Kim Dotcom tried - and failed - to save Christmas for gamers around the world. His attempt to strike a deal with a notorious hacking group to cease attacking online gaming systems seems to have backfired.

Hackers knocked out PlayStation and Xbox networks on the day millions received consoles for Christmas.

The online networks which allow game players to get the most out of their new machines went down yesterday, leaving many youngsters frustrated and parents furious.

Notorious hacking group Lizard Squad, who had previously brought down both networks earlier this month, claimed responsibility for the sustained distributed denial-of-service (DDoS) attacks.

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As the disruption dragged on into a second day today, many desperate gamers sent messages to the group on Twitter, urging them to return service to normal.

Many had thought the systems would be restored when the hackers made a deal with Kim Dotcom, who told them he would provide them with with free, lifetime vouchers for his new MegaPrivacy website designed to provide encrypted cloud-storage.

Dotcom also made it clear he would cancel the vouchers if they shut down the network again. But while Microsoft XBox was soon restored, PlayStation is not.

This as the hackers revealed in an interview "that the task simply began for the laughs", also adding that they felt "it would anger and reach the largest amount of people - more people angry calls for a greater response from the companies."

They also claim to have stopped the attacks on the PlayStation Network, though the network remains down, and posted on Twitter that they were now targeting the Tor Project, an anonymous communication service used by such people as Edward Snowden.

Lizard Squad claimed they could take down the NASDAQ if they wanted and that they "jokingly refer to themselves as terrorists".

They said that Microsoft was the easier of the two companies to take down as Sony had recently upgraded their systems.

Asked about what protections the Xbox network had, Lizard Squad said: "Almost nothing."

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Microsoft and Sony both used Twitter to acknowledge the issues and to assure users that they were doing everything they could to restore their services.

On Boxing Day morning, Xbox support tweeted: "Some Xbox One users may currently be experiencing issues signing into Xbox Live."

Around the same time, Playstation's support team posted: "Our engineers are continuing to work hard to resolve the network issues users have experienced today. Thanks for your continued patience!"

The hack left gamers unable to play online and also impacted online components of hugely popular games such as Call of Duty, Madden, FIFA and The Sims 4.

Occasional downtime is par for the course for both services, but Christmas Day is a particularly bad time to be hacked, just as hundreds of thousands of PlayStation 4s and Xbox Ones were being unwrapped and set up for the first time.

Lizard Squad had first announced earlier this month plans to take down the PlayStation Network and Xbox Live on Christmas Day. It described itself as the 'next generation Grinch.'

Another hacker group, The Finest Squad, then emerged, saying that it would stop the group and bring its members to justice. The Finest Squad tweeted at about 5pm ET that they had Xbox 'pretty much restored.'

The problems may have been exacerbated by Sony's decision to let consumers download the controversial movie The Interview through Xbox Video as well as other online sources.

What is the Lizard Squad?

The Lizard Squad began showing up more on the online hacking radar this year, largely by attacking gaming networks. This wasn't the first time the group targeted Sony and Microsoft's gaming networks. It claimed to have hit the PlayStation network in August and Xbox in early December, as well as several others such as RiotGames' League of Legends and Blizzard's Battle.net.

Apparently in conjunction with those hacks, the group pulled off some fairly serious pranks. In August, while Lizard Squad was hacking the PlayStation network, the Twitter account associated with the group tweeted out a bomb scare, forcing an American Airlines flight to make an emergency landing. On board was Sony Online Entertainment President John Smedley. The incident put Lizard Squad squarely in the sights of the FBI, several news organizations have reported.

Around the same time, that Twitter account (which has since been suspended) also claimed to have "planted the ISIS flag" on Sony's servers.

Should we be worried?

Tweeting a bomb threat is a pretty serious federal crime. But for the most part, Lizard Squad's tactics have amounted to pranks rather than public safety threats. Most hacking analysts doubt the group has anything to do with ISIS.

But when it comes to hacking, Lizard Squad seems to know what it is doing. One network analyst warned this week that the group is "not to be trifled with."

"Let me say this about Lizard Squad," said Dan Holden, director of research at the IT analysis firm Arbor Networks. "My personal opinion is, those guys know what they're doing, and if they're coming after you, you're going to have a bad day."

Lizard Squad's apparent weapon of choice is Distributed Denial of Service attacks, or DDoS attacks, which overwhelm servers with massive amounts of fake traffic, rendering them inoperable.

But as the bomb scare and ISIS flag incidents show, the group appears to have greater ambitions than just carrying out a bunch of DDoS hacks. But as with everything in the hacking world, it's hard to know whether Lizard Squad is responsible for these hijinks or whether they are just taking credit for the work of others.

So why are they doing this?

As with many hacking organizations, Lizard Squad's motivations are often described as "for the lulz" - hacker-speak for "because it's fun, or funny." Over time, its strategy has evolved a little. The group now targets gaming companies, specifically to expose lax security practices, members claimed in an apparent interview with tech news site WinBeta. By disrupting networks like Xbox Live, its members say, they force companies to improve user protections.

But there is also evidence of pure self interest: Lizard Squad agreed to withdraw their Christmas Day attack on gaming systems in exchange for an offer of lifetime accounts to the online encrypted file hosting service Mega which was created by founder Kim DotCom, according to reports.

Another group, calling itself "Finest Squad" claims to be playing interference, DDoS-ing Lizard Squad servers in an attempt help the gaming networks return to normal service. The group has also posted a site featuring alleged information on the digital footprint and identities of Lizard Squad members.

- Daily Mail and Washington Post