Bancor ICO Explodes, Cryptocurrency Networks Under Attack

Several blockchain networks experienced cyberattacks and outages in the past week, including the Russian cryptocurrency exchange BTC-E, as cryptocurrency prices skyrocketed. CNBC reported Ethereum's ether tokens traded for around $400 each on Monday, up 5,000 percent since January.

The blockchain startup Bancor said in a statement Monday widespread outages were caused by “overwhelming demand and traffic, and massive malicious attacks.” However, the details of Bancor's initial coin offering glitches are unclear. A reddit user argued avoidable technical issues, not hackers, could be the driving force behind network failures.

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Either way, the hitches with Bancor’s ICO may have a silver lining. Because of it, they extended the window for investors to buy ICO tokens. Coindesk reported the Bancor ICO set a record by raising $153 million in ether from around 10,885 buyers. Billionaire venture capitalist Tim Draper participated in the ICO and joined the Bancor advisory board, the startup’s blog said.

Yet complaints about erroneous transactions still abound and some buyers are outraged. It is still unclear how, or if, the malfunction could impact the value of their tokens. “How can we trust anything Bancor says now?” a Slack user wrote on Bancor’s public channel.

Twitter users also complained one of the world’s biggest bitcoin exchange markets, Coinbase, was down again Monday after a similar outage in May. Like previous outages, the current glitches happened during a market spike as online traders rushed to cryptocurrency exchanges. CNBC reported bitcoin and ether both reached record-breaking heights this week, with bitcoin going for $3,000 at its peak.

Although blockchain currency networks are still in their infancy, they often attract hackers just like established banks and financial institutions. For example, the bitcoin exchanges Kraken and Poloniex both suffered similar denial of service cyberattacks in May. A report by the cybersecurity firm Nexusguard said the frequency of DDOS attacks by hackers increased 380 percent during the first quarter of 2017. Many cryptocurrency companies don’t have comparable security budgets to deal with hackers the way traditional financial institutions do.

However, Coinbase may prove to be the exception. CBS News reported this bitcoin exchange is eyeing a $1 billion valuation, putting it on the same tier with startups like Uber and Pinterest. Outraged Twitter users criticized Coinbase on Monday, flooding the social network with screenshots and complaints about how the company has handled this widespread network crisis so far.

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