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Statement From MtGox Causes Tension in the Bitcoin Community

February 14, 2014 at 16:04 by Wade Powers

According to a CNBC report from earlier today, the value of Bitcoin is under duress due to an announcement today by Mtgox.  One of the first and most recognized Bitcoin exchanges, MtGox suspended Bitcoin withdraws over the past weekend.  CNBC’s report stated:

(MtGox) said that it had detected unusual activity on its bitcoin wallets. A bug in the bitcoin software made it possible for people to use the bitcoin network to alter transaction details. That could give the false impression that bitcoins had not been sent to a bitcoin wallet, when “in fact” they had.

MtGox went on to say:

The problem we have identified is not limited to MtGox and affects all transactions where bitcoins are being sent to a third party.

The problem itself, called Transaction Malleability, has been known about for some time.  As well known Bitcoin developer and consultant Andreas Antonopoulos tweeted, there is a wiki page over a year old dedicated to the exact issue.  You can learn more on the wiki page about how this problem manifests itself.  The interesting part here is MtGox using this issue to explain its suspension of Bitcoin withdraws.  The issue does not appear to be affecting other exchanges and their ability to process withdraws in any way.

There can be no doubt that the statement by Mt Gox has affected the price, as Bitcoin experienced a sharp drop off on all exchanges.  The five day chart from Bitcoincharts.com shows a frenzy of volume and some of the largest candles we’ve seen since the price of Bitcoin exploded last year.

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On the popular Reddit sub r/bitcoinmarkets,  the top post  contained a quote from lead Bitcoin developer Gregory Maxwell.  Maxwell described himself as betrayed, expressing his displeasure at how MtGox chose to blame Bitcoin.  In this article from cryptocoinnews.com, Maxwell went on to say say:

The challenge for me in offering something here is that this isn’t news to me – for years – and it’s never been a particularly large concern. This wouldn’t make the top ten list of dangers in the Bitcoin technology.

One only needs to peruse through the comments from the above mentioned Reddit post, and read the rest of the article, to ascertain that there is hostile sentiment towards MtGox.

Fears that this statement would resonate the world still new to digital currency, proved accurate.   Well known publication PC World published this article, which highlighted the issue MtGox brought up.  The article itself never questions whether it was a legitimate security concern, or a cover for deeper issues within the exchange itself.

As to MtGox, people are already musing about how it’s downfall came about.  Kyt Dotson from the Silicon Angle concluded in her article released yesterday:

The cracks in the façade that made MtGox such an amazing exchange and a flashpoint for bitcoin adoption have slowly worn thin with losing the ability to exchange dollars, the cessations of withdrawals, and now the site going dark. Little to no communication from administrators of the site also do not bode well for the future of what began as the first platform to trade BTC for local money.

It would appear that the future of MtGox is precarious, and as one of the flagship exchanges, it will be interesting to see how this affects the perception of Bitcoin going forward.

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