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Bitstamp re opens for trading and Bitcoin value rises

On Saturday, Bitstamp, the Slovenia-based manager of the world’s largest bitcoin exchange, said it has restored automated customer withdrawal. Trading had been halted for four days after a hacking attack that crippled various platforms for exchanging the digital currency and once again raised questions of security in the global Bitcoin network, according to the WSJ Saturday.

The other two largest Bitcoin exchanges, Mt. Gox and BTC-e all halted trading temporarily in the last few days. BitStamp and Mt. Gox account for more than half of all traded Bitcoins.

Tokyo-based Mt. Gox, whose struggle with fraudulent customer requests paved the way for a network-wide denial-of-service, or DOS, attack Tuesday on elements of Bitcoin’s shared infrastructure, said it had temporarily frozen deposits.

In a statement on Saturday, Bitstamp said that ‘after rigorous testing, we have restored fully automated processing for Bitcoin withdrawals.’

On Friday, Jeff Garzik, a programmer at payment processor Bitpay and a member of the bitcoin network's five-man core development team said he was working with exchanges like Bitstamp to devise workaround solutions to allow them to clean up, reconcile and restore their accounts.

How the problem lies in the ability for the software that many exchanges use to interact with the core protocol code that manages Bitcoin’s blockchain, the digital currency ledger of Bitcoin transactions. This will take longer to secure.

Bitcoin Foundation Chief Scientist Gavin Andresen, who leads the core development team, said a permanent fix to that adjunct software, known as the reference implementation, should be ready next week.

Bitstamp released a statement on Saturday: ‘Unforeseen incidents like this DoS attack against an edge case in the Bitcoin protocol are to be expected with such a young technology,’ Bitstamp said. ‘The core protocol remains sound and the world has seen how these incidents are addressed by the Bitcoin community. Every challenge that is successfully overcome is a milestone that allows the world to grow their confidence in Bitcoin.’

The shutdowns began earlier in the week with Mt. Gox

A statement that the reason it had ceased trading the prior Thursday was due to illicit traders were causing transactions to mutate and trick the Mt. Gox wallet into thinking that the trade did not go through and a second trade was issued.

The Tokyo-based exchange further stated that ‘a bug in the Bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of Bitcoins to a Bitcoin wallet did not occur when in fact it did occur.’

Micky Malka, a venture capitalist and a board member of Bitcoin Foundation, told Reuters this week that ‘Bitcoin is still an experimental protocol in its infancy.’ He added that ‘no one should be investing an amount they cannot afford to lose.’

CoinDesk has removed Mt. Gox from the BPI due to the exchange’s persistent failure to meet the Index’s standards.

Bitcoin closed up Friday 9.73% at $656.61 according to CoinDesk.

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