News reports about the virtual currency are increasingly popping up in mainstream media, and experts are predicting much broader use of bitcoins.