Bitcoin storage service, Instawallet, suffers database attack

Instawallet, which stored a person's bitcoins, said it will refund some lower balances

An online bitcoin storage service, Instawallet, said Wednesday it is accepting claims for stolen bitcoins after the company's database was fraudulently accessed.

Instawallet didn't say in a notice on its website how many bitcoins were stolen. The virtual currency has surged in value in the past couple of months due to rising interest. At one point Wednesday, a bitcoin sold for more than US$140.

Bitcoin is a virtual currency that uses a peer-to-peer system to confirm transactions through public key cryptography. The method for confirming transactions is highly secure, but bitcoins can be stolen if hackers can gain access to the private key for a bitcoin that authorizes a transaction. Secure storage of bitcoins remains a challenge.

Instawallet said its service is "suspended indefinitely" until it can develop an alternative architecture. Instawallet apparently assigned an ostensibly secret URL that allowed users to access their accounts without a login or password.

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Tags: intrusion, security, Exploits / vulnerabilities, Identity fraud / theft, Instawallet
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