Mt. Gox fell victim to another DDoS attack yesterday. Anyone who’s been involved with Bitcoin for more than a week knows this is a relatively common occurrence. That said, there was something very different about this attack that if repeated consistently should lead to a reduction in frequency of DDoS downtime: your reaction.
The most commonly assumed incentive to DDoS a bitcoin exchange is to profit from the ensuing chaos. Remove the chaos and you remove the incentive to attack. That’s exactly what happened yesterday.
Why DDoS an exchange?
In a distributed denial of service (DDoS) attack, Malicious traders use botnets to overload the exchange’s servers, causing heavy latency. The goal of a DDoS is to cause a panic and drive other market participants into a fear-driven sell-off. After the price of BTC drops, the attacker buys in below true market value, waits for prices to normalize, and sells higher for a profit.
DDoS attack on April 3
DDoS attack on April 10
How was yesterday different?
Unlike past DDoS attacks, something very interesting happened yesterday: nothing. Trades trickled through and prices barely moved, remaining in a tight band for hours. The implications of that could be tremendously positive.
A DDoS attack isn’t free. The attacker could make a botnet, but it’s more likely they rented one. All in, a DDoS could cost up to or even above $1,000 – an amount that could be easily covered by trading the resulting swings – that is, of course, assuming a swing happens. Yesterday there was uncommonly low volatility (see chart below), meaning the attacker probably lost money.
Well now you’re just wasting everyone’s time
If the financial gain is removed, theoretically the incentive to attack the exchange should wane similarly. Yesterday was surely not the last time Gox will be DDoS’d, but we should all hope the most recent market reaction was the beginning of a trend.
Why was yesterday different?
Most of the folks remaining post-bubble are longer-term players, rather than speculators looking to make a quick buck in the hottest new market and have a deeper understanding of exchange issues, so they’re less inclined to rush into a panicked frenzy during a DDoS. The result was a tightly-banded holding pattern as people realized this was another temporary blip and looked to consciously and deliberately take positions.
This is a sign of increasing market maturity, an important step in bitcoin’s broader adoption. Let’s hope it continues.
Not today.
Nice read Jonathan, I agree. Definitely a micro-sign of maturation.
Agreed. Great analysis.
Nice read. I couldn’t agree more. Some guys are making serious money from those DDoS attacks. Nicely analyzed…
so.. in order for us to have a stable market, we need to DDoS MtGox every day?
it’s gonna be expensive.. but ok
Nice article. I am not, however, convinced there was a DDOS. Volume could dry up for various reasons. Any more facts on DDOS?
Thank you for both the enthusiasm and a great question. Gox stated via twitter it was confirmed to be a DDoS: https://twitter.com/MtGox/status/324873103484260352
Great article and reflection. Love the pics too. Keep up the good work while I plan for a Bitcoin Exchange in SE Asia side…thanks
The power of the people! Show these people that the bitcoin won’t be brought down by these attacks!
Looks like you spoke too soon, given today’s downtime and price drop.
I can see why one might draw this conclusion at first glance, but consider the following:
1. Today’s DDoS put Gox out of commission completely for a significantly extended period, relative to the last attack. This causes greater uncertainty and as a result opens the door for increased investor concern.
2. Compare the normalization period after Gox reopened today with the chart in this article showing the April 3 attack. Even with the extended down time today, prices normalized in less than an hour. On April 3, volatility remained elevated for nearly 12 hours.
This market undoubtedly has quite a bit of growing up to do and will continue to see its share of difficulties, but there are small signs every day indicating we’re moving in the right direction.
dude you’re the man. great points.
Both of those things being true don’t actually counter my point. The fact remains that Gox was DOS’d and the price dropped, and the attacker had the opportunity to sell high and buy low. The point of the article is that this tactic may no longer be profitable, but it clearly is.
nope. fuck you
If you look at it in black and white, sure. You are definitely right. But the decline in how profitable DDOS’s are becoming is a much more interesting point. Quit being dense.