Your Instawallet Just Got Picked

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Despite its status as peer-to-peer digital currency, one apparently still needs a place to store one's bitcoins. And those places are just as easy to hack as a real bank's systems.

Instawallet, a site that offered a service to allow people to store bitcoins, said Wednesday its site had been hacked. Instawallet said it will suspend its service until it can “develop an alternative architecture….”

Problems with the site were disclosed last week in an open letter to Instawallet that appeared on the Adaptive Glass blog. The letter described a security flaw on the site that affected 3,000 people. The problems affected accounts with fractional amounts of bitcoins up to about 100 bitcoins in them. The security flaw also affected Paymimum, Paytunia, Instawire, and Bitcoin Central, according to the post.

Subsequently, Instawallet posted a notice on its site on April 1, saying it was down for maintenance, prompting Adaptive Glass to ask in a headline: Did Instawallet just have $4.3 million dollar bank heist?

Bitcoin prices spiked to $147 Wednesday, before falling back sharply to around $125.

Bitcoin plummets amid slowdowns and hacking of service sites [MarketWatch The Tell blog]

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