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Mt. Gox Shuts Down: Collapse Should Come As No Surprise
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."
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.
SJW n. One who posts facts.
Risk? In a commodity that has regular 2x and 0.5x value swings in a single day? Say it isn't so!
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.
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.
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.
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.
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...
Greed is the root of all evil.
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.
Nice analogy... if you want a real world example of this happening, consider the storage facilities for fine wine in Manhattan-- flooded during hurricane Sandy
For (largely unexplained) reasons the storage facilities still won't allow the customers access to (or even look at) the wine they're supposedly storing...
http://www.nytimes.com/2013/12...