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Mt. Gox Gone? Apparent Theft Shakes Bitcoin World
mendax was one of many readers to write with news about the apparent shutdown of Bitcoin exchange Mt. Gox, in the wake of massive theft. "The New York Times is reporting that Mt. Gox, the most prominent Bitcoin exchange, 'appeared to be on the verge of collapse late Monday, raising questions about the future of a volatile marketplace.' 'On Monday night, a number of leading Bitcoin companies jointly announced that Mt. Gox, the largest exchange for most of Bitcoin's existence, was planning to file for bankruptcy after months of technological problems and what appeared to have been a major theft. A document circulating widely in the Bitcoin world said the company had lost 744,000 Bitcoins in a theft that had gone unnoticed for years. That would be about 6 percent of the 12.4 million Bitcoins in circulation.' Maybe the U.S. Dollar isn't so bad after all." Forbes goes further, and says flatly that Mt. Gox has shut down; Wired calls it an implosion. Reader electron gunner links to the alleged leaked document which outlines the exchange's crisis strategy. Watch this story for updates, since there are bound to be new developments.
I've never personally been part of a Ponzi scheme collapsing before. But as the proud owner of a fraction of a Bitcoin, I guess this may be my big chance.
SJW's don't eliminate discrimination. They just expropriate it for themselves.
It's as if a million bitcoin owners suddenly cried out in terror and were suddenly silenced.
No sig today...
If it's risky as an investment, how useful is it as a currency? I would expect a currency to be one of the least risky forms of property to be useful.
What a fool believes, he sees, no wise man has the power to reason away.
Sounds to me like someone was running a long term con here. Act like a legitimate business for a few years, get people to trust them. Maybe think of them as a bank and a safe place to actually cash, not bitcoins. Then once that trust is built up and you have a nice supply of money sitting in some off shore bank. Vanish like a thief in the night.
Supporting World Peace Through Nuclear Pacification
Madoff is an excellent example of why handing your money to an individual or small group (just like the ameteurs at Mt. Gox) to keep in your trust is an awful idea. Real banks, the ones with experience not losing all of your money or that are regulated and insured by the U.S. gov't, by comparison, are stable, secure, and at least reliable enough for an economy to run on.
while(1) attack(People.Sandy);
The bankruptcy of MtGox would hardly lead to the demise of Bitcoin, at worst it will temporarily shake confidence in the cryptocurrency. Expect a drop, rebound and gradual increase in price.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
For small-scale transactions in time and value - e.g. turning $7 into BTC to immediately buy a CD - a relatively unstable currency is fine.
Stability of currency is absolutely needed for a vendor. If you had to change your pricing every 10 minutes how would you ever advertise anything? Would restaurants have dynamic menus with pricing that changes throughout the meal?
Maybe this will be an object lesson for the libertarians (a very expensive lesson, for some of them). In the real financial world, we used to have "bank panics" all the time. People could lose their life savings if a bank was run poorly or crookedly. Worse, if there was a recession, people were more likely to need their money immediately, so they'd go to the bank to withdraw it – but of course a large portion of deposits had been loaned out and weren't immediately. And since people knew this could happen, they'd rush to withdraw their deposits at the first sign of trouble, since they didn't want to be the one left out in the game of musical chairs. These "bank panics", then, could happen even to well-run banks, and they made recessions far worse than they might otherwise have been. During the 19th century, the U.S. economy was repeatedly devastated by bank panics.
Finally, after the Great Depression and the mother of all bank runs, the government stepped in, because the "free market" obviously wasn't working well in this area and really never had. The answer was to create the Federal Deposit Insurance Corporation (FDIC), funded by insurance premiums charged to banks. This ensured that even if a bank did go broke, the FDIC would reimburse depositors up to a certain amount (originally $2,500, but now a quarter of a million dollars). Stockholders might be wiped out, but depositors would be made whole. As intended, this reform restored confidence in the U.S. banking system. There have been quite a few failed banks that went broke, but people with checking or savings accounts at those banks still get their money back.
But didn't that lead to "too big to fail"? Not really. The whole point of the FDIC is that you can let a bank go broke, let the stockholders be wiped out, sell the bank assets at auction, and the federal insurance will make sure the regular depositors – who didn't sign up for extra risk – will get their money back anyway. So why didn't that happen in 2008? It's extremely complicated, but it basically has to do with the repeal of Glass-Steagall. This was legislation passed in 1933 that basically said because banks are federally insured, risky investment activities have to be cordoned off into separate businesses from ordinary consumer banking. In other words, you weren't supposed to be able to run a bank, gamble on risky high-yield investments with the deposits, and then go running to the federal government for a bailout when things went south. They didn't want bankers privatizing profits and socializing costs. But that law was repealed by Phil Gramm in the 1990s. As a result, everything got intermingled – we had massive insured deposits being used to gamble on derivatives that no one understood, and everything was linked to everything else in such a way that one false move would bring the whole house of cards tumbling down. The fear was that if there was not a general bailout for the investment banks (not covered by FDIC) then the whole economy would collapse. Whether that argument was sensible or just self-serving, it's what happened. Since then there have been several attempts, only partially successful, to rein in the exuberant activities of Wall Street to try to stop this from happening again.
Now back to Bitcoin. People in Mt. Gox thought they were keeping their money in a bank. Well, they were – a pre-1933 bank, with no insurance and no guarantees. There was a de facto bank run on Gox a couple months ago, and now it's gone bust and everyone has lost everything. And the libertarians didn't see this coming because they thought FDR was the devil and that all banking regulations are unnecessary.
The new meme on Reddit seems to be that you need to keep your coins in "cold storage" – if you keep them on an exchange and something bad happens, you have only yourself to blame. Imagine the financial papers saying that you can't trust the banks, so y
I'm setting up a new exchange. It used be a Pez dispenser trading site but I'm sure it can be adapted to securely manage millions of dollars worth of financial transactions.
Waiting for angry libertarians to demand that the government pass regulations to stop this from happening again.
Ding! We have a winner. Anyone who uses an exchange as a bank didn't grok the point of a distributed P2P transaction log in the first place. I would have thought it would be a key point for all those libertarians as well - personal responsibility n'all.
Keep your own wallets, keep your keys backed up, and keep them offline unless you need them. ALL these Bitcoin theft stories have one thing in common - the wallets were accessible from a public server. You would have thought that all the Bitcoin banks would have crashed right after the first story as people transferred their balances into personal wallets, but apparently people really do value their convenience much more than their hard-earned Bitcoin.
At a minimum, have a "current account" wallet that you maybe carry around on your personal devices like a phone, and a "deposit account" which you keep the wallet for OFFLINE. You can still transfer TO it any time you like - you only need the keys to transfer FROM it. Store multiple redundant copies of the keys somewhere secure - you might even want to go as far as storing a paper wallet in a real safe deposit box, but a USB memory thumb in your desk drawer and a backup thumb somewhere else is probably secure enough - you do remember your passphrases, right? And they're not the same for each copy of the wallet, right?
Recharge your current account from currency exchanges, or from your deposit account. Transfer any balances that are too large for comfort to your deposit account. Now the only thing that can destroy the value of your coins is... oh, everyone else who's still dumb enough to value convenience over personal responsibility. Que sera.