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Mt. Gox Shuts Down: Collapse Should Come As No Surprise

Unknown Lamer posted about 8 months ago | from the virtual-currency-actual-losses dept.

Bitcoin 232

New submitter Dan541 writes in with word that Mt. Gox has halted all operations indefinitely. A statement from the CEO: "As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues. ... In light of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly." MrBingoBoingo writes that we should not be surprised Mt. Gox appears to have failed "The recent closure of the famous Bitcoin exchange Mt. Gox has grabbed a lot of media attention lately, but people involved heavily in bitcoin have been raising alarms about business practices at Mt. Gox for quite some time now. With the Mt. Gox failure being Bitcoin's biggest since the collapse of the ponzi run by Trendon Shavers, also known as Pirateat40, it might be time to revisit the idea of counterparty risk in the world of irreversible cryptocurrency."

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Is MtGox Bitcoin? (5, Informative)

serviscope_minor (664417) | about 8 months ago | (#46346407)

If you can answer that question, then it says something about the usefulness of bitcoin without MtGox.

Yeah MtGox was big, and this will almost certainly cause bitcoin to take a slide, but there are other exchanges, and Bitcoin is bigger than just MtGox. My prediction: bitcoin will drop a lot, then slowly recover as other exchanges take the load and people see that this is not, in fact, the end of the world.

Hopefully the ones that replace MtGox will have better tech.

Re:Is MtGox Bitcoin? (2)

alphatel (1450715) | about 8 months ago | (#46346473)

Here we have a large brokerage that shuts down, but changes in the value of bitcoin are largely unaffected except temporarily by the news, and everything remains stable despite a large market share being removed from the market. How will this change when users gain access to their accounts and finally settle at a loss is unknown. But the value of the underlying currency is both an interesting sounding board for this type of data, and in terms of technical chart analysis, an interesting point of stability. FWIW.

Re:Is MtGox Bitcoin? (0)

Anonymous Coward | about 8 months ago | (#46346619)

Yes, in a rigged market, the price is controlled and doesn't drop on very bad news. You can contrast that with a free market like housing which took a drop after Lehman shut down.

Re:Is MtGox Bitcoin? (3, Interesting)

alphatel (1450715) | about 8 months ago | (#46347203)

Yes, in a rigged market, the price is controlled and doesn't drop on very bad news. You can contrast that with a free market like housing which took a drop after Lehman shut down.

Those two objects are not correlated. The housing market collapsed because of bad debt that was loaded into paper held by banks, and Lehman happened to have some of the paper too. Note that Lehman was allowed to collapse because the impact to the housing market was a non-event. The impact to the US as a whole, and the housing market secondarily, by the bankruptcy of all solvent banks was much greater. And so we entered into a time when the government took a stake in the stock market and financial institutions.

MT and BTC are the same scenario, luckily the US Govt has not stepped in yet. Which means the market is actually free.

Re:Is MtGox Bitcoin? (5, Insightful)

JoeMerchant (803320) | about 8 months ago | (#46346507)

MtGox is a large part of the Bitcoin "brand."

Much of the value attributed to Bitcoin comes from the perception that it can be traded, easily, for traditional currency, and how do you do that? Well, the main place to do it is (was) MtGox.

If you hold a stock that trades on the NYSE, part of its value is that NYSE market. When stocks fall off the major exchanges onto "the pink sheets," they almost invariably lose value just from the de-listing.

The MtGox failure is worse, it's like a bank failure - your coins are in there, but can you get them out now?

Regardless of history, it is true that Bitcoin is "just another cryptocurrency" and MtGox is "just another exchange" but, they are both significant brands in their space, and perception of them will weigh heavily on all similar cryptocurrencies and exchanges, regardless of "reality."

Re:Is MtGox Bitcoin? (1, Insightful)

TheRealMindChild (743925) | about 8 months ago | (#46346655)

Well, the main place to do it is (was) MtGox.
No it wasn't and hasn't been for a long time

Re:Is MtGox Bitcoin? (2)

JoeMerchant (803320) | about 8 months ago | (#46346903)

Well, the main place to do it is (was) MtGox.
No it wasn't and hasn't been for a long time

Spoken like a truly "hip" trader of 'coin.

Value doesn't come from you guys, value comes from the unwashed masses who see a story on CNN and say "how can I get in on this Bitcoin thing?" Where, until very recently, would they end up placing their first buy order?

Re:Is MtGox Bitcoin? (3, Informative)

TheRealMindChild (743925) | about 8 months ago | (#46346947)

https://btc-e.com/ [btc-e.com]

Re:Is MtGox Bitcoin? (1)

NiteTrip (694597) | about 8 months ago | (#46347147)

Never heard of it and I've been following bitcoin for a couple of years.

Re:Is MtGox Bitcoin? (1)

Anonymous Coward | about 8 months ago | (#46346995)

Well, the main place to do it is (was) MtGox.
No it wasn't and hasn't been for a long time

I would disagree [bitcoincharts.com] .

I couldn't find historical data, but MtGox dominance is even great if you go back only a few months.

Re:Is MtGox Bitcoin? (1)

pankkake (877909) | about 8 months ago | (#46347111)

It's easy to have volume when you're trading two worthless things (mtgoxUSD was known to be worthless for a while, then it appeared mtgoxBTC was going to be too as it was used to get out of it).

Re:Is MtGox Bitcoin? (1)

Immerman (2627577) | about 8 months ago | (#46346761)

Let it be a warning to anyone dealing with bitcoin - don't store it in a "bank" that lacks bank-grade security. Doing so just means your coins have been combined with a bunch of others to make a much more tempting target.

let me tell you about my pokemons... (0)

Anonymous Coward | about 8 months ago | (#46347101)

they were all stolen!

Re:Is MtGox Bitcoin? (0)

Anonymous Coward | about 8 months ago | (#46346839)

To be honest, MtGox hasn't been the main place to trade for at least half a year. This might sound like a very short time, but in BTC time it's decades.

Re:Is MtGox Bitcoin? (0)

Anonymous Coward | about 8 months ago | (#46347079)

So the rest of the world is travelling at nearly the speed of light while MtGox remains stationary, and so half a year elapses for us but decades for them thanks to time dilation?

Re:Is MtGox Bitcoin? (1)

Spazmania (174582) | about 8 months ago | (#46346961)

The MtGox failure is worse, your coins are in there, but can you get them out now?

Are you sure? I thought the reason they stopped trading was alleged software flaws which were siphoning the coins out.

Re:Is MtGox Bitcoin? (1)

NiteTrip (694597) | about 8 months ago | (#46347167)

Software flaws for the users, but features for the owners. The owners lined their pockets with untraceable stacks of cash with no change of legal repercussions because bitcoins aren't regulated.

Re:Is MtGox Bitcoin? (1, Informative)

1s44c (552956) | about 8 months ago | (#46346965)

MtGox is a large part of the Bitcoin "brand."

MtGox was a parasite on the backside of BitCoin. Removing it might hurt like hell but it has to go. If that kills the price so be it, it will recover.

The customer's coins are most likely not in MtGox anymore. They leaked away all the coins they were trusted with because they had no understanding of how the technology they relied on actually worked.

Re:Is MtGox Bitcoin? (1)

JDG1980 (2438906) | about 8 months ago | (#46346585)

Yeah MtGox was big, and this will almost certainly cause bitcoin to take a slide, but there are other exchanges, and Bitcoin is bigger than just MtGox. My prediction: bitcoin will drop a lot, then slowly recover as other exchanges take the load and people see that this is not, in fact, the end of the world.

That's basically what has happened over the last couple of days. After the joint statement on the insolvency of Mt. Gox [siliconangle.com] , the Bitcoin price dove to ~$400, but started to recover not long after; it's now back up to ~$600, which isn't far from where it was before the most recent round of nonsense.

Re:Is MtGox Bitcoin? (1)

Joce640k (829181) | about 8 months ago | (#46346691)

That's basically what has happened over the last couple of days. After the joint statement on the insolvency of Mt. Gox [siliconangle.com] , the Bitcoin price dove to ~$400, but started to recover not long after; it's now back up to ~$600, which isn't far from where it was before the most recent round of nonsense.

Mt. Gox is only the beginning. Once the script-kiddies get around to it then anything of value that can be stolen electronically from ordinary PCs is toast.

Re:Is MtGox Bitcoin? (4, Insightful)

tom229 (1640685) | about 8 months ago | (#46347103)

CAVirtEx allows you to do a direct conversion of Canadian dollars, debited directly from your bank account to a bitcoin wallet address of your choice. The site never holds the funds and the transfer is nearly instant. This is how it should be done.

Always think of an online wallet as asking some stranger to hold your money and promise to give it back. We're used to this idea because traditional banks are federally regulated and insured, but without those protections it's a terribly foolish practice. The only reason to let someone else hold your money would be if they could do so more securely and with a reasonable guarantee. Online wallets/exchanges can provide neither.

Re:Is MtGox Bitcoin? (1)

NiteTrip (694597) | about 8 months ago | (#46347133)

Here's a prediction for you. As long as bitcoin transactions remain anonymous, one of the key selling points of bitcoin, people will continue to abuse this and steal millions of dollars from unsuspecting users claiming "technical problems" and "hackers". 700,000 + bitcoins went missing, with a value of $350 million right now, after the huge drop. That's a lot of temptation. If this is allowed to keep happening the value of bitcoin will drop until they are worthless again.

Cryptocurrency (-1)

Anonymous Coward | about 8 months ago | (#46346409)

Cryptocurrency is apparently significantly easier to steal than the cash in my mattress...

Somebody should tell those arrogant fucking nerds.

Re:Cryptocurrency (4, Funny)

Spad (470073) | about 8 months ago | (#46346567)

It would have been fine if they'd kept it in their mattresses, but instead they gave it all to a guy who used to manage Magic The Gathering card swaps.

Re:Cryptocurrency (2, Insightful)

Anonymous Coward | about 8 months ago | (#46346765)

It would have been fine if they'd kept it in their mattresses, but instead they gave it all to a guy who used to manage Magic The Gathering card swaps.

No, they didn't. They gave it all to a guy who bought the business of a Magic The Gathering card swaps side from its original programmers and organizers, extending the site as an afterthought for Bitcoins worth cents at the time.

It was easier to replace lost Bitcoins than cards in stock. MtGox committed the ultimate fault for any business plan: the one thing they had no contingency plan for was success. They had no clue how to patch up the holes in their inventory (or probably even how to take inventory) when the holes became expensive because Bitcoins took off.

Re:Cryptocurrency (1)

1s44c (552956) | about 8 months ago | (#46346927)

Cryptocurrency is apparently significantly easier to steal than the cash in my mattress...

Cryptocurrency is absolutely secure. What the MtGox users did was gave their cash-stuffed-mattress to lying scumbags. Sure enough they got robbed.

There were clear warning signs about mtgox for about a year. They were not paying people back. You don't give your cash to people that have a history of not paying cash back. You just don't.

Risk? (5, Insightful)

JoeMerchant (803320) | about 8 months ago | (#46346419)

Risk? In a commodity that has regular 2x and 0.5x value swings in a single day? Say it isn't so!

Enough with the fucking Beta (-1)

Anonymous Coward | about 8 months ago | (#46346425)

Enough already

Can someone explain this theft? (1)

OakDragon (885217) | about 8 months ago | (#46346427)

I don't understand Bitcoins in general, but I *really* don't understand the process where they could be stolen. Could someone please explain it? Car analogies OK.

Re:Can someone explain this theft? (1)

drinkypoo (153816) | about 8 months ago | (#46346459)

This is a very simple situation. It's no different from an uninsured bank failing.

But you can also steal bitcoins by getting access to someone's wallet, just like you could steal cash by getting access to someone's wallet. Once you spend them, they can't be spent again. The system doesn't know that they didn't arrange to give them to you offline.

Re:Can someone explain this theft? (1)

silas_moeckel (234313) | about 8 months ago | (#46346463)

Bitcoin was fine these guys were idiots and left a gaping hole in the exchange API. Sending your bitcoin to somebody else to hold for you is not a good idea security wise. The transactions can not be undone and there is no state run insurance backing it so they can and will loose your bitcoin.

Re:Can someone explain this theft? (2)

timeOday (582209) | about 8 months ago | (#46346711)

Sending your bitcoin to somebody else to hold for you is not a good idea security wise.

Compared to what? Stuffing your savings into your (digital) pillow case isn't a good idea security wise either. Whatever you do, It's going to boil down to something physical that hopefully doesn't break or get stolen, plus a secret that isn't forgotten or discovered.

All around, it's hard to imagine what you could come up with that would beat a safety deposit box at a bank, i.e. letting somebody else hold your bitcoin.

Re:Can someone explain this theft? (1)

wonkey_monkey (2592601) | about 8 months ago | (#46346905)

What about letting several somebodies hold encrypted copies of your bitcoin wallet?

Re:Can someone explain this theft? (0)

Anonymous Coward | about 8 months ago | (#46347039)

This would only help in the scenario where you have lost all your (own) copies of your wallet, but still have the encryption key for the wallet your friend keeps for you.

What else would it be good for?

Car Analogy (2)

Dareth (47614) | about 8 months ago | (#46346467)

You load your friend you car and he promises to take care of it.
You sell your car to a person not your friend.
You ask your friend for the car back. He can't or won't give it back to you to deliver to the buyer.

Re:Car Analogy (1, Funny)

allcoolnameswheretak (1102727) | about 8 months ago | (#46346627)

You type out a lame car analogy
You suspect that it is not actually correct
You like to appear knowledgeable and witty, yet
You didn't secure your Bitcoin wallet
You are in quite a predicament, and how?
Your Bitcoins are all belong to me now.

Re:Car Analogy (0)

Anonymous Coward | about 8 months ago | (#46346643)

I have a fever, and the only prescription, is more car analogy.

Re:Car Analogy (2)

JoeMerchant (803320) | about 8 months ago | (#46346687)

Too simple, try this:

There's a budding market in Ford turn indicator lenses - they're exposed to unusually high levels of breakage and common across a large number of models, and the supplier that makes them is having labor troubles, something about the paperwork required to certify them for use growing exponentially.

So, some guy sets up an overseas depot that makes a market in these turn indicator lenses, they'll hook up buyers and sellers of the lenses and allow the market to find its own price point. For convenience, they will hold the actual lenses for you and you can just deal with them in cash.

Somebody runs a classic scam, resulting in less lenses being held at the depot than are promised to be held there. Now, if everybody wants to get their lenses all at once, there won't be enough to go around. The depot halts trading while they sort things out. Unless the scammer is caught and forced to cough up the goods, people are going to be taking a loss due to the missing lenses.

Other depots around the world haven't been scammed, that we know of, so they continue to trade.

Re:Can someone explain this theft? (5, Funny)

darkwing_bmf (178021) | about 8 months ago | (#46346513)

Let's say you deposit your retirement money at the Bonnie and Clyde savings and loan. They then take that money and move to Mexico and use it for their retirement. They may or may not use a car to get there. Either way, you're never going to see that money again.

Re:Can someone explain this theft? (4, Informative)

n7ytd (230708) | about 8 months ago | (#46346523)

I don't understand Bitcoins in general, but I *really* don't understand the process where they could be stolen. Could someone please explain it? Car analogies OK.

Just about any scenario where money is held as cash or a deposit in a bank account could apply equally to Bitcoin. You give a stack of $100 bills to a bank, they give you a slip of paper showing they have your money and will give it back when you ask. If the bank president or a crooked teller then puts everyone's stacks of $100 bills in a suitcase and disappears, your slip of paper isn't worth much.

In the case of the Pirateat40, it was a classic Ponzi scheme. The fact that it was done with Bitcoins instead of pieces of paper with pictures of dead Presidents and statesmen on them doesn't change much.

Re:Can someone explain this theft? (2)

OakDragon (885217) | about 8 months ago | (#46346565)

So, the reason for my question is that when I first heard about this, it was presented as a theft by an entity outside of Mt. Gox. These explanations seem like it was inside job. Is that the thinking now?

Re:Can someone explain this theft? (5, Informative)

Anonymous Coward | about 8 months ago | (#46346651)

Mt. Gox is presenting it as a theft by an entity outside of Mt. Gox.

The question is whether you trust Mt. Gox enough to believe that. Other possibilities are:

1. Someone at Mt. Gox stole the money
2. Mt. Gox itself was just a confidence trick designed to steal peoples' money.
3. Mt. Gox was a Ponzi scheme that is now unraveling.
4. Mt. Gox was essentially a legitimate bank, but was run too incompetently to maintain solvency in the face of market fluctuations, and they're now lying to cover up their incompetence.
5. Even the people at Mt. Gox don't know what's going on and have self-servingly decided on an explanation that puts the blame on someone else.

I'm sure there are more options.

Re:Can someone explain this theft? (4, Insightful)

ArsenneLupin (766289) | about 8 months ago | (#46346751)

As far as I understood, the Mt. Gox' API had a hole, which allowed customers to withdraw money without it showing up in Mt. Gox's books. Some customers noticed, and overdid it so much that no money was left to honour the other (honest) customers' accounts.

Re:Can someone explain this theft? (5, Informative)

1s44c (552956) | about 8 months ago | (#46346863)

The feeling on reddit and bitcointalk is that it was due to unbelievable incompetence by MtGox and not an inside job. They wrote their withdrawal code to throw money away over and over and they didn't audit their accounts for years. They also lied to cover up their losses for maybe a couple of years.

They simply had no understanding of the technology they were using.

Re:Can someone explain this theft? (1)

JoeMerchant (803320) | about 8 months ago | (#46346575)

One difference, most US "banks" that little kids are told are safe to put their money in have a little sticker in the window that says "FDLC insured" - meaning that your little slips of paper are not only backed by the bank, but also by the government.

Re:Can someone explain this theft? (1)

Chickan (1070300) | about 8 months ago | (#46346729)

They weren't always FDIC insured. Not too long ago they were not insured at all, so you would only put money in banks that you trusted. These banks still sometimes would fail. FDIC insurance came about to eliminate the fear of a bank collapsing. One day a bit coin exchange/bank may be FDIC (or similar) insured, but probably the whole thin will collapse first.

Re:Can someone explain this theft? (2, Insightful)

Anonymous Coward | about 8 months ago | (#46346849)

They weren't always FDIC insured.

Exactly, and before FDIC insurance there were massive upheavals of the monetary system (i.e. people lost their life savings) due to bank runs.

FDIC insurance is backed by the government's power to borrow money, and more importantly to print money. This means that the FDIC can never be insolvent.

There is no equivalent for bitcoin, and there can never be, because no one can print bitcoins. That means that the best an insurer can do is cause you to worry about an insurance collapse instead of a banking collapse. (We got a taste of this in the real world with AIG, and it wasn't pretty.)

Re:Can someone explain this theft? (1)

JoeMerchant (803320) | about 8 months ago | (#46347179)

Funny, on the other end of this thread, I've got people telling me how MtGox hasn't been the "go-to" exchange for nearly six months now - an eternity in Bitcoin time.

I think FDIC came around in the 1930s - well before my parents were born in any case.

Re:Can someone explain this theft? (1)

ClickOnThis (137803) | about 8 months ago | (#46346739)

One difference, most US "banks" that little kids are told are safe to put their money in have a little sticker in the window that says "FDIC insured" - meaning that your little slips of paper are not only backed by the bank, but also by the government.

FTFY.

Other countries protect depositors with similar measures. [wikipedia.org]

Re:Can someone explain this theft? (1)

JoeMerchant (803320) | about 8 months ago | (#46347157)

Thanks, though you reinforce my point, exact knowledge of the acronym isn't required to gain trust from the concept.

Re:Can someone explain this theft? (1)

medv4380 (1604309) | about 8 months ago | (#46346733)

Actually that slip of paper is worth quite a bit with most US Banks. FDIC insurance will cover the losses to your account unless you're keeping some absurd amount in a single account. And the receipt is proof that you did do a deposit. Similarly a receipt in a cash transaction allows for legal recourse if the person you're doing business with is a thief though not as much as if it were a bank. Unregulated entities, and Bitcoin in general offers very few of the legal protections normal transactions offer.

Re:Can someone explain this theft? (0)

Anonymous Coward | about 8 months ago | (#46346759)

I don't understand Bitcoins in general, but I *really* don't understand the process where they could be stolen. Could someone please explain it? Car analogies OK.

Just about any scenario where money is held as cash or a deposit in a bank account could apply equally to Bitcoin. You give a stack of $100 bills to a bank, they give you a slip of paper showing they have your money and will give it back when you ask. If the bank president or a crooked teller then puts everyone's stacks of $100 bills in a suitcase and disappears, your slip of paper isn't worth much.

Apparently you've forgotten about a few things. Your slip of paper is guaranteed and insured by the FDIC to be worth exactly what is printed on it, up to $250,000.

This is also exactly what makes BTC more like a gamble than an investment. No different than stocks, people invest in risky things with NO guarantee of return every single day. They just assume BTC is different because it's somehow "currency". Stop doing that stupid shit and wake up.

Re:Can someone explain this theft? (1)

Patent Lover (779809) | about 8 months ago | (#46346785)

Just about any scenario where money is held as cash or a deposit in a bank account could apply equally to Bitcoin. You give a stack of $100 bills to a bank, they give you a slip of paper showing they have your money and will give it back when you ask. If the bank president or a crooked teller then puts everyone's stacks of $100 bills in a suitcase and disappears, your slip of paper isn't worth much.

In the case of the Pirateat40, it was a classic Ponzi scheme. The fact that it was done with Bitcoins instead of pieces of paper with pictures of dead Presidents and statesmen on them doesn't change much.

This would be a good analogy if you substituted "some guy in an alley" for "bank".

Wrong (0)

Anonymous Coward | about 8 months ago | (#46347049)

Wrong. Banks are held responsible for safeguarding your deposits by their regulators. And in the US, your deposits are insured against loss by the FDIC, which collects insurance premiums from all chartered banks in the US.

Re:Can someone explain this theft? (1)

Zero__Kelvin (151819) | about 8 months ago | (#46347097)

"Just about any scenario where money is held as cash or a deposit in a bank account could apply equally to Bitcoin. You give a stack of $100 bills to a bank, they give you a slip of paper showing they have your money and will give it back when you ask. If the bank president or a crooked teller then puts everyone's stacks of $100 bills in a suitcase and disappears, your slip of paper isn't worth much."

Somebody should invent the FDIC!

Re:Can someone explain this theft? (4, Interesting)

medv4380 (1604309) | about 8 months ago | (#46346581)

It's like someone came up to their car siphoned off some gas. Then rather than report that the tank was half empty they ran things as if everything as "ok". As long as people kept putting in gas no one would be the wiser. But when people started taking their gas back, and stopped putting more gas in the tank eventually ran empty before it should have.

Ether it was deliberate theft on part of MTGOX that was done to effectively make a ponzi scheme. It could have been a theft from unrelated parties, and MTGOX lied to effectively create a ponzi scheme to hide the damage. Or, somehow, it was theft from unrelated parties, and MTGOX was blissfully unaware until it all came crashing down.

Re:Can someone explain this theft? (4, Insightful)

Trachman (3499895) | about 8 months ago | (#46346589)

For a simplistic explanation, think of Bitcoins as golden coins. You can own gold coins/bitcoins physically (keep gold coin in your pocket or keep BTC private keys in your posession). You can also relinquish your gold coin to the bank and have a bank note stating that they owe you a gold coin. In terms of Bitcoin, MtGox acted as a de-facto bank, where BTC owners gave away (or transfered) BTC to Mt Gox and had a false sense of security that their assets were "there". MtGox victims basically entrusted their private key to the third party (MtGox). Now, let's assume, the bank who kept gold was robbed, by someone who dig to the vaults and silently removed gold. The bank kept telling you that, according to their records, you still are the owner of the gold, while in reality they would not be in position to repay you. MtGox did the same thing: their real assets were stolen, while their "paper" records were showing existence of the BTC. This is a simplistic explanation, but, to be sure gold/bitcoins did not just disappear. They only sit in the possession of other owners.

Re:Can someone explain this theft? (0)

Anonymous Coward | about 8 months ago | (#46346605)

1. you intiate a transaction with a given transaction id and hash.
2. you initiate second transaction with the same id and a different hash
3. normal bit coin clients know that the second transaction is bogus and fail it
4. your braindead software sees that the second transaction failed and reissues it.

Re:Can someone explain this theft? (4, Insightful)

JDG1980 (2438906) | about 8 months ago | (#46346699)

I don't understand Bitcoins in general, but I *really* don't understand the process where they could be stolen. Could someone please explain it? Car analogies OK.

A car analogy? Sure. You're a classic car collector. Because storing and securing your classic cars is such a pain, you decide to entrust them to a business that is fairly well known and respected in the hobby. This business, for a modest fee, says they will keep your classic cars in a secure garage, and also let you sell them to other collectors who are customers of the same service without having to physically move them.

For a while all this works OK. People deposit their cars for safekeeping, they withdraw their cars, they trade them, everything is fine. A few mix-ups and glitches, but nothing out of the ordinary for a business of this size. Then at some point there's a "security problem" that keeps people from taking their cars back. The business says it's because of some kind of flaw in the software they use to track them, but they're working on getting it fixed. They give a date. The date comes and goes, and people still can't get their cars back. The CEO of the company gives excuses – he can't talk about what actually happened, but he promises everything will be OK if the collectors just give him a bit more time. There are complicated issues, but no, your cars haven't been stolen, pinky swear!

Eventually a hobbyist organization that this CEO is a member of decides to kick him out, and puts out an announcement saying that his company is insolvent – as everyone suspected for some time now, he doesn't have the cars he was supposed to be keeping in safe storage for his customers. No one knows where they went, who has them now, or if the theft was internal or external.

And because this company was holding ~6% of all the classic cars in existence, it's kind of a big deal.

Re:Can someone explain this theft? (5, Informative)

TomGreenhaw (929233) | about 8 months ago | (#46346837)

You are a car rental agency and your customer comes to get the car they reserved. The customer pays and drives off with the car. They return immediately afterward and says they haven't picked up the car yet. Because of a deficiency in the paperwork, the checkout person doesn't realize that a car has already been provided but sees that its paid for and provides a second car. Turns out the customer has used a false identity and can also reissue VIN numbers and now has two cars for the price of one. You look out in the parking lot the next day and realize all your cars are gone and you only have half the money. Crap. Somebody had the nerve to take advantage of a problem in your paperwork system that has been publicly known for a couple years but you have been too lazy and irresponsible to correct.

Its pretty obvious that getting the transaction process fixed is the solution. All the exchanges have or are in the process of doing this. Its too late for Mt. Gox. They and their customers are screwed unless they can come up with a way to trace the funds through a byzantine scheme to mix and anonymize and retract the transactions. Building a warp drive star ship would likely be simpler...

Re:Can someone explain this theft? (1)

Anonymous Coward | about 8 months ago | (#46346919)

People withdraw part of the money they paid in, and Bitcoins had to be split into change in order to pay them. All transactions with Bitcoin are recorded in a global distributed resource, the "Block chain" and each Bitcoin or fraction of it can only be spent once.

MtGox identified Bitcoins with a simplistic method. When they paid out a Bitcoin, the recipient immediately spray-painted the Bitcoin (or its transfer) in a different color (changed its description to the Blockchain in a manner MtGox would no longer recognize) and injected their version of the transfer into the Blockchain. When MtGox' version of the transfer arrived at the Blockchain, the Blockchain looked at the engine number and said "no go, this car is already sold". Then MtGox looked through the Blockchain to see whether there was a sale of a red car reported somewhere and came up empty-handed.

So they took a different Bitcoin and sent that "instead" instead of trying to figure out just why the Bitcoin they tried sending apparently never arrived according to their search for the red car they put out for delivery (instead of taking the pains of checking the engine numbers).

"Transaction malleability" was the art of stuffing the Blockchain accept a description of the authorized transfer that the optimistically written MtGox software did not recognize as the transfer it initiated itself.

So here comes the Ponzi scheme: stuffing the increasing holes by using the money of customers. Payout of money got increasingly delayed, and the money was used for purchasing the missing Bitcoins elsewhere when people wanted to have them for good (rather than for sending them to another MtGox customer's account).

Re:Can someone explain this theft? (1)

invid (163714) | about 8 months ago | (#46346941)

You buy a virtual car online.
You store your virtual car in a virtual garage.
The virtual garage collapses to virtual rubble, and all the virtual cars that were once inside are now gone.

no paper trail, no hope (0)

Anonymous Coward | about 8 months ago | (#46346485)

no paper trail, no hope

You lost your fait assets. Anonymity is a double edged sword, you just felt the bad edge blow.

Re:no paper trail, no hope (2)

Jay Vickery (2908369) | about 8 months ago | (#46346615)

no paper trail, no hope

You lost your fait assets. Anonymity is a double edged sword, you just felt the bad edge blow.

Do some research. Fiat is government issued currency and crypto currencies are not really all that anonymous. All transactions can be followed on the chain. The only trick is matching the wallet with a real person but that isn't impossible.

Re:no paper trail, no hope (2, Interesting)

leuk_he (194174) | about 8 months ago | (#46346861)

Forget the "non"anonymity of bitcoin. The problem is: every transaction becomes final. No reverse.

If i buy a apple, give a (real) coin, i expect a apple in return. If i do not get the apple, I will hold the counter party responsible. (e.g. beat him up/ call the police / etc etc.)

Now the counter party becomes the entire bitcoin public. I give a (fraction of) a bitcoin.... and I fail to get the apple. Now who do i beat up? Who do i call for? How do I tell that the reputation of the apple-seller is bad?

That is where there is no counterparty in the bitcoin protocol. bitcoin only keeps track of the bitcoin transaction, but looses track of the counter-part of the transaction.

For fiat money you can call someone (cop) to mediate the bad outcome of the transaction. For bitcoin you are lost. The coin transaction is deep down in the chain.

That is where the idea of counterparty is born, some way of 2-way commit, or reputation system for party that receives the coin transaction.

Not impossible, but (0)

Anonymous Coward | about 8 months ago | (#46346873)

It is not encouraged either.

In fact that is one of the top selling points of the crypto currency, it is fait, it is backed up by NOTHING, no assets, nothing.

Re:no paper trail, no hope (1)

1s44c (552956) | about 8 months ago | (#46346801)

Yep. Gone. Poof. The people that lost out though were the ones who didn't do their research. MtGox had been delaying payments for months for about a year, you stay the hell away from companies like that.

MtGox != BitCoin (1)

JohnA (131062) | about 8 months ago | (#46346537)

As posted recently on Twitter by @Henry_Young:

"#MtGox=Service #Bitcoin=Protocol. If Gmail closed would email be dead? No because Gmail is a service & email is a protocol."

Re:MtGox != BitCoin (0)

Anonymous Coward | about 8 months ago | (#46346647)

Gmail isn't operating as a currency exchange for a new type of digital currency whose value depends on public image.

Re:MtGox != BitCoin (1)

Spad (470073) | about 8 months ago | (#46346663)

True, but if Gmail was the thing that everyone associated with email and the only service anyone outside of the email field had really heard of, then it'd do serious damage to email's reputation.

Re:MtGox != BitCoin (1)

ArsenneLupin (766289) | about 8 months ago | (#46346805)

Gmail already does sufficient damage to email as it is now, it doesn't even need to fail!

Re:MtGox != BitCoin (0)

Anonymous Coward | about 8 months ago | (#46346937)

If somebody hacked into Gmail, downloaded every message ever sent, then deleted every message from the server, and then the GMail team said "This was caused by an inherent flaw in the email protocol and all mail servers are vulnerable*", you can damn well bet that everyone in the world would be looking for alternatives to email.

*I'm not saying this is true, only that this is what MtGox seems to be claiming, and to many people MtGox is to Bitcoin as Gmail is to email. Also, email isn't really a protocol. POP, SMTP, IMAP and MAPI are protocols. I'd like to think the folks at GMail would be aware of that, and thus their statement would likely be worded differently.

Ah! westerners in japan ... (0)

Anonymous Coward | about 8 months ago | (#46346555)

when cultures collide ... full body bubble baths?

Update, good news! (3, Funny)

eclectro (227083) | about 8 months ago | (#46346561)

I just read online that the flash drive containing the 170K missing bitcoins was just found behind the couch at Starbucks that it slid behind!

Re:Update, good news! (1)

tech.kyle (2800087) | about 8 months ago | (#46347125)

[Citation Needed]?

tips for weary travelers (-1)

Anonymous Coward | about 8 months ago | (#46346563)

resistance is futile? http://youtu.be/DzUc3Eqzzos but we can lighten our load http://youtu.be/vJtf7R_oVaw

Old news still $580 /BC (1)

Anonymous Coward | about 8 months ago | (#46346569)

This is old news, and shouldn't have been a surprise to anyone who is involved in bitcoin or hasn't been under a rock. The value dipped briefly yesterday but is back to 580 today with little effect.
Mt Gox is no longer relevant to anyone except to another outdated tech page struggling to also stay relevant.

Transaction ID Bug (5, Informative)

Grantbridge (1377621) | about 8 months ago | (#46346601)

There was a bug in the code whereby you could get MtGox to send out your bitcoins to your address, but rebroadcast the transaction under a different transaction ID. This mean when MtGox checked to see if their transaction worked, it looked like it hadn't (since the transaction ID didn't match.) They then re-sent you the bitcoins you already had received, giving you twice as much as they should have.

Apparently the bug has been there for years.

It's like getting a cheque, and changing the cheque number from 123 to 124. The new cheque still looks valid so it cashes fine, but you go back to the sender and complain you never got a cheque. They see cheque 123 was never cashed, and so write you a new one. You cash that one as well. At some point they should notice that they've paid out twice as much as they should have, but for MtGox they didn't notice this for a long time.

Re:Transaction ID Bug (1)

1s44c (552956) | about 8 months ago | (#46346731)

The story goes they were automatically resending these transactions. It didn't require any manual action.

MtGox were amazingly stupid.

Re:Transaction ID Bug (1)

Kjella (173770) | about 8 months ago | (#46347087)

At some point they should notice that they've paid out twice as much as they should have, but for MtGox they didn't notice this for a long time.

Which shows they're either absurdly incompetent or complicit. Validating the books is incredibly much easier with Bitcoin than regular money because nobody can forge the blockchain. Here's how much money our system thinks we have, here's how much the blockchain says we got and we're not even talking about an audit. We're talking about somebody keeping their own bank account record on a napkin listing deposits and withdrawals without ever checking with the bank what they say the balance is. Honestly, it doesn't sound like a place you'd even want to trade Magic cards, much less "money".

Following the money (4, Interesting)

goombah99 (560566) | about 8 months ago | (#46347209)

So given that bitcoin transactions are all known why can't they trace a suffient number of these back to wither a source or to nullify the recipient's income?

that is even if the person doing it hid there tracks at some point they would have transacted those bit coins, possibly to some third party (e.g. to convert them to dollars or buy a pony). Or they might have transmitted them into some combined tumbler to anonymize the trail. But with real currency if I rob a bank and buy a car with the money the money can be seized from the car dealer if the cops so decide. With bit coin there's no mechanism to do that. The whole bitcoin ecosystem would have to agree to the seizure to unwind the transaction trail. It would also require a lot of new non-trivial calculations to do that back multiple years.

But in principle these transactions are at least tracebale. Perhaps the problem is it's international and Mt GOx doesn't have the resources to trace this?

Just accept (0)

Anonymous Coward | about 8 months ago | (#46346645)

Just accept that bitcoin was never meant to be.

You talk about bitcoin like it was some kind of sparkling unicorn that's going to solve all our problems... but as you can see, theft, human error, all will still happen. It's currency. Either you regulate it or shit like this is going to happen. You know why it gained this much attention? Because someone said "look, this should be worth real money", than the top nerds got there to mine the crap out of it so to have more of it, not out of thirst for knowledge or feelings of open source bliss or for the benefit of others. It's money dude, and money is all the same.

You say "there can never be more bitcoin than what's mathematically possible", but when that wall get hit, someone someday somehow will find a way to convince the bitcoin community to add more bitcoins and to add "new rules". Then your system you crumble and be corrupted and fail BIG TIME, because you will enter "their" territory, and "they" are there a lot longer than you dealing with real currencies (no matter how failed they are).

why speculate on buyassed pr firm rhetorhea? (0)

Anonymous Coward | about 8 months ago | (#46346693)

check it out http://bitcoincharts.com/markets/

slashdot only allows....... check this out http://www.youtube.com/results?search_query=fiat%20currency&sm=3

MtGox was always a joke (2)

1s44c (552956) | about 8 months ago | (#46346703)

MtGox had been taking months to make payments and they had been doing this for about a year. They made bad excuse after bad excuse for this. They blatantly lied about the delays in support tickets. It was obvious that something was seriously wrong for around a year. I'm sorry for anyone that lost money but there were many obvious warning signs.

The whole world is better off without companies like MtGox. Good riddance to bad rubbish and may they be replaced with a competent outfit.

Re:MtGox was always a joke (1)

jones_supa (887896) | about 8 months ago | (#46347161)

Yep. Bitcoin can still live, but we must start rigorously monitoring and rating the trust towards various exchanges. As you said, for Mt. Gox it was obvious that something was seriously wrong for around a year. That should have rung an alarm bell.

Bitcoin is Nuts. (5, Insightful)

MarkvW (1037596) | about 8 months ago | (#46346741)

To play Bitcoin, you have to trust your Bitcoin exchanges. Those are BANKS, people. UNREGULATED banks!!! Banks have a history of really screwing depositors over when they're unregulated. Bank panics?? Why we have the FDIC?? Think about this for half a fucking second.

How do you know where "your" Bitcoins are right now?

One of the benefits of money is that it's backed up by a social superstructure (police, judiciary, the army, etc.). Bitcoin has none of that. You are on your own.

Re:Bitcoin is Nuts. (2)

drinkypoo (153816) | about 8 months ago | (#46346781)

One of the benefits of money is that it's backed up by a social superstructure (police, judiciary, the army, etc.). Bitcoin has none of that. You are on your own.

Yes, and if you don't use it in the way they prefer, then police, the judiciary, and eventually the army will be used to force you to do so, or to punish you for doing otherwise. It's not all wine and roses.

Re:Bitcoin is Nuts. (1)

wonkey_monkey (2592601) | about 8 months ago | (#46346923)

To play Bitcoin, you have to trust your Bitcoin exchanges.

What stops a user keeping their wallet to themselves? Is there no mechanism for an individual to make payments without the use of an exchange?

Re:Bitcoin is Nuts. (1)

Anonymous Coward | about 8 months ago | (#46347071)

You can make all the bitcoin transactions you want without the exchanges. The exchanges make it easier to turn those bitcoin into your local currency and more importantly, your local currency into bitcoin (can't play if you don't have them).

Without an exchange, you must find an individual willing to exchange bitcoin for local currency.

Re:Bitcoin is Nuts. (0)

Anonymous Coward | about 8 months ago | (#46347005)

No, banks pay interest, make loans and let you buy stuff with drafts directly from your account. Exchanges don't do that. The problem is people using exchanges as a vault, when they're not meant to be that. Put your money or bitcoins in, make the transaction, pull it out. It's not that hard. Don't expose yourself any more than you have to and don't leave more there than you can afford to lose.

Re:Bitcoin is Nuts. (1)

Ralph Wiggam (22354) | about 8 months ago | (#46347021)

Bitcoin has none of that. You are on your own.

That was a selling point not that long ago. People pitched bitcoin as the "Wild West", where fortunes could be made quickly using just your wits and some luck.

Most people don't realize that life in the actual wild west sucked. Banks failed all the time, losing people's life savings. People shot each other over mining claims, horses, or just drunken bar fights.

Free Market At Work (0)

Anonymous Coward | about 8 months ago | (#46346753)

Libertarians should be pleased.

Re:Free Market At Work (1)

sqorbit (3387991) | about 8 months ago | (#46346899)

We are.

Re:Free Market At Work (1)

HornWumpus (783565) | about 8 months ago | (#46346939)

You prefer the government prop up broken financial institutions.

All things considered, the loses land exactly where they should. A fool and their bitcoins were lucky to get together in the first place.

Sorry folks... (2)

kaizendojo (956951) | about 8 months ago | (#46346917)

but I can't feel bad for anyone that trusted a 'bank' called Mt. Gox or 'bankers' named PirateAt40.

Re:Sorry folks... (1)

Anonymous Coward | about 8 months ago | (#46347031)

Yeah, because Magic The Gathering Online eXchange sounds like a great name for a company that has a few hundred million dollars of their customers' money at any given time...

please sell your bitcoins (1)

Anonymous Coward | about 8 months ago | (#46346993)

I missed the train, I want cheap bitcoins. 584 is not cheap. Please panic more. Bitcoin is dead. sell to me please

Who uses bitcoin? (0)

Anonymous Coward | about 8 months ago | (#46347089)

Other than internet libertarian moron types and criminals, who even cares about bitcoin? When all of the people involved fall into one of those two categories, how can you expect anything but disaster?

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