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Man Confronts CEO of MT. Gox In Tokyo

84 points by richardknop 13y ago

Also covered by The Wall Street Journal: http://blogs.wsj.com/japanrealtime/2014/02/14/bitcoin-protester-confronts-mt-gox-executive/

zwily 13y ago
Wow, so they can't even process a withdrawal for someone with a big balance who shows up in person? Sounds scary, like they actually are insolvent.
- tomp 13y ago
  Why would they any more than the (verified!) users online?
  - smtddr 13y ago
    Because if a customer with a lot of coins flies to Japan to confront the CEO while being video-taped and _still_ doesn't get his coins back... people will believe things must be very bad. I'm convinced that it's one of 2 things. a) A criminal investigation + gag order. b) MtGox really screwed up and/or got hacked. The funds are just plain gone and they're in the process of winding down the company into bankruptcy or something.
    - Xylakant 13y ago
      Flying to japan is a publicity stunt, nothing more. The public statement was that all withdrawals are halted since they need to consolidate their accounting. So why would they hand out bitcoins for people that show up in person? I'd be more concerned if they gave in and cashed out everyone that shows up in person and not online. Edit: Parent stealth-edited, so I'll rephrase my comment. Original preserved here: And then, the next one comes and want his bitcoins on the spot. And then someone makes a video of a withdrawal online that fails. The video on youtube does not add anything negative to the current situation: Withdrawals are not possible, in no way.
      - smtddr 13y ago
        >>The video on youtube does not add anything negative to the current situation: Withdrawals are not possible, in no way. If you think this video does not negatively impact MtGox's public image or cause people with funds stuck in there to become even more concerned, then I don't agree with you.
        Xylakant 13y ago
        Oh, I do believe that the video is damaging to MtGox's public image, but paying out this guy would have been at least as damaging. They hit rock bottom and are damned whatever they do. I sort of doubt if their public image matters at the moment: They either fix the problem and then can communicate that "yes, it was unfortunate but we could no do any payouts since we needed to fix the bug for all of you, instead of a nutcase that went to japan to pester us." or they can't fix it and go bankrupt at which point the video on youtube won't do any harm either. Nor do the concerns of their users: You can't withdraw funds, not at all, no way, no matter how concerned you are and how often you show up at their office. Be more concerned, go ahead. If I had any money on MtGox I'd be writing it off right now and throw a party when I get it back.
        smtddr 13y ago
        Ah... okay, then I agree with you now.
    - tomp 13y ago
      But you can't get neither (1) money nor (2) bitcoins from MtGox, so what does it matter what people believe? It's not like they can do much, or that releasing coins for privileged customers would help MtGox...
      - smtddr 13y ago
        >> or that releasing coins for privileged customers would help MtGox... I don't agree with that. If this person got his coins back, people would have gained a little faith that MtGox might actually get back on its feet. So at least that'd be positive PR for them. The fact that this guy did not get his coins back suggests to me that the situation, whatever it is, must be very serious and lowers my faith that MtGox will recover.
        ItendToDisagree 13y ago
        As pointed out by another reply, if this user had gotten his withdrawal processed, it would show that you more or less have to fly to Japan in person to get your money. If that precedent were set I believe that would negatively impact MtGox's PR in a pretty substantial way. I'm not disagreeing with what you're saying. It would show that they at least 'have funds' to pay out, rather than what looks like them not having anything (or enough) to cover the coins. I just think that the realization that you need to fly to Japan would also cause a lot of negative PR for them.
        smtddr 13y ago
        Oh, definitely there'd be some people saying "Hey! That's not fair! We can't all fly to Japan", but I suspect the overall effect would be a net-positive. At least, after the the people yelling "unfair!" calm down. Might take a week or 2.
- samworm 13y ago
  There are very good procedural reasons for not paying out to random people that turn up at your offices. Try going to your bank's office building (not branch) and demanding cash. Proper withdrawal processes should be designed to protect both parties from fraud / risk while remaining convenient. I'm not saying I think mtgox's actual procedures aren't batshit insane (they are), but trying (and failing) to operate outside of those procedures doesn't really prove anything.
  - ItendToDisagree 13y ago
    ^This is true. While the attempt to contact the CEO in person does push the issue, it is sort of ridiculous to think that they keep 'cash on hand' at the office to cash people out. As pointed out there are a bunch of reasons to keep withdrawal processes within process especially with a semi-anonymous currency of this type.
  - zwily 13y ago
    I think you're right... But gox really needs to do something to prove they control [a whole bunch of] funds, like they did a couple years ago.
pavlov 13y ago
There's still time to get on the bandwagon! http://en.wikipedia.org/wiki/File:Flora%27s_Malle-wagen_van_Hendrik_Pot_1640.jpg http://en.wikipedia.org/wiki/File:Flora%27s_Malle-wagen_van_...
bdfh42 13y ago
The protagonist felt that his "wealth" was tied up in MT. Gox. Surely that is/was an illusion. Wealth is rather more tangible than some encrypted code in (wow this will upset some folks but it is still true) a glorified ponzi scheme.
- d0 13y ago
  "wealth" is subjective. For my father it's a Range Rover he can't afford but can show people. For me it's solving a problem (intellectual wealth). For him, it's the promise of exchanging some electronic fairy dust for a different kind. (all money on this scale is fairy dust and promises which scares me away from it all)
  - bdfh42 13y ago
    A dictionary might define wealth as "an abundance of valuable possessions or money". We who are working on start-ups of various kinds, seek wealth for ourselves perhaps but certainly if we are successful to increase the total wealth of the world. At least the fairy dust of the dollar or euro is backed by the wealth of nations.
    - d0 13y ago
      Euros and dollars are backed by guns and ammunition, not the wealth of nations. A short peek at history will show you that.
      - ItendToDisagree 13y ago
        Agreed! But at one point there was a 'gold standard' which was backed by an actual thing. Although that thing was to a great extent backed by guns and ammo as well. Serious question: Could a 'crypto-currency' run on a gold standard? IE MtGox (or whoever) having enough of an actual thing to cover all of the coins? I hadn't thought about that but it is an interesting thought to me.
        13y ago
lhnz 13y ago
This should be a warning to anybody that ends up amassing X00K in a digital currency to be very very careful to keep your money secured and in your control.
- coldpie 13y ago
  Suddenly, thousands of Internet libertarians learn the value of regulation.
  - gonvaled 13y ago
    You got this backwards: just transfer the bitcoins to your private wallet, and you have no need whatsoever for regulation. People keeping their bitcoins in online wallets are trusting MtGox et al. A libertarian trusts nobody but himself - and specially not the state.
    - jusben1369 13y ago
      A libertarian trusts nobody but himself? In general or just with his/her money?
      - clavalle 13y ago
        Well, I think there would be a level of interpersonal trust. That wouldn't go away. But there is much in day-to-day life that we all trust to at least a Lowest Common Level that would no longer exist in a Libertarian world. For example, did you visit an office building today? How do you know it won't fall in on you? Today you know because it was built to certain specifications set forth in regulation. You know the builders were certified and that the inspectors made sure no corners were cut (at least in a well functioning system as we generally have in the U.S.) In a Libertarian world that might be taken over by some sort of for profit certification body...or it might not. The onus would be on you to find out before you walk through the door and put your life in the hands of people you've never met.
        13y ago
sillysaurus2 13y ago
After researching the issue for a couple days, I've turned up a few things to boost my confidence in the situation. First, Tux (the owner of MtGox) has been participating in the Github discussion about getting a "normalized txid" implemented ASAP to address the malleability issue. Here's the github discussion: https://github.com/bitcoin/bitcoin/pull/3656 https://github.com/bitcoin/bitcoin/pull/3656 Here's the latest comment from Tux (8 hours ago): "Just to update this thread, it seems that this discussion is mostly stale now. We (at MtGox) will implement this new hash index in our transactions database and start working with it (we will announce a maintenance as we will have to stop bitcoin deposits too during the database schema update) and will start providing this new hash when customers are withdrawing bitcoins, litecoins, or any other coin based on Bitcoin we may support in the future. We will also provide an API that will allow our customers to use this hash to retrieve the transaction hash as seen in the blockchain once the transaction is confirmed, and will hope others (blockchain.info?) will index this value one day. We also invite other exchanges and businesses which may need to keep track of bitcoins they send to use this same method, since dealing with multiple variations of the same thing wouldn't be very productive." As of an hour ago, blockchain.info has implemented the proposal. Here's an example of a "normalized txid": https://blockchain.info/ntxid/3c0b247b0f9107309c603441f0411b1e8a54dbbb86c892d0aced6aa285804c7f https://blockchain.info/ntxid/3c0b247b0f9107309c603441f0411b... Why is ntxid important? Because for most practical purposes, ntxid cannot mutate. The recent attack was possible because people were able to mutate txids by changing the signature. So, "txid" includes the signature, but "ntxid" doesn't. Therefore ntxid is immune to the previous malleability attack vectors. So what else boosts my confidence? Well, another aspect is that Gox support personnel have been in #mtgox almost 24/7 answering questions. They often don't have answers that people are seeking, but they have been professional and helpful to the best of their ability given the current situation. A third thing that boosts my confidence is that Gox has, conservatively, made at least 120k bitcoin in profit from trade fees. It's more likely in the range of 440k. So even if they lost an ungodly amount of bitcoin, such as 70k, they will still have more than enough to cover the losses. To expand on this third point, people have expressed at least two concerns about whether Gox has enough coins. The first concern is whether Gox has enough coins to cover the losses they suffered. For example, perhaps they've been paying themselves a massive salary, and perhaps they lost more than the amount of profit they had remaining. People feel that the press release was designed to drive down the price of bitcoin, perhaps to sell high and buy low in order to grow their bitcoins by enough to cover the losses. But this doesn't make sense, because bitcoin's price rapidly recovered on all the other exchanges. This method wouldn't have been able to net them more than a few thousand btc. Plus, their own buy order would influence the price itself. The logic of "Gox issued an accusatory press release to drive down the price" doesn't seem to hold up. The second concern is that people believe Tux will use this as a way to get out of bitcoin entirely and retire. I don't know Japan's law, but people seem to believe Gox is the equivalent of a limited liability corp, which is of course designed to limit personal liability in the event of a massive screwup such as the one Gox has suffered. People say that since there was no malicious intent by Gox, then Gox may simply be closed down without much penalty to Tux. But if that were the case, then Tux's behavior would become very different very quickly. It seems pretty likely that Gox has, by now, calculated how many coins they've lost. Tux knows whether they're solvent. If they aren't able to cover losses, why would he be participating in Github? Why is he seemingly working so hard to resolve the issue? In that situation, "keeping appearances" isn't valuable. His time would be better spent speaking with lawyers and crafting his legal defense. This doesn't seem to be happening. So at this point we know the malleability exploit was real and that Gox really was bitten by it. We know they responded to the exploit in the only way that they were able: by suspending withdraws before further coins were siphoned out of Gox's systems. We know that Gox aren't making any exceptions to this withdraw suspension, not even for customers with large bitcoin holdings. (To me, this seems quite fair.) We know that Tux has been personally working with the bitcoin devs to push through a proposed fix to the protocol, and we know that the proposal has already been implemented in blockchain.info's website. Lastly, and most persuasively, we know that the expected value for Tux to reopen Gox is the massive amount of trade fees he stands to earn in the future. This incident will shake people's faith in Gox, but people are fickle, and if just 30% of their user base sticks with Gox then that means in another few years Gox will have earned 30% of "a massive amount of profit from the trade fees." That's still quite a bit of profit, and profit is better than no profit. Since Gox stands to earn at least another $million USD in trade fees over the next few years, then that's a million reasons for him to continue operating the exchange. Tux's behavior is roughly the opposite of what you'd expect from someone who was about to shut down their business. I had the option to sell my bitcoins in my MtGox wallet for 80% of their value. For example, if I transfer 1 bitcoin from my Gox wallet to their Gox wallet, then they would send me 0.8 btc to my external wallet address in return. But I chose not to sell off my Gox bitcoin, because the probability of Gox closing seems much less than 20% due to all of the above reasons. I'm going to wait it out.
Keyframe 13y ago
That's one of the downsides of unregulated market. I'm not saying it wouldn't happen in regulated market, it would be less likely.
- boon 13y ago
  1. It's not completely unregulated. 2. If you think a highly regulated system works better, just google "jon corzine mf global".
  - 300bps 13y ago
    Bernie Madoff, Worldcom, Enron, Lehman Brothers, etc, etc.
haakon 13y ago
Wall Street Journal covers this: http://blogs.wsj.com/japanrealtime/2014/02/14/bitcoin-protester-confronts-mt-gox-executive/ http://blogs.wsj.com/japanrealtime/2014/02/14/bitcoin-protes...
carsonreinke 13y ago
Why is the CEO in a T-Shirt?
- serf 13y ago
  You're asking that on HN? Isn't this the t-shirted-ceo capital of the world? (for what it matters, I share your sentiment.)
  - carsonreinke 13y ago
    It was snowing, don't you find that a bit odd?
- freehunter 13y ago
  Why not?
  - lucb1e 13y ago
    It's like freezing
- ItendToDisagree 13y ago
  Is there a reason a CEO can't wear a T-shirt? Or do you just mean because of the weather? Maybe he is wearing a super fancy and expensive invisible suit? :D
snorkel 13y ago
It was nearly 3 years ago when I sensed that Mt. Gox lack of maturity as an exchange would eventually spell trouble for Bitcoin: https://news.ycombinator.com/item?id=2608055 https://news.ycombinator.com/item?id=2608055 ... and 78 days ago I recommended sell your Bitcoin now. I'm not clairvoyant or an insider, rather I've seen this movie before. It's called The Bubble. This is the part of the movie where the bubble pops and remaining investors act all shocked and disappointed. There was a Dot-com Bubble, it popped, people lost a lot money, but many of the dot-coms still exist and have grown. There was a (US) Housing Bubble, it popped, and there's still houses being bought and sold, just at lower prices today. ... and there's still tulips for sale too. My point is Bitcoin may still carry on past this episode, but you have to recognize that its current price is way too heavy to make it over this bridge without collapsing, and it takes a long long long time for prices to recover after a bubble pop.
- hindsightbias 13y ago
  IMO, the best indicator for a bubble is when people participating in some financial activity look at you like you're an idiot when you ask basic questions and can't explain themselves w/o all sorts of complicated answers and rationalizations, ultimately followed with "you just don't understand." I get that there are superpeople who are really that smart, but in my experience 99% of you are not that person. The hard part is guessing the limits of irrationality and maximizing your profits. I got out of the dot-com bubble over a year early.
hoopism 13y ago
We know one thing for sure... the CEO did not steal the bitcoins in order to invest in proper winter attire.
Cthulhu_ 13y ago
Isn't it MtGox? Not 'mount Gox', sillies.
- michaelhoffman 13y ago
  The logo on mtgox.com is "MT.GOX"
gonvaled 13y ago
Honest question: why are people using online wallets to keep big amount of bitcoins? Isn't it risky per-se? And just to make sure I understand this: a personal wallet (in a USB, my laptop, my dropbox, whatever), would not be susceptible to these risks, right? (of course, other risks apply, like somebody accessing your wallet, or losing it) I guess the users of the online wallets have no direct access to their wallets, so they can not order a transfer to a private wallet to recover their money. Probably there is not even a per-user wallet, but a wallet for the pool of MtGox clients?
- DanBC 13y ago
  I've heard that traders keep large amounts in online wallets. It is bizarre behaviour - online wallets are risky and have had several large hacks and losses; trading is inherently risky.
- jjoonathan 13y ago
  Liquidity. Offline wallets are risky in that they could delay a cash-out in the face of plummeting bitcoin value.
- driverdan 13y ago
  Foolishness. People will give you all kinds of excuses as to why they'd do something as stupid as that, but the reality is that there's no reason to keep massive amounts of BTC in an online wallet. The only reason that comes close to being realistic is trading and even then you'd only need to keep the amount you trade.
- smtddr 13y ago
  * Day-trading So on a site like btc-e.com, if you're buying & selling on little peaks & valleys you can make significant income. If you buy 400 litecoin for 14 then the price goes up 3 bucks after 5 hours, you've just made over $1,000. You can't make these plays with an offline wallet. I day trade on btc-e.com but always move my coins to an offline wallet when they grow to an uncomfortable amount. Because of my fear of hacks though, I'm only making $30 or $40 bucks. I could dump 7 or 8k into the system and daytrade making over $1,000 a day... but then I'd be taking up the risk that a hack empties my account. Some people take that risk. I'm willing to risk up to 7k on crypto, but I don't want to risk losing it to a random online-wallet hack. However, if I unexpectedly got 5k out of thin air(say H&R Block found some tax deductions never noticed before) I'd day-trade that and risk losing it to hack. Another problem is that if you make profit on btc-e.com, you now have a bunch of USD sitting there[1] that you cannot transfer out. You don't want to withdraw that USD to your bank account because that's a slow process that takes more than 24 hrs. You're out of the game until all that bank stuff settles. I bought a bunch of litecoins on xmas-eve 2013, then on xmas-day the price suddenly doubled. I had to move my coins out of my offline wallet back to btc-e and sell. I made money, but now I had USD in btc-e that I can't get out. Afterall, I don't want to buy the coins I just sold for profit. I have to wait until the price drops. Now, if btc-e got hacked. The hackers would just buy whatever they could with my funds and withdraw the coins. I've lost. ___ 1. Unlike coinbase.com, btc-e.com allows you to have a fiat balance. I guess think of etrade.com, where you can transfer money out of your bank to etrade. Once those funds are confirmed, you can buy stock instantly because etrade already has your money and doesn't need to talk to your bank again.
jellicle 13y ago
Look people. In the world we live in in 2014, financial regulation is low and headed downwards. Scams are high and rising. Even in traditional banking industries denominated in dollars, there is no appetite from government (I will not here go into the reasons) for punishing wrongdoers. Accordingly, people are behaving rationally and ramping up their cheating and fraud. In non-traditional industries not denominated in dollars, there is even less appetite for punishing cheaters and scammers. Every bitcoin business is a fraud. Every one. There is no one who is planning to do anything except steal as much money as fast as they can, and then use the stolen funds to pay some lawyers to "negotiate" if the government shows any interest at all, which is unlikely. Just tell your lawyer to claim "we were hacked, we're a victim too". No one can prove that isn't true. For anyone who is ethically-challenged, this is a great business to get into. Watching internet libertarians run smack into an entire industry that seems specifically designed to liberate them from their life savings - with no recourse - is fucking hilarious. There are going to be a lot more people wondering where their tulip-wealth went. The answer - safely into someone else's swiss bank account - is not going to please them. Anyone want to start a betting pool on when the first bitcoin-related death will be? The first bitcoin-bankrupt person assaulting a scammer, or something like that?

84 points by richardknop 13y ago

Also covered by The Wall Street Journal: http://blogs.wsj.com/japanrealtime/2014/02/14/bitcoin-protester-confronts-mt-gox-executive/

zwily 13y ago

Wow, so they can't even process a withdrawal for someone with a big balance who shows up in person? Sounds scary, like they actually are insolvent.

tomp 13y ago
Why would they any more than the (verified!) users online?
- smtddr 13y ago
  Because if a customer with a lot of coins flies to Japan to confront the CEO while being video-taped and _still_ doesn't get his coins back... people will believe things must be very bad. I'm convinced that it's one of 2 things. a) A criminal investigation + gag order. b) MtGox really screwed up and/or got hacked. The funds are just plain gone and they're in the process of winding down the company into bankruptcy or something.
  - Xylakant 13y ago
    Flying to japan is a publicity stunt, nothing more. The public statement was that all withdrawals are halted since they need to consolidate their accounting. So why would they hand out bitcoins for people that show up in person? I'd be more concerned if they gave in and cashed out everyone that shows up in person and not online. Edit: Parent stealth-edited, so I'll rephrase my comment. Original preserved here: And then, the next one comes and want his bitcoins on the spot. And then someone makes a video of a withdrawal online that fails. The video on youtube does not add anything negative to the current situation: Withdrawals are not possible, in no way.
    - smtddr 13y ago
      >>The video on youtube does not add anything negative to the current situation: Withdrawals are not possible, in no way. If you think this video does not negatively impact MtGox's public image or cause people with funds stuck in there to become even more concerned, then I don't agree with you.
      - Xylakant 13y ago
        Oh, I do believe that the video is damaging to MtGox's public image, but paying out this guy would have been at least as damaging. They hit rock bottom and are damned whatever they do. I sort of doubt if their public image matters at the moment: They either fix the problem and then can communicate that "yes, it was unfortunate but we could no do any payouts since we needed to fix the bug for all of you, instead of a nutcase that went to japan to pester us." or they can't fix it and go bankrupt at which point the video on youtube won't do any harm either. Nor do the concerns of their users: You can't withdraw funds, not at all, no way, no matter how concerned you are and how often you show up at their office. Be more concerned, go ahead. If I had any money on MtGox I'd be writing it off right now and throw a party when I get it back.
        smtddr 13y ago
        Ah... okay, then I agree with you now.
  - tomp 13y ago
    But you can't get neither (1) money nor (2) bitcoins from MtGox, so what does it matter what people believe? It's not like they can do much, or that releasing coins for privileged customers would help MtGox...
    - smtddr 13y ago
      >> or that releasing coins for privileged customers would help MtGox... I don't agree with that. If this person got his coins back, people would have gained a little faith that MtGox might actually get back on its feet. So at least that'd be positive PR for them. The fact that this guy did not get his coins back suggests to me that the situation, whatever it is, must be very serious and lowers my faith that MtGox will recover.
      - ItendToDisagree 13y ago
        As pointed out by another reply, if this user had gotten his withdrawal processed, it would show that you more or less have to fly to Japan in person to get your money. If that precedent were set I believe that would negatively impact MtGox's PR in a pretty substantial way. I'm not disagreeing with what you're saying. It would show that they at least 'have funds' to pay out, rather than what looks like them not having anything (or enough) to cover the coins. I just think that the realization that you need to fly to Japan would also cause a lot of negative PR for them.
        smtddr 13y ago
        Oh, definitely there'd be some people saying "Hey! That's not fair! We can't all fly to Japan", but I suspect the overall effect would be a net-positive. At least, after the the people yelling "unfair!" calm down. Might take a week or 2.
samworm 13y ago
There are very good procedural reasons for not paying out to random people that turn up at your offices. Try going to your bank's office building (not branch) and demanding cash. Proper withdrawal processes should be designed to protect both parties from fraud / risk while remaining convenient. I'm not saying I think mtgox's actual procedures aren't batshit insane (they are), but trying (and failing) to operate outside of those procedures doesn't really prove anything.
- ItendToDisagree 13y ago
  ^This is true. While the attempt to contact the CEO in person does push the issue, it is sort of ridiculous to think that they keep 'cash on hand' at the office to cash people out. As pointed out there are a bunch of reasons to keep withdrawal processes within process especially with a semi-anonymous currency of this type.
- zwily 13y ago
  I think you're right... But gox really needs to do something to prove they control [a whole bunch of] funds, like they did a couple years ago.

pavlov 13y ago

There's still time to get on the bandwagon! http://en.wikipedia.org/wiki/File:Flora%27s_Malle-wagen_van_Hendrik_Pot_1640.jpg http://en.wikipedia.org/wiki/File:Flora%27s_Malle-wagen_van_...

bdfh42 13y ago

The protagonist felt that his "wealth" was tied up in MT. Gox. Surely that is/was an illusion. Wealth is rather more tangible than some encrypted code in (wow this will upset some folks but it is still true) a glorified ponzi scheme.

d0 13y ago
"wealth" is subjective. For my father it's a Range Rover he can't afford but can show people. For me it's solving a problem (intellectual wealth). For him, it's the promise of exchanging some electronic fairy dust for a different kind. (all money on this scale is fairy dust and promises which scares me away from it all)
- bdfh42 13y ago
  A dictionary might define wealth as "an abundance of valuable possessions or money". We who are working on start-ups of various kinds, seek wealth for ourselves perhaps but certainly if we are successful to increase the total wealth of the world. At least the fairy dust of the dollar or euro is backed by the wealth of nations.
  - d0 13y ago
    Euros and dollars are backed by guns and ammunition, not the wealth of nations. A short peek at history will show you that.
    - ItendToDisagree 13y ago
      Agreed! But at one point there was a 'gold standard' which was backed by an actual thing. Although that thing was to a great extent backed by guns and ammo as well. Serious question: Could a 'crypto-currency' run on a gold standard? IE MtGox (or whoever) having enough of an actual thing to cover all of the coins? I hadn't thought about that but it is an interesting thought to me.
      - 13y ago

lhnz 13y ago

This should be a warning to anybody that ends up amassing X00K in a digital currency to be very very careful to keep your money secured and in your control.

coldpie 13y ago
Suddenly, thousands of Internet libertarians learn the value of regulation.
- gonvaled 13y ago
  You got this backwards: just transfer the bitcoins to your private wallet, and you have no need whatsoever for regulation. People keeping their bitcoins in online wallets are trusting MtGox et al. A libertarian trusts nobody but himself - and specially not the state.
  - jusben1369 13y ago
    A libertarian trusts nobody but himself? In general or just with his/her money?
    - clavalle 13y ago
      Well, I think there would be a level of interpersonal trust. That wouldn't go away. But there is much in day-to-day life that we all trust to at least a Lowest Common Level that would no longer exist in a Libertarian world. For example, did you visit an office building today? How do you know it won't fall in on you? Today you know because it was built to certain specifications set forth in regulation. You know the builders were certified and that the inspectors made sure no corners were cut (at least in a well functioning system as we generally have in the U.S.) In a Libertarian world that might be taken over by some sort of for profit certification body...or it might not. The onus would be on you to find out before you walk through the door and put your life in the hands of people you've never met.
      - 13y ago

sillysaurus2 13y ago

After researching the issue for a couple days, I've turned up a few things to boost my confidence in the situation. First, Tux (the owner of MtGox) has been participating in the Github discussion about getting a "normalized txid" implemented ASAP to address the malleability issue. Here's the github discussion: https://github.com/bitcoin/bitcoin/pull/3656 https://github.com/bitcoin/bitcoin/pull/3656 Here's the latest comment from Tux (8 hours ago): "Just to update this thread, it seems that this discussion is mostly stale now. We (at MtGox) will implement this new hash index in our transactions database and start working with it (we will announce a maintenance as we will have to stop bitcoin deposits too during the database schema update) and will start providing this new hash when customers are withdrawing bitcoins, litecoins, or any other coin based on Bitcoin we may support in the future. We will also provide an API that will allow our customers to use this hash to retrieve the transaction hash as seen in the blockchain once the transaction is confirmed, and will hope others (blockchain.info?) will index this value one day. We also invite other exchanges and businesses which may need to keep track of bitcoins they send to use this same method, since dealing with multiple variations of the same thing wouldn't be very productive." As of an hour ago, blockchain.info has implemented the proposal. Here's an example of a "normalized txid": https://blockchain.info/ntxid/3c0b247b0f9107309c603441f0411b1e8a54dbbb86c892d0aced6aa285804c7f https://blockchain.info/ntxid/3c0b247b0f9107309c603441f0411b... Why is ntxid important? Because for most practical purposes, ntxid cannot mutate. The recent attack was possible because people were able to mutate txids by changing the signature. So, "txid" includes the signature, but "ntxid" doesn't. Therefore ntxid is immune to the previous malleability attack vectors. So what else boosts my confidence? Well, another aspect is that Gox support personnel have been in #mtgox almost 24/7 answering questions. They often don't have answers that people are seeking, but they have been professional and helpful to the best of their ability given the current situation. A third thing that boosts my confidence is that Gox has, conservatively, made at least 120k bitcoin in profit from trade fees. It's more likely in the range of 440k. So even if they lost an ungodly amount of bitcoin, such as 70k, they will still have more than enough to cover the losses. To expand on this third point, people have expressed at least two concerns about whether Gox has enough coins. The first concern is whether Gox has enough coins to cover the losses they suffered. For example, perhaps they've been paying themselves a massive salary, and perhaps they lost more than the amount of profit they had remaining. People feel that the press release was designed to drive down the price of bitcoin, perhaps to sell high and buy low in order to grow their bitcoins by enough to cover the losses. But this doesn't make sense, because bitcoin's price rapidly recovered on all the other exchanges. This method wouldn't have been able to net them more than a few thousand btc. Plus, their own buy order would influence the price itself. The logic of "Gox issued an accusatory press release to drive down the price" doesn't seem to hold up. The second concern is that people believe Tux will use this as a way to get out of bitcoin entirely and retire. I don't know Japan's law, but people seem to believe Gox is the equivalent of a limited liability corp, which is of course designed to limit personal liability in the event of a massive screwup such as the one Gox has suffered. People say that since there was no malicious intent by Gox, then Gox may simply be closed down without much penalty to Tux. But if that were the case, then Tux's behavior would become very different very quickly. It seems pretty likely that Gox has, by now, calculated how many coins they've lost. Tux knows whether they're solvent. If they aren't able to cover losses, why would he be participating in Github? Why is he seemingly working so hard to resolve the issue? In that situation, "keeping appearances" isn't valuable. His time would be better spent speaking with lawyers and crafting his legal defense. This doesn't seem to be happening. So at this point we know the malleability exploit was real and that Gox really was bitten by it. We know they responded to the exploit in the only way that they were able: by suspending withdraws before further coins were siphoned out of Gox's systems. We know that Gox aren't making any exceptions to this withdraw suspension, not even for customers with large bitcoin holdings. (To me, this seems quite fair.) We know that Tux has been personally working with the bitcoin devs to push through a proposed fix to the protocol, and we know that the proposal has already been implemented in blockchain.info's website. Lastly, and most persuasively, we know that the expected value for Tux to reopen Gox is the massive amount of trade fees he stands to earn in the future. This incident will shake people's faith in Gox, but people are fickle, and if just 30% of their user base sticks with Gox then that means in another few years Gox will have earned 30% of "a massive amount of profit from the trade fees." That's still quite a bit of profit, and profit is better than no profit. Since Gox stands to earn at least another $million USD in trade fees over the next few years, then that's a million reasons for him to continue operating the exchange. Tux's behavior is roughly the opposite of what you'd expect from someone who was about to shut down their business. I had the option to sell my bitcoins in my MtGox wallet for 80% of their value. For example, if I transfer 1 bitcoin from my Gox wallet to their Gox wallet, then they would send me 0.8 btc to my external wallet address in return. But I chose not to sell off my Gox bitcoin, because the probability of Gox closing seems much less than 20% due to all of the above reasons. I'm going to wait it out.

Keyframe 13y ago

That's one of the downsides of unregulated market. I'm not saying it wouldn't happen in regulated market, it would be less likely.

boon 13y ago
1. It's not completely unregulated. 2. If you think a highly regulated system works better, just google "jon corzine mf global".
- 300bps 13y ago
  Bernie Madoff, Worldcom, Enron, Lehman Brothers, etc, etc.

haakon 13y ago

Wall Street Journal covers this: http://blogs.wsj.com/japanrealtime/2014/02/14/bitcoin-protester-confronts-mt-gox-executive/ http://blogs.wsj.com/japanrealtime/2014/02/14/bitcoin-protes...

carsonreinke 13y ago

Why is the CEO in a T-Shirt?

serf 13y ago
You're asking that on HN? Isn't this the t-shirted-ceo capital of the world? (for what it matters, I share your sentiment.)
- carsonreinke 13y ago
  It was snowing, don't you find that a bit odd?
freehunter 13y ago
Why not?
- lucb1e 13y ago
  It's like freezing
ItendToDisagree 13y ago
Is there a reason a CEO can't wear a T-shirt? Or do you just mean because of the weather? Maybe he is wearing a super fancy and expensive invisible suit? :D

snorkel 13y ago

It was nearly 3 years ago when I sensed that Mt. Gox lack of maturity as an exchange would eventually spell trouble for Bitcoin: https://news.ycombinator.com/item?id=2608055 https://news.ycombinator.com/item?id=2608055 ... and 78 days ago I recommended sell your Bitcoin now. I'm not clairvoyant or an insider, rather I've seen this movie before. It's called The Bubble. This is the part of the movie where the bubble pops and remaining investors act all shocked and disappointed. There was a Dot-com Bubble, it popped, people lost a lot money, but many of the dot-coms still exist and have grown. There was a (US) Housing Bubble, it popped, and there's still houses being bought and sold, just at lower prices today. ... and there's still tulips for sale too. My point is Bitcoin may still carry on past this episode, but you have to recognize that its current price is way too heavy to make it over this bridge without collapsing, and it takes a long long long time for prices to recover after a bubble pop.

hindsightbias 13y ago
IMO, the best indicator for a bubble is when people participating in some financial activity look at you like you're an idiot when you ask basic questions and can't explain themselves w/o all sorts of complicated answers and rationalizations, ultimately followed with "you just don't understand." I get that there are superpeople who are really that smart, but in my experience 99% of you are not that person. The hard part is guessing the limits of irrationality and maximizing your profits. I got out of the dot-com bubble over a year early.

hoopism 13y ago

We know one thing for sure... the CEO did not steal the bitcoins in order to invest in proper winter attire.

Cthulhu_ 13y ago

Isn't it MtGox? Not 'mount Gox', sillies.

michaelhoffman 13y ago
The logo on mtgox.com is "MT.GOX"

gonvaled 13y ago

Honest question: why are people using online wallets to keep big amount of bitcoins? Isn't it risky per-se? And just to make sure I understand this: a personal wallet (in a USB, my laptop, my dropbox, whatever), would not be susceptible to these risks, right? (of course, other risks apply, like somebody accessing your wallet, or losing it) I guess the users of the online wallets have no direct access to their wallets, so they can not order a transfer to a private wallet to recover their money. Probably there is not even a per-user wallet, but a wallet for the pool of MtGox clients?

DanBC 13y ago
I've heard that traders keep large amounts in online wallets. It is bizarre behaviour - online wallets are risky and have had several large hacks and losses; trading is inherently risky.
jjoonathan 13y ago
Liquidity. Offline wallets are risky in that they could delay a cash-out in the face of plummeting bitcoin value.
driverdan 13y ago
Foolishness. People will give you all kinds of excuses as to why they'd do something as stupid as that, but the reality is that there's no reason to keep massive amounts of BTC in an online wallet. The only reason that comes close to being realistic is trading and even then you'd only need to keep the amount you trade.
smtddr 13y ago
* Day-trading So on a site like btc-e.com, if you're buying & selling on little peaks & valleys you can make significant income. If you buy 400 litecoin for 14 then the price goes up 3 bucks after 5 hours, you've just made over $1,000. You can't make these plays with an offline wallet. I day trade on btc-e.com but always move my coins to an offline wallet when they grow to an uncomfortable amount. Because of my fear of hacks though, I'm only making $30 or $40 bucks. I could dump 7 or 8k into the system and daytrade making over $1,000 a day... but then I'd be taking up the risk that a hack empties my account. Some people take that risk. I'm willing to risk up to 7k on crypto, but I don't want to risk losing it to a random online-wallet hack. However, if I unexpectedly got 5k out of thin air(say H&R Block found some tax deductions never noticed before) I'd day-trade that and risk losing it to hack. Another problem is that if you make profit on btc-e.com, you now have a bunch of USD sitting there[1] that you cannot transfer out. You don't want to withdraw that USD to your bank account because that's a slow process that takes more than 24 hrs. You're out of the game until all that bank stuff settles. I bought a bunch of litecoins on xmas-eve 2013, then on xmas-day the price suddenly doubled. I had to move my coins out of my offline wallet back to btc-e and sell. I made money, but now I had USD in btc-e that I can't get out. Afterall, I don't want to buy the coins I just sold for profit. I have to wait until the price drops. Now, if btc-e got hacked. The hackers would just buy whatever they could with my funds and withdraw the coins. I've lost. ___ 1. Unlike coinbase.com, btc-e.com allows you to have a fiat balance. I guess think of etrade.com, where you can transfer money out of your bank to etrade. Once those funds are confirmed, you can buy stock instantly because etrade already has your money and doesn't need to talk to your bank again.

jellicle 13y ago

Look people. In the world we live in in 2014, financial regulation is low and headed downwards. Scams are high and rising. Even in traditional banking industries denominated in dollars, there is no appetite from government (I will not here go into the reasons) for punishing wrongdoers. Accordingly, people are behaving rationally and ramping up their cheating and fraud. In non-traditional industries not denominated in dollars, there is even less appetite for punishing cheaters and scammers. Every bitcoin business is a fraud. Every one. There is no one who is planning to do anything except steal as much money as fast as they can, and then use the stolen funds to pay some lawyers to "negotiate" if the government shows any interest at all, which is unlikely. Just tell your lawyer to claim "we were hacked, we're a victim too". No one can prove that isn't true. For anyone who is ethically-challenged, this is a great business to get into. Watching internet libertarians run smack into an entire industry that seems specifically designed to liberate them from their life savings - with no recourse - is fucking hilarious. There are going to be a lot more people wondering where their tulip-wealth went. The answer - safely into someone else's swiss bank account - is not going to please them. Anyone want to start a betting pool on when the first bitcoin-related death will be? The first bitcoin-bankrupt person assaulting a scammer, or something like that?