"Bitcoin: A Peer-to-Peer Electronic Cash System," the paper defined the foundations for a distributed, de-centralized financial payment system, with no transaction fees. The Bitcoin system was implemented and people started using it. What kind of people? In the beginning, they were mostly hobbyists and mathematicians. Soon, they were joined by others – mostly ordinary people, but also cyber criminals and terrorists.
Bitfinex, one of the largest U.S. dollar bitcoin exchanges, said on Aug. 2 that it lost 119,756 bitcoins after its platform was hacked. Law enforcement has been contacted, the company said in a statement.
In June, hackers stole $55 million worth of ether, another digital currency, in an attack against an experimental investment fund called the Decentralized Autonomous Organization (see $55 Million in Digital Currency Stolen from Investment Fund). Ether developers made a software modification to the virtual currency's code that froze the funds.
Despite numerous exchange hacks and scammers, supporters of digital currencies have remained largely positive about the potential to revolutionize what they contend is an antiquated financial system.
But security breaches are a reminder of the vulnerabilities of cryptocurrency technologies, writes Peter Van Valkenburgh, director of research at the Washington-based Coin Center, which is a digital currency advocacy group.