What is the story behind Bitcoinica?

Question

Bitcoinica was a very popular service when it was operating. What is the story behind it - when was it started, what did it offer, and what hurdles did it face?

Answer 1

I think this is a good summary: http://arstechnica.com/uncategorized/2012/05/bitcoins-worth-87000-plundered/

Even more summarised thanks to freesummarizer.com:

More than $87,000 worth of the virtual currency known as Bitcoin was stolen after online bandits penetrated servers belonging to Bitcoinica, prompting its operators to temporarily shutter the trading platform to contain the damage.

Friday's theft came after hackers accessed Bitcoinica's production servers and depleted its online wallet of 18,547 BTC, as individual Bitcoin units are called, company officials said in a blog post published on Friday.

In early March, a security lapse at cloud services provider Linode allowed hackers to make off with about $210,000 worth of bitcoin after they gained unauthorized access to bitcoin wallets stored by Bitcoinica and seven other customers.

Strong cryptographic controls ensure that once bitcoins are spent they can't be taken back, although a recently published research paper reports limitations that allow the same bitcoins to be double spent in certain cases (which Bitcoin developers say they've long warned users to avoid).

The March heist that hit Bitcoinica also affected several other trading platforms that have also lamented the necessity of storing large amounts of the currency in liquid form in "hot wallets" to automatically cover payout requests made by customers.