Bitcoin Battered By DoS Attacks

A number of Bitcoin exchanges have reported issues with completing transactions, as hackers have exploited a vulnerability in the cryptocurrency’s protocol for a form of denial-of-service attack.

Slovenia’s Bitstamp said yesterday it had suspended withdrawals and deposits, just a matter of days after Mt. Gox, the world’s biggest exchange, did the same as a result of the issue. BTC is also reportedly experiencing problems as a result of DoS attacks.

Bitcoin transaction malleability

The weakness resides in what is known as “transaction malleability”.  This is where attackers can take advantage of a small window where transaction IDs can be renamed before being confirmed in the blockchain, the ledger of all Bitcoin transactions.

Attackers can send large numbers of these malformed IDs, which look very similar to real transactions, to exchanges. If they are accepted, the exchanges will fall out of sync with the blockchain. That means they have to alter their records and fix fund balances, so if sent in vast numbers, the malformed transactions can cause carnage.

The problem only affects users who make multiple transactions in a short period of time, according to the Bitcoin Foundation, although it is clearly hampering entire exchanges, thereby impacting many Bitcoin owners.

“Somebody (or several somebodies) is taking advantage of the transaction malleability issue and relaying mutated versions of transactions. This is exposing bugs in both the reference implementation and some exchange’s software,” the Bitcoin Foundation explained.

“We (core dev team, developers at the exchanges, and even big mining pools) are creating workarounds and fixes right now. This is a denial-of-service attack; whoever is doing this is not stealing coins, but is succeeding in preventing some transactions from confirming. It’s important to note that DoS attacks do not affect people’s bitcoin wallets or funds.

“Exchanges are temporarily suspending withdrawals to protect customer funds and prevent funds from being misdirected.”

The value of Bitcoin has dipped, most likely because of the issues being experienced. It is now hovering around the $650 mark, having been steadily above $800 since the start of the year.

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