Bitcoin Weekly 2014 May 14: Doge Vault hacked, BFL and 300 FTC complaints, BitPay’s ground-breaking $30m investment

bitcoinweekly-4This week’s Bitcoin Weekly brings us news of Doge Vault being hacked with the bandits making away with potentially 111 million coins–the service has been offline since the heist. eBay’s CEO has shown some interest in Bitcoin’s future. Butterfly Labs is on the outs with almost 300 customers, if not more, who sent complaints to the FTC. And BitPay has received a record-breaking investment of $30m to keep doing what they do best.

Doge Vault hacked

As an alt-currency to Bitcoin and based on a meme, Dogecoin has seen its fair share of detractors. It’s also an extremely popular alt-coin that enjoys a great deal of media attention. So when a popular online wallet service for Dogecoin, called Doge Vault, suffered a hack that lost 111 million coins it became Bitcoin news.

The Cryptocurrency Times has the story of the hack, which started with 950,000 coins discovered missing from a DogeVault.com user’s wallet. This quickly led to another wallet where the 950k coins joined others adding up to the 111m coins also thought to have been stolen from Doge Vault.

Dogevault.com is currently entirely offline and the front page contains an announcement:

On the 11th of May, the Doge Vault online wallet service was compromised by attackers, resulting in a service disruption and tampering with wallet funds.

As soon as the administrator of Doge Vault was alerted, the service was halted. The attackers had already accessed and destroyed all data on the hosted virtual machines.

We are currently in the process of identifying the extent of the attack and potential impact on user’s funds. This involves salvaging existing wallet data from an off-site backup. We will also closely be investigating potential attack vectors, and determining the security breach which enabled the attackers to compromise the service.

Please do not transfer any funds to Doge Vault addresses while our investigation is under way.

Thank you for your patience – we will issue an additional statement including our findings and plan of action within the next 24-48 hours.

Email support@dogevault.com for any enquiries.
Doge Vault.

Online wallets for virtual currencies provide a level of convenience but weakened security. As with bitcoins, it’s possible for a third party to hold a wallet full of dogecoins and grant access to them via the web. Of course, this means that someone who gets access to that big wallet can steal everyone’s coins. This is what probably happened with Doge Vault.

Security issues have plagued many early Bitcoin projects. From a hack that nearly crashed MtGox in 2011 to other glitches that struck major exchanges and wallets. In the last 3 years, Bitcoin projects have spent a lot of time shoring up security and engaging in better practices.

Dogecoin may not have the industry lead of Bitcoin, but its wallets can suffer the same security issues.

eBay CEO on Bitcoin

In the grand scheme of buyers, sellers, and economics the electronic commerce segment of the Internet seems like it would be the most disrupted by the adoption of Bitcoin. PayPal in particular exists in a niche that widespread use of Bitcoin would affect, but at the same time companies such as PayPal could embrace Bitcoin and give BitPay and Coinbase competition.

So, when questions rose at an eBay shareholders meeting (PayPal is a wholly owned subsidiary of eBay) interesting things were said on the subject.

At the meeting Carl Davis, Jr of the Silicon Valley Black Chamber of Commerce asked John Donahoe, CEO of eBay, what he thought of Bitcoin.

Donahoe replied, “We think Bitcoin will play a very important role in the future. Exactly how that plays out, and how we can best take advantage of it and enable it with PayPal, that’s something we’re actively considering. It’s on our radar screen.”

An ongoing trend of financial industry leaders saying cautious things about the future and Bitcoin is certainly emerging. In previous years, CEOs and executives deigned to talk on the subject because of media pressure, now we have questions during shareholder meetings.

Butterfly Labs has revived almost 300 federal complaints in the past 18 months

Ars Technica reports that controversial ASIC Bitcoin miner maker Butterfly Labs has received just under 300 federal complaints in the past 18 months.

The information came to Ars by way of a Freedom of Information Act (FOIA) request to the Federal Trade Commission (FTC). Butterfly Labs has been in the spotlight for over a year as controversy surrounded the Kansas-based company’s production of Bitcoin miners and the apparent failure to ship orders on time.

Aside from shipping woes, Butterfly Labs has also gotten itself caught up in customer service issues. In 2013, during the height of shipping problems, a company spokesperson rebuffed a customer with, “You received no answer because your question was so incredibly stupid that it doesn’t deserve an answer.”

This long history of overpromising and under-delivering may be catching up with the company.

The FOIA produced 283 complaints, which begin in September 2013 and end in early April 2014. The complaints represent a sum of almost $1 million in customer orders as unfulfilled or dissatisfied.

While Butterfly Labs has actually shipped products in the past—and continues to do so—part of customer satisfaction with Bitcoin mining is that the value of mining equipment falls quickly. A powerful mining rig delivered too late could lead to a real loss in income, both because of missed mining time and that the same money could then be used to buy a more powerful rig.

BitPay receives $30 million in funding

Bitcoin payment processor BitPay just received a giant injection of cash from investors. The $30 million infusion comes from an investor group including Virgin Group Chairman Richard Branson and Yahoo Inc. co-founder Jerry Yang. The investment raises BitPay’s valuation to around $160 million in what The Wall Street Journal calls “the biggest venture-capital investment in the digital-currency industry.”

BitPay made its bones by being one of the best bitcoin-processors on the market. Between launching in July 2011 and December 2013, BitPay had processed over $100 million in transactions. The Atlanta-based company brags TigerDirect, WordPress.com, the Sacramento Kings basketball team, and the San Jose Earthquakes soccer team as clients.

This investment represents an ongoing trend of industry confidence in the Bitcoin ecology. In April, Circle received a $17m in series B funding; in March, Kraken, a BTC exchange, received $5m; in September 2013, Armory Technologies, a cryptographic wallet, received $600k; and in May 2013, Coinbase received $5m.

About Kyt Dotson

Technology and civilization walk hand in hand and civilization is nothing without the skin of society, brushing up against itself, speaking strange nothings across dimly lit avenues and computer screens. If we're going to understand ourselves in this digital era, it will be through watching the adoption of technology by people to express themselves as people. I am an anthropologist and an author of science fiction and fantasy--and with my technology, I hope to open up new and exciting worlds that will not just enlighten the humanity of my friends and fans but also educate and enhance the expression of their own personhood. Find more of my work on Google+; send tips to @kytsune.