It’s been a trying few weeks for Bitcoin and those who insist the digital currency marks the future of the global economy.
Barely a week after $350 million in Bitcoin was reportedly stolen from massive online exchange Mt. Gox, Bitcoin bank Flexcoin has reportedly been shuttered by a smaller hacker attack that cost it roughly $600,000, transferring the funds to two different addresses.
The sum accounts for all 896 Bitcoins that had been stored in its hot wallet — and there will be no recovery.
“As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately,” it said in a statement. Only cold storage coins, which are kept offline, will be recoverable for its users.
As the Bitcoin Wiki notes, storing large quantities of Bitcoin in a hot wallet, which is connected to the Internet, always makes for a “fundamentally poor security practice.”
The situation is especially troubling for those who regard the Mt. Gox hack as an irreparable blow to Bitcoin’s public perception. Austin E. Alexander, the deputy director of Bitcoin Center NYC, insisted that the Flexcoin situation is not representative.
“I don't really understand who was using that service,” he told Newsweek. “Most people, if they understand how the protocol works, they can give themselves that same level of security without having to rely on a third party.”
Alexander questioned whether the hack would damage Bitcoin’s longterm viability.
“I don’t think it’s going to have much effect,” he argued. “When people get their wallet stolen, it doesn’t dissuade them of using a wallet. They understand that they have to keep the money in their pocket secure.”
A Reddit user named ‘flamingboard’ concurred. “Just a reminder that for every story about someone losing their coins there are many more that didn't,” the Redditor wrote. “You just never hear about it.”
For Alexander, the currency’s potential is yet to come. “It has so much utility to add to the world and the number one market for Bitcoin you’ve yet to even hear about, which is the developing world,” he said. “By using Bitcoin, someone in Somalia can be connected to the global economy in minutes.”