Two months ago, BTC-China was growing fast. It was on a blazing trajectory that would soon see it become the world’s largest Bitcoin exchange. With Bitcoin, the world’s most popular digital currency, in the midst of an tremendous upswing of its own, BTC was on the verge of hitting it very, very big.

But before that, there would be the double-barreled rite of passage. First came the extortion attempt, and then the non-stop computer attacks, known as distributed denial of service (DDoS) attacks.

The extortionists contacted BTC-China in mid-September. Over instant-message chats, they first said they wanted just a few hundred dollars — paid out in bitcoins, naturally — but the demands soon escalated. BTC-China CEO Bobby Lee doesn’t want to get into specifics, but he says that they claimed to have been hired by one of his competitors. He doesn’t believe this, but he thinks that other Bitcoin companies should be concerned.

“The DDoS attackers are hitting more and more of us, and it’s going to be a widespread problem,” he says. Since, September, there have been dozens of these attacks on BTC-China. According to Lee, one of them used up a remarkable 100 G/bits per second in bandwidth.

“They’re throwing big-time resources into these attacks,” says Marc Gaffan, co-founder of Incapsula, the company that Lee hired to protect his exchange from the criminals. “The attack on BTC-China was one of the largest ever.”

Incapsula has about two-dozen clients that are involved in Bitcoin businesses, Gaffin says. A year ago, it had none.

CloudFlare, another provider of DDoS protection services has seen a big jump in attacks over the past three months, says Matthew Prince, the company’s CEO. “We’re seeing daily attacks targeting Bitcoin related sites on our network, most of which are relatively small but some get to very high volumes.” Some attacks have even exceeded the 100 G/bits per second volume that hit BTC-China, he says.

Yesterday, European payment processor BIPS said it had been hit with a DDoS attack, and then hacked to the tune of nearly 1,300 bitcoins, or $1 million. Last week, Bitstamp, another major Bitcoin Exchange, went offline temporarily. The company has not responded to requests for comment, but it blamed the outage on software and networking issues, not a DDoS.

On most websites, hackers can steal credit card numbers or personal information, but these have to be sold somehow. When you break into a Bitcoin business and get access to digital wallets, as was the case with BIPS and an Australian company, Inputs.io, which was hit last month, you’re stealing money itself. “If a Bitcoin wallet can get compromised, then the hackers can actually steal real money and there’s no way to refund the money,” Lee says.

In April, Mt. Gox got clobbered via DDoS. The point, the company speculated, was to destabilize Bitcoin, and fuel panic-selling. “
Attackers wait until the price of bitcoins reaches a certain value, sell, destabilize the exchange, wait for everybody to panic-sell their bitcoins, wait for the price to drop to a certain amount, then stop the attack and start buying as much as they can,” Mt. Gox wrote on its website.

Gaffan and Lee agree that, in addition to extortion, market manipulation is likely a motive with the recent DDoS attacks too. “It’s about trying to influence the market,” Gaffan says. “We see more Bitcoin exchanges going under attack.”

Source: http://www.wired.com/wiredenterprise/2013/11/ddos_bitcoin/