10 ms·

Why Mt. Gox is full of shit

277 points by klrr 13y ago

ewams 13y ago
FTA: "The time to stop using Mt. Gox has been long overdue. Move your business to a more serious exchange, one that is willing to admit their failures, should they occur. One that has the best interests of the entire Bitcoin ecosystem in mind, rather than their own bottom line."
- gnoway 13y ago
  Yes. I'm shocked this hasn't happened already, since this seems like a textbook instance of where the unrestricted free market should correct ignorant or malicious behavior by a bad actor. </snark>
  - oleganza 13y ago
    Keep in mind that if the market was free, US and EU would be full of bitcoin ATMs and there would be several working exchanges in every country. So if someone had a slightest problem with MtGox, they'd easily switch to another exchange already. However, in reality there are huge obstacles to moving fiat money around and the market is simply not allowed to improve liquidity how it desires.
    - simias 13y ago
      I'm not sure if you're being sarcastic or not but why do you believe the "US and EU would be full of bitcoin ATMs and there would be several working exchanges in every country" if the market was "free" ? That seems an incredibly preposterous statement to me. Also why isn't the market free exactly? Sometimes I feel bitcoin people live on a different plane of reality.
      - oleganza 13y ago
        You probably did not notice, but here are some of "chilling effect" news: 1. http://www.forbes.com/sites/kashmirhill/2013/08/12/every-important-person-in-bitcoin-just-got-subpoenaed-by-new-yorks-financial-regulator/ http://www.forbes.com/sites/kashmirhill/2013/08/12/every-imp... 2. http://blogs.marketwatch.com/thetell/2013/08/30/bitcoin-exchange-tradehill-suspends-trade-cites-banking-and-regulatory-issues/ http://blogs.marketwatch.com/thetell/2013/08/30/bitcoin-exch... 3. http://www.businessinsider.com/charlie-shrem-arrested-bitcoin-ceo-2014-1 http://www.businessinsider.com/charlie-shrem-arrested-bitcoi... 4. http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.... 5. http://www.nbcnews.com/tech/tech-news/bitcoin-goes-mainstream-atm-vancouver-coffee-shop-f8C11496324 http://www.nbcnews.com/tech/tech-news/bitcoin-goes-mainstrea... - scanning hands of the customers to protect ATM from raid. etc. If you are a merchant slightly interested in Bitcoin, your concern number 1 is "is it legal? Won't my taxman hit me with huge fines so I have to close the shop just because I did something suspicious?" If you are a guy building an exchange your concern number 1 is "won't I go to jail for 'laundering' money for some guy who then goes and buys drugs elsewhere with coins he bought through my service". Also: FinCEN tells you to get "money transmitter" licenses in 48 states which is VERY EXPENSIVE, so only a few guys are allowed to even try. If you are a guy with an ATM, your concern number 1 is "won't they confiscate it for investigation for several months and put me in jail meanwhile for aiding terrorists and child pornographers?" There's a lot of pending demand to do anything related to Bitcoin. And the reason it's not serviced yet is a big legal concern and very-very-very harsh law enforcement behaviour. If you are a suspect, you've already lost. Even if you are free to go later, you already lost time, money, opportunity, some property etc. You simply can't do business in such landscape. Free market would mean that there's no uber-controller over the entire property of the whole multi-state country. If every shop owner is free to own his piece of land how he wants and resolving disputes directly with anyone who's concerned, then you could see many more bitcoin ATMs and other businesses. But currently you are at a permanent risk of well-equipped guys with guns coming to you and taking your stuff and yourself, just for doing something innocent which is not yet explicitly allowed.
    - krrrh 13y ago
      A free market isn't just one with lower amounts of regulation but also one where regulation is applied indiscriminately to all participants. Many bitcoin exchanges have only been viable because a they did not yet have the same regulation applied to them as is applied to "fiat" exchanges. There are necessary regulations for how exchanges or ATMs work, what sort of reporting they need to do, and what sort of safeguards are in place to protect customers from fraud and loss. And there is a lack of financial professionals who believe in bitcoin enough to help adequately build these systems, and of course far more importantly, a huge lack of demand from the general population.
      - fauvenoire 13y ago
        Dear diary, Today, I made up what words mean. Hugs and Kisses, krrrh
      - oleganza 13y ago
        By your logic, if His Majesty The King applies his laws equally to everyone, then it's a free market? Any organization which is tax-funded has inequality and discrimination built in. Some are net tax payers, others are net tax receivers. Then, net tax receivers dictate why it's good and honest for them not to pay, but receive and why it's good and honest for them to extract payment from others. And under what "regulations". Obviously, tax-funded regulations cannot be applied indiscriminately to all participants. Free market is not about equality. It's about ability to protect property against anyone's opinion. Bitcoin and the internet themselves are a fine example of a nearly free market: no matter what you think of me and no matter what I think of you, we both can avoid each other and no one can take each other's coins. But if we don't have such technology and have to keep our cash in a bank, then we both depend on someone's opinion how the money should be used and how much we can spend and where.
    - gamblor956 13y ago
      The problem with MtGox is that they are preventing the switch. In a totally free market, that would be the standard scenario--as soon as an exchange got large enough, it could (and would) simply halt outbound transactions because there wouldn't be any regulations requiring it to switch (and economically, at that point it would be better to prevent outbound transactions than to compete for new business). One of the problems with people advocating for a free market is that they don't understand what it really means: might makes right.
      - oleganza 13y ago
        1. What exactly does MtGox prevent? I never used it, never relied on it and almost all of my friends don't care about MtGox. Yet all of us were able to buy, sell, trade and write software for Bitcoin without a problem. 2. Free market for me is about protection, not aggression. Bitcoin network is a free market in a sense that everyone's property is very cheap to protect and very expensive to extract. No matter what I think about how government should work, your BTC is safe and same for my BTC regarding your opinions. We simply have no other way, but to stop arguing and start cooperating voluntarily or just ignore each other. With BTC scripts we can fully insure our contracts without any need for neither "law", not its "enforcement". You can be very-very rich guy, but it still will be more expensive for you to steal my coins than just to trade honestly. Expanded argument: http://blog.oleganza.com/post/71410377996/crypto-anarchy-does-not-require-anonymity http://blog.oleganza.com/post/71410377996/crypto-anarchy-doe...
        gamblor956 13y ago
        1) MtGox currently prevents outbound transfers of Bitcoins, and limits conversions into real currency. 2) Using your own personalized definition of free market changes the discussion. "Free market" isn't about protection or aggression, or power of any kind. The common definition is that that the market is free of external influences, so that market forces determine all outcomes. Indeed--by the common definition of "free market" Bitcoin is the absolute opposite--it's the pinnacle of socialized currency: everyone owns the currency and everyone is responsible for protecting it. BTC scripts don't eliminate the law or its enforcement, they become the law. (Law is simply regulation--in whatever form it takes place. For example, in the US law is both statutory, case-based, and practice-based, depending on the context.)
  - ctdonath 13y ago
    Just because the free market works well (on the whole) doesn't mean it works instantly. We're seeing the correction underway, and this thread is part of it: people are identifying a bad actor, having sensible discussions about the problem and alternatives, and are transitioning to more suitable actors while those being abandoned over time are discovering the error of their ways and either correcting the problems or are getting/pushed out. You'd rather place the process in the hands of people no more competent or interested than those already involved? and do so by threat of force?
    - deleted 13y ago
      [deleted]
  - interstitial 13y ago
    Ah... you just learned something, free markets and "capitalism" are related but not the same.
  - jccooper 13y ago
    Mt Gox is already bleeding to death; it's just in slow motion because the same problems that make people wont to leave make it hard to leave. The over-valuation of BTC at Mt Gox (until recently) is evidence of capital flight through BTC due to their USD withdrawal problems; it's apparently turned around just now since the new BTC restrictions are even worse (and there's some fiat currencies--like the Yen--where you can still get money out.) Either way, MtGox has been consistently out of line with market price, in a market with plenty of arbitraging, indicating that they have problems and people know it. I don't know how to get easy numbers on exchange volume over time, but I do know that Mt Gox has fallen from the obvious top exchange to a solid third over the time I've paid attention (maybe half a year.) Why they still have any decent volume, I don't know; inertia, people still cashing out or waiting for Mt Gox to improve, suckers lured by the arbitrage opportunity, perhaps the Japanese domestic market (they're the only Yen exchange). I know I wouldn't touch the place with a 29.5 foot pole.
- glesica 13y ago
  > "...rather than their own bottom line." So much for capitalism I guess...
nwh 13y ago
There's no acceptable middle ground really. Practically every Bitcoin service is full of incompetence of varying degrees. Coinbase for example uses MongoDB for their accounting and apparently was hacked (and the funds returned) as an effect of that. Every other service has issues with the founders (BTC-e is run by who?) or their security record (inputs.io had a cold wallet?) in some way. You can't trust much in this particular corner of the internet.
- mateuszf 13y ago
  Haven't heard of any problems with bitstamp. Did you?
  - nwh 13y ago
    I have not either, beside the usual phishing and DDoS. That said I've not had any experience with them except for hearing the name in passing. Remember that a comment like this is possibly a false positive, they could be incompetent until we know that it's 100% true, we can't ever prove that they aren't incompetent.
    - mateuszf 13y ago
      Maybe, but that's like me calling you incompetent because there is no proof you always are competent.
      - nwh 13y ago
        True, but I'm not handling financial transactions.
        mateuszf 13y ago
        It doesn't matter. With your definition of competence no one could be called that way ever.
        13y ago
spoiledtechie 13y ago
I wonder which side is actually telling the truth...
- jafaku 13y ago
  Are you serious?
- pudquick 13y ago
  If you'd like an in-depth discussion of what Mt. Gox has screwed up and how: http://www.reddit.com/r/Bitcoin/comments/1x93tf/some_irc_chatter_about_what_is_going_on_at_mtgox/cf99yac http://www.reddit.com/r/Bitcoin/comments/1x93tf/some_irc_cha... They didn't discover anything - they were warned, quite some time ago, that they were not correctly spending and opening themselves up for double+ spends due to their own misunderstanding of how to reliably track a spend (compounded by their coding errors).
sillysaurus2 13y ago
One interesting aspect of this whole ordeal is the fact that, thus far, exchanges' prices have depended on each other. That is, a huge sell order on Bitstamp will more or less immediately affect the price on BTC-E, MtGox, etc. (The exception seems to be Coinbase, which seems to use some kind of exponential weighted averaging, but even Coinbase will get dragged down if the price drop is dramatic enough.) If people lose all confidence in Gox, but still retain faith in other exchanges, then that means we're going to witness MtGox's price drop while the other exchanges' prices rise. However, this becomes an economic opportunity for anyone who wants to do arbitrage between exchanges. Therefore it seems like the prices won't ever diverge too much. The conclusion, it seems, is that no matter how bad one exchange is, it will simply drag the overall price of Bitcoin down across all exchanges rather than suffer punishment as an individual company. The fact that arbitrage is doable seems to give MtGox some insulation from consumer outrage. This poses a question: Is it true that as long as an exchange keeps functioning, then it's "here to stay" no matter how badly they behave? Is there any way that an exchange could go out of business from nothing more than consumers losing faith that one exchange?
- socialist_coder 13y ago
  You can't do arbitrage on Mt Gox though because you can't get any money out. That's the whole reason the price discrepancy exists.
  - fnordfnordfnord 13y ago
    You can as long as the arbitrage doesn't always go one way, but you have to tie up additional funds.
  - oijaf888 13y ago
    Why can't you get the money out via a Japanese bank account? They claim to send funds to those within a few days.
    - afterburner 13y ago
      Is is supposed to be easy to get a Japanese bank account if you've, say, never been to Japan, and don't speak Japanese? Honest question...
oleganza 13y ago
Today's price fluctuation only proves that people do not really understand how Bitcoin works. Many keep all their coins on the exchange because they got used to the traditional banking. MtGox says "it's a fault in the protocol" and people sell off in panic. Thankfully, over time we have more exchanges, more different implementations, more and better educational resources to learn about real risks of Bitcoin. Meanwhile, smart people pick up cheap coins while they can.
jasonlingx 13y ago
Let this be a warning to everybody with bitcoin in wallets they do no absolutely control, for example, Coinbase - you can and almost certainly will lose them at a moment's notice, sooner or later. I feel really sorry for those with funds tied up with MtGox. It was only recently where I used MtGox to store most of my bitcoin and I am lucky to have decided to move them all to paper wallets. This demonstrates one of the biggest issues holding back widespread adoption of bitcoin, the ability of the layperson to securely hold large amounts of bitcoin.
rainmaking 13y ago
My experience exactly. I was just buying a hundred bucks worth of coins, and I had to suffer through inexplicable delays, error messages that were obvious lies, the list goes on and on. Incompetence is one thing ("sorry about the hassle, but look aren't we cheap!") but trying to obfuscate the real reason of problems is just a huge red flag. I'm in Europe, and I like Kraken very much. blockchain.info recommended them.
o_nate 13y ago
This article seems rather biased and brings in lots of past problems at Mt. Gox rather than focusing on the current issue - perhaps because a more detailed explanation of the current issue would reveal that this problem goes beyond Mt. Gox. There is a disturbing tendency among some Bitcoin partisans to instantly dismiss any issue that comes up as being well-known and well-understood, even if "well-known" means that it was posted somewhere on a message board read by few.
- TomGullen 13y ago
  If it goes beyond Gox, why are other exchanges operating seemingly with no problems? Bitstamp is a good example of a well run exchange. Gox has been mired in self inflicted problems for many months.
  - o_nate 13y ago
    From my understanding, workarounds do exist for the issue, and some exchanges probably have implemented them. However, the issue goes beyond Gox in the sense that without those workarounds in place, any exchange could be vulnerable.
lispsil 13y ago
Of course Gox is full of shit, anybody see his php ssh implementation? Karpales is a guy who rolls his own crypto everyday and has no idea it's completely flawed, and when you point out the flaws he doesn't believe you and uses it anyways. He's a cancer and nobody should be using MtGox. You're supposed to trade coins in IRC decentralized using the web of trust, or localbitcoins in person. Exchanges should only be used if you have a business bank account and are on first name basis with the guy who runs Bitstamp or Cavirtex on IRC otherwise you get delays and holds for identity verification, limits, other problems like your bank freezing your account when they notice wires going to Slovenia too often. *Edit Gavin just posted a response on the bitcoin foundation blog, confirming Gox is indeed full of shit.
kordless 13y ago
News flash: people don't like to admit they are wrong. They will find ways to rationalize their actions to fit a model where their fears of being wrong are temporarily alleviated. Unfortunately most people don't realize it's more work in the end to deny being wrong than just coming clean. We've been through this several times with Mt. Gox. It's time for everyone to STOP using them and start using something else for trading. Continuing to use them and making rationalizations that things will 'get better' will only result in a global case of cognitive dissonance. They are threatening an ecosystem that is important and which has a large potential value. In my opinion, they need to be removed from that ecosystem.
steven2012 13y ago
Anyone who uses Mt. Gox is a fool, especially after the first few security issues. Hearing about further issues in terms of security, etc is sort of like hearing the wailings of a person whose spouse is cheating on them... for the 5th or 6th time. At some point, the victim only has themselves to blame.
- hatu 13y ago
  Literally 2 days after I registered on Mt Gox (2011), I got this email: "[Mt.Gox] Account database compromised". I'm glad if they're going away. I've never trusted them since.
victorlin 13y ago
the justin bieber of bitcoin exchange
deleted 13y ago
[deleted]
kens 13y ago
I don't think anyone has pointed out that MtGox said "We have discussed this solution [additional hash in the protocol] with the Bitcoin core developers and will allow Bitcoin withdrawals again once it has been approved and standardized." [1] A Bitcoin protocol change like that is not going to happen for a long, long time, if ever so do the math on MtGox's statement and when they will allow withdrawls. The Bitcoin team did push out a change in 8 hours once for a critical signed/unsigned bug that threatened the whole system [3], but this problem looks to me like NOTABUG/WONTFIX. The transaction malleability is an annoyance, not a real bug. Basically the support team just needs to spend an extra 5 seconds checking a transaction instead of blindly issuing refunds. My recent article [2] goes into the Bitcoin protocol in great detail if you want to know more about transaction signing, which should help explain technically what is going on with malleability. [1] https://www.mtgox.com/press_release_20140210.html https://www.mtgox.com/press_release_20140210.html [2] http://righto.com/bc http://righto.com/bc [3] https://bitcointalk.org/index.php?topic=822.0 https://bitcointalk.org/index.php?topic=822.0
- rjzzleep 13y ago
  ok, but please read the related pull requests https://github.com/bitcoin/bitcoin/pull/2131 https://github.com/bitcoin/bitcoin/pull/2131 https://github.com/bitcoin/bitcoin/pull/3637 https://github.com/bitcoin/bitcoin/pull/3637 https://github.com/bitcoin/bitcoin/pull/3016 https://github.com/bitcoin/bitcoin/pull/3016 https://github.com/bitcoin/bitcoin/pull/3025 https://github.com/bitcoin/bitcoin/pull/3025
  - nullc 13y ago
    These are not all that directly related— they're the start of a set of changes which will probably take us one to three years to fully deploy... what mtgox was talking about in their press releases was just some simple standard way of generating a stable ID, this wouldn't be a protocol change at all... and is only a few lines of code: https://github.com/sipa/bitcoin/commits/normtxid https://github.com/sipa/bitcoin/commits/normtxid But whats more important is that this malleability stuff is not very much related to fraud risk, I explained more here: http://sourceforge.net/mailarchive/message.php?msg_id=31956576 http://sourceforge.net/mailarchive/message.php?msg_id=319565...
sscalia 13y ago
In case anyone needs a reminder: Magic The Gathering Online Exchange. Chase Manhattan, they are not.
- pbhjpbhj 13y ago
  They don't seem too dissimilar. JP Morgan Chase started as The Manhattan Company (http://en.wikipedia.org/wiki/The_Manhattan_Company http://en.wikipedia.org/wiki/The_Manhattan_Company). Formed to provide a clean water supply instead the owners took 95% of the $2 million to form a bank and created a system of waterworks that caused massive cholera outbreaks ... I don't think MtGox has killed anyone yet, though I've been convinced for a time that they've probably made-off with a lot of the money. JP Morgan Chase aren't exactly trustworthy either, motivation based on pure financial profit will do that - a synopsis of some of their major indiscretions: http://www.icij.org/offshore/jpmorgan-chases-record-highlights-doubts-about-big-banks-devotion-fighting-dirty-money http://www.icij.org/offshore/jpmorgan-chases-record-highligh...
ck2 13y ago
the official Bitcoin daemon (bitcoind) does not rely on a transaction ID to determine if a transaction succeeded Sooo how does it do it? How does it determine a unique transaction id?
- jimktrains2 13y ago
  IIRC it sends some money back to you at a new address that you know about.
- nullc 13y ago
  It tracks the coins you were spending when you made the transaction.
rsync 13y ago
Why do these services exist at all ? Cannot the bit coin protocol be used by end users with full features without a third party "wallet" service ? Are these services purely for people that don't understand files and encryption utilities ? I do not use bitcoin, but if I did, I assume I would just protect and back up those computer files like many other extremely valuable computer files I have. What am I missing here ?
- fnordfnordfnord 13y ago
  Exchanges are for trading and speculation.
- natdempk 13y ago
  These services generally provide a service that is not part of standalone bitcoin, whether that is a payment API which generates addresses and verifies transactions for customers, an exchange to trade and value bitcoin based on fiat currency, or a user-friendly wallet that allows access from anywhere with internet access and bypasses the need for a user to download and update their own copy of the blockchain. (The blockchain is pretty large. It currently sits around 13GB and is always growing.) There are also end-user applications like Armory, which are meant to manage and secure a wallet on an end-user's machine, but its inevitable that people will use online services for foreseeable future.
  - walden42 13y ago
    There are clients, like Electrum and MultiBit, that don't require downloading the whole blockchain. The average person should be using these, IMO, not trusting any e-wallets.
- sliverstorm 13y ago
  Mtgox is an exchange, so think of your stock broker. You wire your broker/brokerage a pool of your money, and shuffle it around in the brokerage among various assets. If you like, you can put more in or take some out, but the brokerage generally holds your assets while you are trading.
- 13y ago
angryasian 13y ago
>Their implementation, against all advice, does rely on the transaction ID, which makes this attack possible. I think a lot of the comments here and especially the article detracts from the discussion. The article seems to go on a rant of all the other mistakes mt gox make rather than addressing the issue. What is the recommended solution by bitcoin implementers to verify a transaction succeeded, with transaction malleability existing ?
zapnap 13y ago
Not wholly surprised here. As a side note, I wish it was easier to move coins out of mtgox. They require "verification" to even transfer coins to another BTC address at this point, which means sending them proof of identity and proof of address. I'm not against identifying myself but given their absolutely abysmal security record and repeated demonstrations of incompetence, I'm loathe to send them anything even remotely sensitive. which leaves me in a bad position where I'm stuck with coins I can't even access... Ugh. Local wallets, people. Local wallets.
x0054 13y ago
Mt. Gox is indeed full of shit. As I understand the issue, due to their bitcoin implementation, there is a possibility that someone would send bitcoins from their Mt. Gox. account to a wallet, than alter the signature of the transaction, and than claim that the transaction did not go through and contact support to request the funds to be resent. Here are 2 easy solutions to this problem which do not require anything to be done by the bitcoin community, and could be exacted by Mt. Gox today: 1. Allow all transactions to go through as before, but state clearly that if your transaction does not go through after being submitted, it will take a long time to clear the transaction, because it will have to be checked by hand. Assuming that 90% of people are not planning to scam Mt. Gox, 90% of people would be able to get their money. The remaining 10% would have to wait a bit longer while Mt. Gox checks transactions by hand. 2. Alternatively, write a system were a user can request to withdraw bitcoins. The Mt. Gox server first generates a new wallet, than transfers the BTC to that wallet, than send the user the public and private keys for that wallet. Assuming that the user (for good reason) does not trust Mt. Gox, they than can simply transfer the BTC from a temporary wallet to a permanent one.
pistle 13y ago
The candlestick charts are not telling a pretty story about trust right now. Bitbugs keep the faith and talk about buying with blood in the streets since it always bounces back, but every flash crash comes with a worse story. The headline is "Largest Bitcoin Exchange Doesn't Understand Bitcoin" What hope do retailers and any but the very-technical have in managing the risk implicit in digital currencies? Not to mention, seeing supporting forum posts where people are discussing the parts of fractions of coin being sent around... do people really think 8-10 digits past the decimal can hope to be manageable for consumers? It's bad enough to deal with Yen conversions. Please tip your server .00343874938239487 bitcoin. When 15% of the value can evaporate while business is happening... when do you bill the customer for lunch? When they order?
kirk21 13y ago
Trying to find an European alternative. Suggestions next to https://localbitcoins.com https://localbitcoins.com or http://www.coinnext.com/ http://www.coinnext.com/ ?
jere 13y ago
Not mentioned in this post is that during that hack where hashed passwords were released, Mt. Gox was using md5. What jokers.
paterpol 13y ago
Hacked bitcoin exchange patforms, its not the point the structure, there cs or a bug in the bitcoin system.The big players have to coopered to avoid the unlimited use from the fed of fiat money to buy bitcoins and attac the big .platforms on using a extreme blow off

277 points by klrr 13y ago

ewams 13y ago

FTA: "The time to stop using Mt. Gox has been long overdue. Move your business to a more serious exchange, one that is willing to admit their failures, should they occur. One that has the best interests of the entire Bitcoin ecosystem in mind, rather than their own bottom line."

gnoway 13y ago
Yes. I'm shocked this hasn't happened already, since this seems like a textbook instance of where the unrestricted free market should correct ignorant or malicious behavior by a bad actor. </snark>
- oleganza 13y ago
  Keep in mind that if the market was free, US and EU would be full of bitcoin ATMs and there would be several working exchanges in every country. So if someone had a slightest problem with MtGox, they'd easily switch to another exchange already. However, in reality there are huge obstacles to moving fiat money around and the market is simply not allowed to improve liquidity how it desires.
  - simias 13y ago
    I'm not sure if you're being sarcastic or not but why do you believe the "US and EU would be full of bitcoin ATMs and there would be several working exchanges in every country" if the market was "free" ? That seems an incredibly preposterous statement to me. Also why isn't the market free exactly? Sometimes I feel bitcoin people live on a different plane of reality.
    - oleganza 13y ago
      You probably did not notice, but here are some of "chilling effect" news: 1. http://www.forbes.com/sites/kashmirhill/2013/08/12/every-important-person-in-bitcoin-just-got-subpoenaed-by-new-yorks-financial-regulator/ http://www.forbes.com/sites/kashmirhill/2013/08/12/every-imp... 2. http://blogs.marketwatch.com/thetell/2013/08/30/bitcoin-exchange-tradehill-suspends-trade-cites-banking-and-regulatory-issues/ http://blogs.marketwatch.com/thetell/2013/08/30/bitcoin-exch... 3. http://www.businessinsider.com/charlie-shrem-arrested-bitcoin-ceo-2014-1 http://www.businessinsider.com/charlie-shrem-arrested-bitcoi... 4. http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.... 5. http://www.nbcnews.com/tech/tech-news/bitcoin-goes-mainstream-atm-vancouver-coffee-shop-f8C11496324 http://www.nbcnews.com/tech/tech-news/bitcoin-goes-mainstrea... - scanning hands of the customers to protect ATM from raid. etc. If you are a merchant slightly interested in Bitcoin, your concern number 1 is "is it legal? Won't my taxman hit me with huge fines so I have to close the shop just because I did something suspicious?" If you are a guy building an exchange your concern number 1 is "won't I go to jail for 'laundering' money for some guy who then goes and buys drugs elsewhere with coins he bought through my service". Also: FinCEN tells you to get "money transmitter" licenses in 48 states which is VERY EXPENSIVE, so only a few guys are allowed to even try. If you are a guy with an ATM, your concern number 1 is "won't they confiscate it for investigation for several months and put me in jail meanwhile for aiding terrorists and child pornographers?" There's a lot of pending demand to do anything related to Bitcoin. And the reason it's not serviced yet is a big legal concern and very-very-very harsh law enforcement behaviour. If you are a suspect, you've already lost. Even if you are free to go later, you already lost time, money, opportunity, some property etc. You simply can't do business in such landscape. Free market would mean that there's no uber-controller over the entire property of the whole multi-state country. If every shop owner is free to own his piece of land how he wants and resolving disputes directly with anyone who's concerned, then you could see many more bitcoin ATMs and other businesses. But currently you are at a permanent risk of well-equipped guys with guns coming to you and taking your stuff and yourself, just for doing something innocent which is not yet explicitly allowed.
  - krrrh 13y ago
    A free market isn't just one with lower amounts of regulation but also one where regulation is applied indiscriminately to all participants. Many bitcoin exchanges have only been viable because a they did not yet have the same regulation applied to them as is applied to "fiat" exchanges. There are necessary regulations for how exchanges or ATMs work, what sort of reporting they need to do, and what sort of safeguards are in place to protect customers from fraud and loss. And there is a lack of financial professionals who believe in bitcoin enough to help adequately build these systems, and of course far more importantly, a huge lack of demand from the general population.
    - fauvenoire 13y ago
      Dear diary, Today, I made up what words mean. Hugs and Kisses, krrrh
    - oleganza 13y ago
      By your logic, if His Majesty The King applies his laws equally to everyone, then it's a free market? Any organization which is tax-funded has inequality and discrimination built in. Some are net tax payers, others are net tax receivers. Then, net tax receivers dictate why it's good and honest for them not to pay, but receive and why it's good and honest for them to extract payment from others. And under what "regulations". Obviously, tax-funded regulations cannot be applied indiscriminately to all participants. Free market is not about equality. It's about ability to protect property against anyone's opinion. Bitcoin and the internet themselves are a fine example of a nearly free market: no matter what you think of me and no matter what I think of you, we both can avoid each other and no one can take each other's coins. But if we don't have such technology and have to keep our cash in a bank, then we both depend on someone's opinion how the money should be used and how much we can spend and where.
  - gamblor956 13y ago
    The problem with MtGox is that they are preventing the switch. In a totally free market, that would be the standard scenario--as soon as an exchange got large enough, it could (and would) simply halt outbound transactions because there wouldn't be any regulations requiring it to switch (and economically, at that point it would be better to prevent outbound transactions than to compete for new business). One of the problems with people advocating for a free market is that they don't understand what it really means: might makes right.
    - oleganza 13y ago
      1. What exactly does MtGox prevent? I never used it, never relied on it and almost all of my friends don't care about MtGox. Yet all of us were able to buy, sell, trade and write software for Bitcoin without a problem. 2. Free market for me is about protection, not aggression. Bitcoin network is a free market in a sense that everyone's property is very cheap to protect and very expensive to extract. No matter what I think about how government should work, your BTC is safe and same for my BTC regarding your opinions. We simply have no other way, but to stop arguing and start cooperating voluntarily or just ignore each other. With BTC scripts we can fully insure our contracts without any need for neither "law", not its "enforcement". You can be very-very rich guy, but it still will be more expensive for you to steal my coins than just to trade honestly. Expanded argument: http://blog.oleganza.com/post/71410377996/crypto-anarchy-does-not-require-anonymity http://blog.oleganza.com/post/71410377996/crypto-anarchy-doe...
      - gamblor956 13y ago
        1) MtGox currently prevents outbound transfers of Bitcoins, and limits conversions into real currency. 2) Using your own personalized definition of free market changes the discussion. "Free market" isn't about protection or aggression, or power of any kind. The common definition is that that the market is free of external influences, so that market forces determine all outcomes. Indeed--by the common definition of "free market" Bitcoin is the absolute opposite--it's the pinnacle of socialized currency: everyone owns the currency and everyone is responsible for protecting it. BTC scripts don't eliminate the law or its enforcement, they become the law. (Law is simply regulation--in whatever form it takes place. For example, in the US law is both statutory, case-based, and practice-based, depending on the context.)
- ctdonath 13y ago
  Just because the free market works well (on the whole) doesn't mean it works instantly. We're seeing the correction underway, and this thread is part of it: people are identifying a bad actor, having sensible discussions about the problem and alternatives, and are transitioning to more suitable actors while those being abandoned over time are discovering the error of their ways and either correcting the problems or are getting/pushed out. You'd rather place the process in the hands of people no more competent or interested than those already involved? and do so by threat of force?
  - deleted 13y ago
    [deleted]
- interstitial 13y ago
  Ah... you just learned something, free markets and "capitalism" are related but not the same.
- jccooper 13y ago
  Mt Gox is already bleeding to death; it's just in slow motion because the same problems that make people wont to leave make it hard to leave. The over-valuation of BTC at Mt Gox (until recently) is evidence of capital flight through BTC due to their USD withdrawal problems; it's apparently turned around just now since the new BTC restrictions are even worse (and there's some fiat currencies--like the Yen--where you can still get money out.) Either way, MtGox has been consistently out of line with market price, in a market with plenty of arbitraging, indicating that they have problems and people know it. I don't know how to get easy numbers on exchange volume over time, but I do know that Mt Gox has fallen from the obvious top exchange to a solid third over the time I've paid attention (maybe half a year.) Why they still have any decent volume, I don't know; inertia, people still cashing out or waiting for Mt Gox to improve, suckers lured by the arbitrage opportunity, perhaps the Japanese domestic market (they're the only Yen exchange). I know I wouldn't touch the place with a 29.5 foot pole.
glesica 13y ago
> "...rather than their own bottom line." So much for capitalism I guess...

nwh 13y ago

There's no acceptable middle ground really. Practically every Bitcoin service is full of incompetence of varying degrees. Coinbase for example uses MongoDB for their accounting and apparently was hacked (and the funds returned) as an effect of that. Every other service has issues with the founders (BTC-e is run by who?) or their security record (inputs.io had a cold wallet?) in some way. You can't trust much in this particular corner of the internet.

mateuszf 13y ago
Haven't heard of any problems with bitstamp. Did you?
- nwh 13y ago
  I have not either, beside the usual phishing and DDoS. That said I've not had any experience with them except for hearing the name in passing. Remember that a comment like this is possibly a false positive, they could be incompetent until we know that it's 100% true, we can't ever prove that they aren't incompetent.
  - mateuszf 13y ago
    Maybe, but that's like me calling you incompetent because there is no proof you always are competent.
    - nwh 13y ago
      True, but I'm not handling financial transactions.
      - mateuszf 13y ago
        It doesn't matter. With your definition of competence no one could be called that way ever.
        13y ago

spoiledtechie 13y ago

I wonder which side is actually telling the truth...

jafaku 13y ago
Are you serious?
pudquick 13y ago
If you'd like an in-depth discussion of what Mt. Gox has screwed up and how: http://www.reddit.com/r/Bitcoin/comments/1x93tf/some_irc_chatter_about_what_is_going_on_at_mtgox/cf99yac http://www.reddit.com/r/Bitcoin/comments/1x93tf/some_irc_cha... They didn't discover anything - they were warned, quite some time ago, that they were not correctly spending and opening themselves up for double+ spends due to their own misunderstanding of how to reliably track a spend (compounded by their coding errors).

sillysaurus2 13y ago

One interesting aspect of this whole ordeal is the fact that, thus far, exchanges' prices have depended on each other. That is, a huge sell order on Bitstamp will more or less immediately affect the price on BTC-E, MtGox, etc. (The exception seems to be Coinbase, which seems to use some kind of exponential weighted averaging, but even Coinbase will get dragged down if the price drop is dramatic enough.) If people lose all confidence in Gox, but still retain faith in other exchanges, then that means we're going to witness MtGox's price drop while the other exchanges' prices rise. However, this becomes an economic opportunity for anyone who wants to do arbitrage between exchanges. Therefore it seems like the prices won't ever diverge too much. The conclusion, it seems, is that no matter how bad one exchange is, it will simply drag the overall price of Bitcoin down across all exchanges rather than suffer punishment as an individual company. The fact that arbitrage is doable seems to give MtGox some insulation from consumer outrage. This poses a question: Is it true that as long as an exchange keeps functioning, then it's "here to stay" no matter how badly they behave? Is there any way that an exchange could go out of business from nothing more than consumers losing faith that one exchange?

socialist_coder 13y ago
You can't do arbitrage on Mt Gox though because you can't get any money out. That's the whole reason the price discrepancy exists.
- fnordfnordfnord 13y ago
  You can as long as the arbitrage doesn't always go one way, but you have to tie up additional funds.
- oijaf888 13y ago
  Why can't you get the money out via a Japanese bank account? They claim to send funds to those within a few days.
  - afterburner 13y ago
    Is is supposed to be easy to get a Japanese bank account if you've, say, never been to Japan, and don't speak Japanese? Honest question...

oleganza 13y ago

Today's price fluctuation only proves that people do not really understand how Bitcoin works. Many keep all their coins on the exchange because they got used to the traditional banking. MtGox says "it's a fault in the protocol" and people sell off in panic. Thankfully, over time we have more exchanges, more different implementations, more and better educational resources to learn about real risks of Bitcoin. Meanwhile, smart people pick up cheap coins while they can.

jasonlingx 13y ago

Let this be a warning to everybody with bitcoin in wallets they do no absolutely control, for example, Coinbase - you can and almost certainly will lose them at a moment's notice, sooner or later. I feel really sorry for those with funds tied up with MtGox. It was only recently where I used MtGox to store most of my bitcoin and I am lucky to have decided to move them all to paper wallets. This demonstrates one of the biggest issues holding back widespread adoption of bitcoin, the ability of the layperson to securely hold large amounts of bitcoin.

rainmaking 13y ago

My experience exactly. I was just buying a hundred bucks worth of coins, and I had to suffer through inexplicable delays, error messages that were obvious lies, the list goes on and on. Incompetence is one thing ("sorry about the hassle, but look aren't we cheap!") but trying to obfuscate the real reason of problems is just a huge red flag. I'm in Europe, and I like Kraken very much. blockchain.info recommended them.

o_nate 13y ago

This article seems rather biased and brings in lots of past problems at Mt. Gox rather than focusing on the current issue - perhaps because a more detailed explanation of the current issue would reveal that this problem goes beyond Mt. Gox. There is a disturbing tendency among some Bitcoin partisans to instantly dismiss any issue that comes up as being well-known and well-understood, even if "well-known" means that it was posted somewhere on a message board read by few.

TomGullen 13y ago
If it goes beyond Gox, why are other exchanges operating seemingly with no problems? Bitstamp is a good example of a well run exchange. Gox has been mired in self inflicted problems for many months.
- o_nate 13y ago
  From my understanding, workarounds do exist for the issue, and some exchanges probably have implemented them. However, the issue goes beyond Gox in the sense that without those workarounds in place, any exchange could be vulnerable.

lispsil 13y ago

Of course Gox is full of shit, anybody see his php ssh implementation? Karpales is a guy who rolls his own crypto everyday and has no idea it's completely flawed, and when you point out the flaws he doesn't believe you and uses it anyways. He's a cancer and nobody should be using MtGox. You're supposed to trade coins in IRC decentralized using the web of trust, or localbitcoins in person. Exchanges should only be used if you have a business bank account and are on first name basis with the guy who runs Bitstamp or Cavirtex on IRC otherwise you get delays and holds for identity verification, limits, other problems like your bank freezing your account when they notice wires going to Slovenia too often. *Edit Gavin just posted a response on the bitcoin foundation blog, confirming Gox is indeed full of shit.

kordless 13y ago

News flash: people don't like to admit they are wrong. They will find ways to rationalize their actions to fit a model where their fears of being wrong are temporarily alleviated. Unfortunately most people don't realize it's more work in the end to deny being wrong than just coming clean. We've been through this several times with Mt. Gox. It's time for everyone to STOP using them and start using something else for trading. Continuing to use them and making rationalizations that things will 'get better' will only result in a global case of cognitive dissonance. They are threatening an ecosystem that is important and which has a large potential value. In my opinion, they need to be removed from that ecosystem.

steven2012 13y ago

Anyone who uses Mt. Gox is a fool, especially after the first few security issues. Hearing about further issues in terms of security, etc is sort of like hearing the wailings of a person whose spouse is cheating on them... for the 5th or 6th time. At some point, the victim only has themselves to blame.

hatu 13y ago
Literally 2 days after I registered on Mt Gox (2011), I got this email: "[Mt.Gox] Account database compromised". I'm glad if they're going away. I've never trusted them since.

victorlin 13y ago

the justin bieber of bitcoin exchange

deleted 13y ago

[deleted]

kens 13y ago

I don't think anyone has pointed out that MtGox said "We have discussed this solution [additional hash in the protocol] with the Bitcoin core developers and will allow Bitcoin withdrawals again once it has been approved and standardized." [1] A Bitcoin protocol change like that is not going to happen for a long, long time, if ever so do the math on MtGox's statement and when they will allow withdrawls. The Bitcoin team did push out a change in 8 hours once for a critical signed/unsigned bug that threatened the whole system [3], but this problem looks to me like NOTABUG/WONTFIX. The transaction malleability is an annoyance, not a real bug. Basically the support team just needs to spend an extra 5 seconds checking a transaction instead of blindly issuing refunds. My recent article [2] goes into the Bitcoin protocol in great detail if you want to know more about transaction signing, which should help explain technically what is going on with malleability. [1] https://www.mtgox.com/press_release_20140210.html https://www.mtgox.com/press_release_20140210.html [2] http://righto.com/bc http://righto.com/bc [3] https://bitcointalk.org/index.php?topic=822.0 https://bitcointalk.org/index.php?topic=822.0

rjzzleep 13y ago
ok, but please read the related pull requests https://github.com/bitcoin/bitcoin/pull/2131 https://github.com/bitcoin/bitcoin/pull/2131 https://github.com/bitcoin/bitcoin/pull/3637 https://github.com/bitcoin/bitcoin/pull/3637 https://github.com/bitcoin/bitcoin/pull/3016 https://github.com/bitcoin/bitcoin/pull/3016 https://github.com/bitcoin/bitcoin/pull/3025 https://github.com/bitcoin/bitcoin/pull/3025
- nullc 13y ago
  These are not all that directly related— they're the start of a set of changes which will probably take us one to three years to fully deploy... what mtgox was talking about in their press releases was just some simple standard way of generating a stable ID, this wouldn't be a protocol change at all... and is only a few lines of code: https://github.com/sipa/bitcoin/commits/normtxid https://github.com/sipa/bitcoin/commits/normtxid But whats more important is that this malleability stuff is not very much related to fraud risk, I explained more here: http://sourceforge.net/mailarchive/message.php?msg_id=31956576 http://sourceforge.net/mailarchive/message.php?msg_id=319565...

sscalia 13y ago

In case anyone needs a reminder: Magic The Gathering Online Exchange. Chase Manhattan, they are not.

pbhjpbhj 13y ago
They don't seem too dissimilar. JP Morgan Chase started as The Manhattan Company (http://en.wikipedia.org/wiki/The_Manhattan_Company http://en.wikipedia.org/wiki/The_Manhattan_Company). Formed to provide a clean water supply instead the owners took 95% of the $2 million to form a bank and created a system of waterworks that caused massive cholera outbreaks ... I don't think MtGox has killed anyone yet, though I've been convinced for a time that they've probably made-off with a lot of the money. JP Morgan Chase aren't exactly trustworthy either, motivation based on pure financial profit will do that - a synopsis of some of their major indiscretions: http://www.icij.org/offshore/jpmorgan-chases-record-highlights-doubts-about-big-banks-devotion-fighting-dirty-money http://www.icij.org/offshore/jpmorgan-chases-record-highligh...

ck2 13y ago

the official Bitcoin daemon (bitcoind) does not rely on a transaction ID to determine if a transaction succeeded Sooo how does it do it? How does it determine a unique transaction id?

jimktrains2 13y ago
IIRC it sends some money back to you at a new address that you know about.
nullc 13y ago
It tracks the coins you were spending when you made the transaction.

rsync 13y ago

Why do these services exist at all ? Cannot the bit coin protocol be used by end users with full features without a third party "wallet" service ? Are these services purely for people that don't understand files and encryption utilities ? I do not use bitcoin, but if I did, I assume I would just protect and back up those computer files like many other extremely valuable computer files I have. What am I missing here ?

fnordfnordfnord 13y ago
Exchanges are for trading and speculation.
natdempk 13y ago
These services generally provide a service that is not part of standalone bitcoin, whether that is a payment API which generates addresses and verifies transactions for customers, an exchange to trade and value bitcoin based on fiat currency, or a user-friendly wallet that allows access from anywhere with internet access and bypasses the need for a user to download and update their own copy of the blockchain. (The blockchain is pretty large. It currently sits around 13GB and is always growing.) There are also end-user applications like Armory, which are meant to manage and secure a wallet on an end-user's machine, but its inevitable that people will use online services for foreseeable future.
- walden42 13y ago
  There are clients, like Electrum and MultiBit, that don't require downloading the whole blockchain. The average person should be using these, IMO, not trusting any e-wallets.
sliverstorm 13y ago
Mtgox is an exchange, so think of your stock broker. You wire your broker/brokerage a pool of your money, and shuffle it around in the brokerage among various assets. If you like, you can put more in or take some out, but the brokerage generally holds your assets while you are trading.
13y ago

angryasian 13y ago

>Their implementation, against all advice, does rely on the transaction ID, which makes this attack possible. I think a lot of the comments here and especially the article detracts from the discussion. The article seems to go on a rant of all the other mistakes mt gox make rather than addressing the issue. What is the recommended solution by bitcoin implementers to verify a transaction succeeded, with transaction malleability existing ?

zapnap 13y ago

Not wholly surprised here. As a side note, I wish it was easier to move coins out of mtgox. They require "verification" to even transfer coins to another BTC address at this point, which means sending them proof of identity and proof of address. I'm not against identifying myself but given their absolutely abysmal security record and repeated demonstrations of incompetence, I'm loathe to send them anything even remotely sensitive. which leaves me in a bad position where I'm stuck with coins I can't even access... Ugh. Local wallets, people. Local wallets.

x0054 13y ago

Mt. Gox is indeed full of shit. As I understand the issue, due to their bitcoin implementation, there is a possibility that someone would send bitcoins from their Mt. Gox. account to a wallet, than alter the signature of the transaction, and than claim that the transaction did not go through and contact support to request the funds to be resent. Here are 2 easy solutions to this problem which do not require anything to be done by the bitcoin community, and could be exacted by Mt. Gox today: 1. Allow all transactions to go through as before, but state clearly that if your transaction does not go through after being submitted, it will take a long time to clear the transaction, because it will have to be checked by hand. Assuming that 90% of people are not planning to scam Mt. Gox, 90% of people would be able to get their money. The remaining 10% would have to wait a bit longer while Mt. Gox checks transactions by hand. 2. Alternatively, write a system were a user can request to withdraw bitcoins. The Mt. Gox server first generates a new wallet, than transfers the BTC to that wallet, than send the user the public and private keys for that wallet. Assuming that the user (for good reason) does not trust Mt. Gox, they than can simply transfer the BTC from a temporary wallet to a permanent one.

pistle 13y ago

The candlestick charts are not telling a pretty story about trust right now. Bitbugs keep the faith and talk about buying with blood in the streets since it always bounces back, but every flash crash comes with a worse story. The headline is "Largest Bitcoin Exchange Doesn't Understand Bitcoin" What hope do retailers and any but the very-technical have in managing the risk implicit in digital currencies? Not to mention, seeing supporting forum posts where people are discussing the parts of fractions of coin being sent around... do people really think 8-10 digits past the decimal can hope to be manageable for consumers? It's bad enough to deal with Yen conversions. Please tip your server .00343874938239487 bitcoin. When 15% of the value can evaporate while business is happening... when do you bill the customer for lunch? When they order?

kirk21 13y ago

Trying to find an European alternative. Suggestions next to https://localbitcoins.com https://localbitcoins.com or http://www.coinnext.com/ http://www.coinnext.com/ ?

jere 13y ago

Not mentioned in this post is that during that hack where hashed passwords were released, Mt. Gox was using md5. What jokers.

paterpol 13y ago

Hacked bitcoin exchange patforms, its not the point the structure, there cs or a bug in the bitcoin system.The big players have to coopered to avoid the unlimited use from the fed of fiat money to buy bitcoins and attac the big .platforms on using a extreme blow off