“Instawallet” Bitcoin Service Hacked, Users Must Now Make Claims


A service that stores Bitcoin online for people to make transactions has been hacked and is currently offline, but is now promising to honor all accounts.

Bitcoin-101_3_ (Copy)By JG Vibes
April 4, 2013

Earlier this week I checked one of my Bitcoin wallets to see if there was any new donations for my free ebooks.  So far I have accumulated about .5 of a Bitcoin, and with the price going up so quickly that is actually becoming a considerable amount of money. 

Before I had really figured Bitcoin out, I set myself up with an instawallet, because it was quick and easy, and I didn’t have to download anything, which is difficult with my rural internet connection.

Weeks later a friend informed me that it was not secure to use instawallet, and that I really needed to get an actual Bitcoin wallet installed on my computer so the Bitcoin that I received would be totally secure.  I followed his advice and installed the wallet, but unfortunately I never got around to actually making the transfer from the instawallet to the secure wallet on my computer.

Right now I am really wishing that I followed through all the way with that advice, because when I checked my instawallet account, there was a notice on the screen telling me that the service was hacked.  At first I really didn’t know what to expect, mainly because it was April fools day and just hours before I had fallen for an elaborate prank that was set up by Cody Wilson of Defense Distributed.  I was really hoping that it was another joke, but this morning a new notice was posted confirming that a hack actually took place.

Their front page reads:

The Instawallet service is suspended indefinitely until we are able to develop an alternative architecture.

Our database was fraudulently accessed, due to the very nature of Instawallet it is impossible to reopen the service as-is.

In the next few days we are going to open the claim process for Instawallet balance holders to claim the funds they had stored before the service interruption.

Important information on claims submission:

  1. For the first 90 days we will accept claims for individual Instawallets. Your wallet’s URL and key will be used to pre-populate a form to file the claim.
  2. After 90 days, if no other claim has been received for the same url, your Instawallet balance under 50 BTC will be refunded. If several claims have been filed for the same url, we will process those claims on a case by case basis, under the presumption that the claim we received first belongs to the legitimate balance holder.
  3. Claims for wallets that hold a balance greater than 50 BTC will be processed on a case by case and best efforts basis.

To be clear, Bitcoin was not hacked.  In traditional banking terms, see this as more of a bank robbery instead of a hacking or  disrupting of an entire currency.  People who were smart enough not to have their Bitcoins on an external server have nothing to worry about with this security breach.  But for me, and everyone else using instawallet, we are left to claim our coins, but apparently we will be able to, so we will see how that goes.

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J.G. Vibes is the author of an 87 chapter counter-culture textbook called Alchemy of the Modern Renaissance, a staff writer, reporter for dev-test.intellihub.com and Executive Producer of the Bob Tuskin Radio Show. You can keep up with his work, which includes free podcasts, free e-books & free audiobooks at his website www.aotmr.com

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