Mt. Gox, Bitcoin exchange, files for bankruptcy


#1

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#2

I for one appreciated the Rick Roll.


#3

“It lost 750,000 bitcoins to a “hacking attack”, reports The New York Times”

Fortunately, nothing of value was lost.


#4

In other news, Parker Brothers reported that Monopoly money has not been hacked.


#5

Tell that to the people who foolishly invested large amounts of their savings at MtGox.


#6

A fool and their money are soon parted?


#7

Shouldn’t the bitcoin just devalue to 0 at this point? If it could be hacked and stolen once, then it could again. I would sound the deathknell for bitcoin at this point.

Edit: ofc i understand it was mtgox that got hit. but one storage space could be as weak as any other.


#8

I’d like to think this would kill these currencies off, but I suspect not.


#9

One of my favorite comments: (probably mangling it from memory)

The fun part of bitcoins is that you get to watch die hard libertarians slowly discover why financial regulations exist

#10

My impression had been that there was still no conclusive evidence that the 750,000 bitcoins were lost due to hacking - that it was still quite possibly they essentially evaporated through incompetence and either greedy users not notifying Mt Gox that they’d been double-paid, or Mt Gox not heeding or understanding when they were told.


#11

This was inherent in the design - it’s meant to be as cash-like as possible.

One of the things that makes cash cash-like is that it can be stolen. If Bitcoins couldn’t be stolen, it would almost be a design flaw.


#12

Except that when actual currency is stolen from a US institution, FDIC insurance as well as 3rd party insurance carried by banks, cover the loss…


#13

The “hack” they’re referring to is called transaction malleability. The issue is that you can change “unconfirmed” transactions up until the point that a block is mined, at which point the transaction can no longer be changed without changing the block’s hash. Three issues here: 1) Mt. Gox was buggy. 2) Mt. Gox relied on “unconfirmed” transactions. 3) People let Mt. Gox store their Bitcoins, instead of doing the sensible thing and keeping them encrypted or in paper wallets.


#14

But it should be possible to know exactly which bc were stolen, and then track and block attempted spending. Each coin is unique.


#15

Right, because actual currency is controlled by government regulation. For the US, the purpose behind the insurance is to regulate the currency’s stability. The entire point of the FDIC was to prevent runs on banks due to the crash of 1929 and the resulting depression because the government realized that hey, people will freak out and it could cripple an economy.

Bitcoin’s entire point is to be outside of regulatory bodies and answering to “the code.” Introducing an insuring body to regulate stability is anathema to the people who want to use it.

The really stupid thing is that the people who are bemoaning the drop (and complain of losing vast wealth) are the same who just a few short months ago were touting their suddenly dramatic increase in wealth. I think the proper answer to these people is essentially exactly what Japan has said. It’s unregulated. Welcome to Speculation!


#16

I’d agree, but when their families have to pay for their mistakes I have a problem.

I spent a year having to live below the poverty line, I don’t wish it on anyone.

Except maybe Conservative party MPs.


#17

Money in an FDIC-insured institution, whether it’s cash or not, is covered by the insurance. Money in a non-FDIC-insured institution is not. If an FDIC-insured institution started offering accounts denominated in bitcoins, they’d have to work out an agreement with the FDIC first.

This wasn’t a failure to be cash-like, it was a failure of Mt Gox to get FDIC insurance. And by the sounds of it, there is no way the FDIC would ever have agreed to work with an institution so poorly run as Mt Gox.


#18

I’m not sure if you can, or should, block attempts to spend the stolen btc. But yes, you should be able to track them to a wallet ID, if not to an identifiable person.

What I’m not clear on is, did the customers realize they were getting double-paid and not report it to Mt Gox? Are there a bunch of btc users who have more coins than they think they do, and may never learn about these extra coins, which will therefore never enter circulation again? Or were the coins really stolen?


#19

I don’t want to trivialize the magnitude/scale of the Mt Gox debacle (7%+ of all bitcoin, $0.5B market value, hundreds of thousands of people affected), but the metaphor is that if a bank gets robbed, that wouldn’t devalue dollars to 0, and it doesn’t make the concept of money a bad idea.

Like cash, bitcoin is susceptible to theft, however there’s a whole set of best practices - regular audits, cold wallets that could minimize the risk if you chose to store your coins with a third party (which is currently necessary if you are exchanging/trading coins, however, I’d guess that most of the coins lost by Mt Gox probably shouldn’t have been left there in the first place - one of the points of bitcoin is to remove that sort of counterparty risk). If Mt Gox were properly run (as they had previously claimed, with regular audits and 98% of their funds in cold storage) there’s no way they could have lost everything like they announced. It’s very confusing when/how they lost their coins and hopefully we’ll get the actual/real story of what happened sooner rather than later (or never).

Gox’s implosion will force exchanges and other coin handlers to be much more transparent (trusted third party audits, cryptographic proof of solvency, at least), but there’s no question that bitcoin’s susceptibility to theft (both for individuals and institutions) and its dependence on up-to-snuff computer security (which people are horrible at) are big issues, as are the regular-currency notions that money being held by third parties are safer. At least historically, this has not been the case for crypto-coins.

With that being said, here’s a sampling of how some other companies that deal with/hold large amounts of crypto-currency secure their coins:


#20

Actually I think the fun part is watching the very same die-hard libertarians who were ardent cheerleaders last week, suddenly remember they never trusted cryptocurrency in the first place and hoped all along it would crash.

This comment thread, for example.