Bitcoin Exchanges Halt Withdrawals After 'Massive' DDoS Attack

The Bitstamp bitcoin exchange has temporarily halted its users from withdrawing bitcoins, as it is targeted by a "massive and concerted" cyber attack.

A DDoS (distributed denial of service) attack is being felt across the bitcoin landscape, with a number of exchanges affected by what is known as the cryptocurrency 'transaction malleability problem', first discovered in 2011 and flagged up by the Mt Gox exchange earlier this week.

The attack has been described by Blockchain chief security officer Andreas Antonopoulos as "massive and concerted" and has forced Bitstamp to halt withdrawals, as Mt Gox did a day earlier.

Fog of confusion

Speaking to CoinBase, Antonopoulos explained: "As transactions are being created, malformed/parallel transactions are also being created so as to create a fog of confusion over the entire network, which then affects almost every single implementation out there."

Antonopoulos went on to say that Blockchain's record of all bitcoin transactions remains unaffected, but exchanges will suffer as their internal accounting systems gradually go out of sync with the bitcoin network. He believes withdrawals will start again within 24 to 72 hours.

Users of the BitcoinTalk forums believe the attacks are being carried out in an attempt to lower the price of bitcoin by spooking inexperienced traders into selling. Once the price has fallen, the attackers will look to buy bitcoins at the lower rate. However, while this worked repeatedly a year ago, bitcoin is proving to be more stable and resistant to price crashes this time around.

Inconsistent results

In a statement, Bitstamp said it "has suspended processing Bitcoin withdrawals due to inconsistent results reported by our bitcoind wallet, caused by a denial-of-service attack using transaction malleability to temporarily disrupt balance checking.

"As such, Bitcoin withdrawal processing will be suspended temporarily until a software fix is issued."

The exchange was keen to point out that no coins have been lost and none are at risk as a result of the attack. Bitcoin's notoriously volatile price has remained stable at around $660 (£400) per coin.

Confident of a quick fix

Bitstamp reassured concerned users that its services would be up and running again soon. "This is a denial-of-service attack made possible by some misunderstandings in the bitcoin wallet implementation. These misunderstandings have simple solutions that are being implemented as we speak, and we're confident everything will be back to normal shortly."

Any customer whose bitcoin withdrawals failed on 10 and 11 February will soon see them cancelled, with their coins returned to their bitstamp wallets, the exchange said.

Fellow bitcoin exchange The Rock Trading Ltd said it would not be halting its service.

Reports of bitcoin's death are greatly exaggerated

In a message to those who believe bitcoin is dying as a result of the attacks, Antonopoulos insisted should they remain calm, telling CoinDesk: "The death of bitcoin has been prematurely announced so many times already that the obvious conclusion is that bitcoin is far more resilient than its critics would like to think.

"I am confident that in a few days, those who predicted the death of bitcoin will once again be proven wrong,"