Cyber Incident Victim: Coinkite Inc
Date:
Jan 2013
Location:
Canada
Summary
A Bitcoin startup discontinued its secure wallet service following prolonged distributed denial-of-service (DDoS) attacks and regulatory pressures, prompting a strategic shift toward hardware-based products. The company mandated customer fund withdrawals within a specified period before terminating wallet access, with automatic Bitcoin redistribution for inactive accounts, while also discontinuing TOR and API services ahead of full closure. Operational challenges, including sustained cyberattacks over multiple years and resource diversion to legal and support issues, drove the decision to prioritize hardware solutions like standalone Bitcoin terminals and authentication tools, as stated by leadership emphasizing frustration with software service burdens.
| CIA Posture | Motives | Tactics, Techniques & Procedures |
|---|---|---|
| Available to members | 2 motives | 1 technique |
| Threat Actors | Type | Location |
|---|---|---|
| 0 actors | Available to members | Available to members |
Description
Coinkite Inc., a Bitcoin startup operating since 2012, announced the discontinuation of its secure wallet service on March 30, 2016, citing persistent operational challenges. The company declared it would cease all wallet-related operations within 30 days, requiring customers to withdraw funds before the deadline. Failure to meet this timeframe would trigger automatic Bitcoin reimbursement to users. Preparatory shutdown measures included terminating TOR network accessibility and application programming interface (API) services 14 days before the full closure. Annual pre-paid subscription holders received prorated refunds as part of the wind-down process. Coinkite attributed this decision to three consecutive years of sustained distributed denial-of-service (DDoS) attacks that disrupted service availability. These cyber assaults drained organizational resources and diverted attention from core development activities. Concurrently, the company faced repeated attempts by government agencies to compromise client privacy protections, though specific agencies weren't disclosed. These cumulative pressures compelled leadership to reevaluate their business model's sustainability.
The operational shift redirected Coinkite's focus toward hardware-based cryptocurrency solutions, abandoning software-as-a-service offerings. Primary development efforts transitioned to Opendime, a physical Bitcoin terminal featuring integrated printing and QR code scanning capabilities. Additional hardware projects included specialized security optimization devices, authentication tools, and standalone systems for managing Bitcoin hot wallets. CEO Rodolfo Novak publicly characterized software-centric operations as financially untenable due to support costs for non-paying users and legal complexities. He emphasized frustration with resource allocation toward attack mitigation rather than product innovation, stating their preference for software development over legal disputes and DDoS countermeasures. This strategic realignment terminated Coinkite's self-described "most advanced web wallet system," which had enabled global cryptocurrency transactions for merchants and consumers since its 2012 launch. The closure marked the conclusion of a platform that facilitated Bitcoin purchases, sales, storage, and commercial acceptance across digital and physical environments.