Bitcoin rise in popularity produces startups focused on giving investors protection from hackers
The phenomenal rise of Bitcoin last year, which has made it a target among hackers and thieves, has led to the emergence of startups that aim to give virtual currency investors protection against losses, Bloomberg reported.
Citing data from BitcoinTalk.org, the report said that there have already been 35 major scams and thefts involving Bitcoin around the world since the digital currency was introduced. This included the May 2012 heist of 38,527 Bitcoins from Bitcoinica Llc.
There are now around a dozen startups whose goal is to alleviate worries about the vulnerability of the digital currency. These include Titan Mint Inc, a coin-making firm and BitShares, a marketplace that allows people to trade Bitcoins among each other. The startups offer everything from metal coins that contain security codes to encrypted accounts on the Internet, the report said.
New York-based ConvergEx Group Chief Market Strategist Nicholas Colas told Bloomberg, "The risk is there, and that is enough to dissuade some users." He thinks that there are more Bitcoins lost to theft and hacking at present than there are dollars lost to bank theft.
Bitcoins are vulnerable to loss due to hacking or failure because they are saved as software files in virtual wallets located in websites, computers or smartphones. When Bitcoins are stolen, they are lost forever because digital currency is designed to be nearly impossible to track compared to the money in a bank, the report said.
The extra initiatives to give protection to Bitcoin are warranted as its increasing value has made the digital currency a target for hackers. Bitcoin security analyst Andreas Antonopoulos told Bloomberg that of the estimated 1 million individuals who own Bitcoin wallets, there are a few thousand who have lost their digital money. However, he said that the situation also creates opportunities. He said, "We have security problems, but we also have security opportunities. We can innovate with money."