Bitcoin Exchange Bitstamp Halts Withdrawals Citing Denial Of Service Attack

Today the Bitcoin exchange Bitstamp stopped processing withdrawals following what it described as a denial-of-service attack. According to Bitstamp, balances are safe and no customer funds have been lost.

The rising profile of Bitcoin and the growing prominence of exchanges that handle its trading makes the attack unsurprising. There is value locked up in Bitstamp and others, making them obvious targets.

The price of Bitcoin on Bitstamp is currently $655. That is comfortably higher than the price of Bitcoin on the Mt.Gox exchange, which currently trades around the $575 mark. Mt.Gox also recently halted withdrawal from its users’ accounts due to the issue of transaction malleability. The problem allows users to make it appear that an amount of Bitcoin was not sent, when in reality it was. So, the payment may be sent a second time.

Bitstamp also cited transaction malleability as a reason for its halt in withdrawals.

In short, Bitstamp and Mt.Gox are responding to similar issues relating to nefarious types working to harm the integrity of Bitcoin transactions for personal gain. Call it an expensive, and at least somewhat worrying, growing pain.

Bitstamp is the largest Bitcoin exchange, and Mt.Gox is the third largest. This makes the halting of withdrawals at the two non-trivial, given the action’s inherent disruption of the nascent Bitcoin economy.