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Bitcoin service Instawallet 'suspended indefinitely' after hack

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bitcoin 1020 (casascius)
bitcoin 1020 (casascius)

Bitcoin wallet site Instawallet has been taken offline after a security compromise, the latest in a trickle of hacks or thefts of the decentralized currency. VentureBeat has posted a missive from Instawallet's homepage, which is currently unavailable: "The Instawallet service is suspended indefinitely until we are able to develop an alternative architecture. Our database was fraudulently accessed, due to the very nature of Instawallet it is impossible to reopen the service as-is."

Users who stored their Bitcoin in the system will be able to get the money back after a waiting period. The site will be opening a claims system, refunding amounts of less than 50BTC (currently around $6400) within 90 days as long as only one person makes a claim on it and processing larger amounts on a case-by-case basis. Little has been disclosed about the hack itself, but it's not the first time such a service has been taken down. In 2012, exchange service BitFloor closed temporarily after losing around $250,000 in Bitcoin; it later reopened with promises to repay the victims. Hackers were able to spirit about $12,000 in Bitcoin away from Bitinstant in March, partly due to security flaws, though no user information or financial data was compromised.

In an apparently unrelated issue, major Bitcoin exchange floor Mt. Gox has been periodically offline today; it faced technical — but not security — problems in mid-March. Despite these problems, the value of Bitcoin has risen dramatically in the past months; once valued as low as $2, it passed $100 a few days ago, currently sitting at $128.