Mt.Gox Disappoints: Does Not Reveal All

Today, Mt.Gox was due to release statements concerning the technical issues it has been facing lately with bitcoin exchange. All bitcoin withdrawals through its system have been suspended since Friday. With the frustrations of Mt.Gox users palpable, it was high time that some answers were given.

Rise of Mt.Gox

The Japan based Mt.Gox was one of the first fully working bitcoin exchange providers in the bitcoin community. It played a huge role in making the digital currency a real life phenomenon. Mt.Gox was severely setback in 2011 due to a massive hack but the administration worked diligently to make a better functional platform. They further improved their security and backed it up with a better infrastructure.

In mid-2013, Mt.Gox’s Dwolla was apprehended by the Department of Homeland security. This resulted in making it very difficult to exchange bitcoins for dollars through the Mt.Gox system. Very quickly, it became more difficult to even get local currency off the system and this caused the bitcoin prices at Mt.Gox to spike. It can be said that this is part of the reason why the prices at Mt.Gox were always much higher than that of the rest of bitcoin exchange market.

Nonetheless, Mt.Gox was able to maintain its image of being one of the foremost in the bitcoin community.

Mt.Gox in Deep Water

As of Friday, February 7th, all bitcoin exchanges through Mt.Gox were suspended temporarily. Citing technical difficulties as the root of the problem, not much else was heard from Mt.Gox regarding the issue. This is one of the biggest setbacks faced by Mt.Gox and its users.

Mt.Gox Price drops

As promised, Mt.Gox has released statements today addressing the technical problems it has been faced with lately. Bitcoin withdrawals remain suspended through their exchange site. Meaning, users are unable to withdraw their digital currency or transfer it to another location. To explain the reason behind this, the document stated that Mt.Gox “detected unusual activity on its Bitcoin wallets and performed investigations during the past weeks. This confirmed the presence of transactions which need to be examined more closely.” As a result, they found out that transactions from its wallets were exposed to “malleability” errors. Hence, wrong transaction data was registered on Bitcoin’s master ledger, the Blockchain. Theoretically speaking, this makes it probable for double spending and theft to occur. Ironically enough, Mt.Gox did not state whether this actually occurred on their network or not. Andreas Antonopoulos posted about this on his twitter saying “unanticipated bugs don’t come with year-old wiki pages fully documenting them.”

According to Mt.Gox the technical issue that they are dealing with is something that also affects the general bitcoin community. In the released statements, it said “The problem we have identified is not limited to Mt.Gox, and affects all transactions where Bitcoins are being sent to a third party. We believe that the changes required for addressing this issue will be positive over the long term for the whole community. As a result we took the necessary action of suspending bitcoin withdrawals until this technical issue has been resolved.”

Mt.Gox also says that the problem is a defect in the bitcoin code itself and that it had

“discussed this solution with the Bitcoin core developers and will allow Bitcoin withdrawals again once it has been approved and standardized.”

But bitcoin developers are not so sure about this defect in the system of bitcoin itself. Greg Maxwell, a bitcoin developer, was contacted by Mark Karpeles, owner of Mt.Gox, but he was “not aware of any reason that Mt.Gox’s withdraws would need to be gated on that.” Ironically, no other bitcoin exchange service is having the “technical problems” that Mt.Gox is. Food for thought.

The good news, withdrawals in non-digital currency are working. This means that users can still get cash from the site.

Future is Blurry for Mt.Gox

In the words of the Mt.Gox administration “To put things in perspective, it’s important to remember that Bitcoin is a very new technology and still very much in its early stages. What Mt.Gox and the Bitcoin community have experienced in the past year has been an incredible and exciting challenge, and there is still much to do to further improve.

Mt.Gox will resume bitcoin withdrawals to outside wallets once the issue outlined above has been properly addressed in a manner that will best serve our customers. More information on the status of this issue will be released as soon as possible. We thank you for taking the time to read this, and especially for your patience.”

The faith of the people in the Mt.Gox network is unquestionably being put on trial. The likelihood of it never recovering is surely a possibility. If Mt.Gox quickly acts to sort out its problems, there might still be a future for it in the bitcoin community.

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