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Can someone give me a ELI5 breakdown of what's happening in the bitcoin world right now? First MtGox and now Bitstamp. Any reading material on the subject (for

Can someone give me a ELI5 breakdown of what's happening in the bitcoin world right now? First MtGox and now Bitstamp. Any reading material on the subject (for a newbie) would be greatly appreciated.

smacktoward 13y ago
It looks a lot like a bank run to me: http://en.wikipedia.org/wiki/Bank_run http://en.wikipedia.org/wiki/Bank_run EDIT: See this for a more thorough description of what I mean: http://www.dailytech.com/Mt+Gox+Bitcoin+Bank+Run+Intensifies+1+Million+Customers+at+Risk/article34293.htm http://www.dailytech.com/Mt+Gox+Bitcoin+Bank+Run+Intensifies...
- celticninja 13y ago
  it is nothing like a bank run. A bank run is where the bank does not hold enough money to cover everyones deposits. Bitstamp have enough BTC to cover everyones deposits they just are delaying withdrawals for 72 hours. Think of it like you rbank telling you you need to wait 3 days for a transaction to go through, not that unlikely and in fact quite common in traditional banking. It seems longer in bitcoin though because of the usually quick transactions.
  - lucb1e 13y ago
    > Think of it like you rbank telling you you need to wait 3 days for a transaction to go through Moreover, with banks you have this every weekend.
    - smm2000 13y ago
      ATMs and credit cards work 24/7 so no, banks do not close every weekend
      - Mtinie 13y ago
        You must not have ever tried to deposit a check for a moderate or significant amount on a Friday afternoon. Unless you've already set up a process with your bank, you'll only have access to part of the funds for 24 to 72 hours.
      - makomk 13y ago
        Except when there's a technical screw-up, in which case you can find that no, you can't use ATMs or your cards for several days whilst it's fixed. This happens with some UK bank or the other every year or so at the moment, as I recall.
        lucb1e 13y ago
        Same here in the Netherlands. Also iDeal, a very popular online dutch payment system that integrates with almost all banks, has only like 95% uptime.
dangrossman 13y ago
Both of these exchanges apparently implemented the Bitcoin protocol incorrectly. Their code that verifies a transaction has completed is incorrect, so they can be tricked into thinking a withdrawal did not happen when it actually did (or that a lesser amount was withdrawn). They need to fix their code, as there is a proper way to verify a transaction occurred or not. Some reading: http://qz.com/175565/why-nobody-can-withdraw-bitcoins-from-one-of-the-currencys-largest-exchanges/ http://qz.com/175565/why-nobody-can-withdraw-bitcoins-from-o...
- mason55 13y ago
  FWIW it's an error in the BTC reference implementation so it's an easy error to make
  - TwoBit 13y ago
    Is that true? If so then significant blame goes to that in addition to the exchanges.
  - Dosenpfand 13y ago
    Please stop spreading FUD. >In the meantime, users of the reference implementation do not need to be concerned. Transactions are always tracked properly by the Bitcoin-Qt/bitcoind software. https://bitcoinfoundation.org/blog/?p=418 https://bitcoinfoundation.org/blog/?p=418
    - mason55 13y ago
      Interesting. This thread on reddit states that it IS an issue in the reference implementation and includes a patch http://www.reddit.com/r/Bitcoin/comments/1xm49o/due_to_active_malleable_transaction_relayers_it/ http://www.reddit.com/r/Bitcoin/comments/1xm49o/due_to_activ... Edit: The concern with the Bitstamp appears to be confusion due to transaction malleability and NOT actual double spend or cancellation issues. However the BTC reference client is not perfect at handling malleability and only gets it right eventually.
    - makomk 13y ago
tghw 13y ago
There's a large attack being directed at Bitcoin exchanges that is trying to exploit what seems to be a common misunderstanding about the Bitcoin protocol. It's the same misunderstanding that forced Mt. Gox to go down. http://www.coindesk.com/massive-concerted-attack-launched-bitcoin-exchanges/ http://www.coindesk.com/massive-concerted-attack-launched-bi...
- malka 13y ago
  Well, 2 identical transaction not resulting in the same hash is more a bug in the bitcoin implementation, than a misunderstanding in the protocol, imo
  - fla 13y ago
    Unless specified otherwise

Can someone give me a ELI5 breakdown of what's happening in the bitcoin world right now? First MtGox and now Bitstamp. Any reading material on the subject (for a newbie) would be greatly appreciated.

smacktoward 13y ago

It looks a lot like a bank run to me: http://en.wikipedia.org/wiki/Bank_run http://en.wikipedia.org/wiki/Bank_run EDIT: See this for a more thorough description of what I mean: http://www.dailytech.com/Mt+Gox+Bitcoin+Bank+Run+Intensifies+1+Million+Customers+at+Risk/article34293.htm http://www.dailytech.com/Mt+Gox+Bitcoin+Bank+Run+Intensifies...

celticninja 13y ago
it is nothing like a bank run. A bank run is where the bank does not hold enough money to cover everyones deposits. Bitstamp have enough BTC to cover everyones deposits they just are delaying withdrawals for 72 hours. Think of it like you rbank telling you you need to wait 3 days for a transaction to go through, not that unlikely and in fact quite common in traditional banking. It seems longer in bitcoin though because of the usually quick transactions.
- lucb1e 13y ago
  > Think of it like you rbank telling you you need to wait 3 days for a transaction to go through Moreover, with banks you have this every weekend.
  - smm2000 13y ago
    ATMs and credit cards work 24/7 so no, banks do not close every weekend
    - Mtinie 13y ago
      You must not have ever tried to deposit a check for a moderate or significant amount on a Friday afternoon. Unless you've already set up a process with your bank, you'll only have access to part of the funds for 24 to 72 hours.
    - makomk 13y ago
      Except when there's a technical screw-up, in which case you can find that no, you can't use ATMs or your cards for several days whilst it's fixed. This happens with some UK bank or the other every year or so at the moment, as I recall.
      - lucb1e 13y ago
        Same here in the Netherlands. Also iDeal, a very popular online dutch payment system that integrates with almost all banks, has only like 95% uptime.

dangrossman 13y ago

Both of these exchanges apparently implemented the Bitcoin protocol incorrectly. Their code that verifies a transaction has completed is incorrect, so they can be tricked into thinking a withdrawal did not happen when it actually did (or that a lesser amount was withdrawn). They need to fix their code, as there is a proper way to verify a transaction occurred or not. Some reading: http://qz.com/175565/why-nobody-can-withdraw-bitcoins-from-one-of-the-currencys-largest-exchanges/ http://qz.com/175565/why-nobody-can-withdraw-bitcoins-from-o...

mason55 13y ago
FWIW it's an error in the BTC reference implementation so it's an easy error to make
- TwoBit 13y ago
  Is that true? If so then significant blame goes to that in addition to the exchanges.
- Dosenpfand 13y ago
  Please stop spreading FUD. >In the meantime, users of the reference implementation do not need to be concerned. Transactions are always tracked properly by the Bitcoin-Qt/bitcoind software. https://bitcoinfoundation.org/blog/?p=418 https://bitcoinfoundation.org/blog/?p=418
  - mason55 13y ago
    Interesting. This thread on reddit states that it IS an issue in the reference implementation and includes a patch http://www.reddit.com/r/Bitcoin/comments/1xm49o/due_to_active_malleable_transaction_relayers_it/ http://www.reddit.com/r/Bitcoin/comments/1xm49o/due_to_activ... Edit: The concern with the Bitstamp appears to be confusion due to transaction malleability and NOT actual double spend or cancellation issues. However the BTC reference client is not perfect at handling malleability and only gets it right eventually.
  - makomk 13y ago

tghw 13y ago

There's a large attack being directed at Bitcoin exchanges that is trying to exploit what seems to be a common misunderstanding about the Bitcoin protocol. It's the same misunderstanding that forced Mt. Gox to go down. http://www.coindesk.com/massive-concerted-attack-launched-bitcoin-exchanges/ http://www.coindesk.com/massive-concerted-attack-launched-bi...

malka 13y ago
Well, 2 identical transaction not resulting in the same hash is more a bug in the bitcoin implementation, than a misunderstanding in the protocol, imo
- fla 13y ago
  Unless specified otherwise