Mt. Gox – $400 Million Bitcoin Theft Scandal

Something mysterious just recently happened to one of the most prominent names in the world of Bitcoin; Mt. Gox apparently vanished in thin air like a phantom. A document was leaked regarding the matter, claiming the disappearance of 744,000 customer Bitcoins along with it. Today’s Bitcoin community continues to reel and is still trying to find out what exactly happened. The accusations, rants, and conspiracy theories have only just begun. One thing is for sure, though, this serves as a wake up call for anybody who thought that Bitcoin will have an easy road to general acceptance.

Mt Gox Logo
Tokyo-based Mt. Gox started as Magic: The Gathering card exchange site. As the ardor over Bitcoin had started spreading around the middle part of 2010, the site eventually rebranded to be Bitcoin trade, one of the forerunners of the service. Mt. Gox served as a get-in-the-middle fro those who wanted to magically transform their Bitcoins into much more liquid currencies such as yen or dollars. Also, it had its very own custom wallet software which enabled users to easily manage their Bitcoins over the cloud. Based on the leaked document, this was where things began crumbling off.

The cracks began emerging the early part of this month right when Mt. Gox decided to suspend withdrawals with the claim of serious flaws regarding how Bitcoin protocol confirms transactions. Mt. Gox mentioned that it was very much possible to essentially have a Bitcoin re-spent simply by renaming the whole transaction just before it becamed synced toward the block chain (which means after it received verification.) The Bitcoin Foundation speedily contradicted Mt. Gox to point out that Bitcoin was never really at fault. The thing they so-call “transaction malleability” issues was known. However, it didn’t get enough attention to be considered as a noteworthy problem. The Bitcoin Foundation then scapegoated Mt. Gox’s utterly-customized wallet software for having compounded the bug. Ultimately, this might have been the only thread that led to the unraveling of Mt. Gox when pulled.

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Mt Gox Got Robbed

Due to the faulty tracking of the software, Mt. Gox did not really hold the Bitcoins it thought to have. The stolen ones were steadily siphoned off straight from the hot wallet of Mt. Gox — the coins put to use in order to proceed with transactions. Many believe that most of Mt. Gox’s funds were in cold storage when they were all safe from the whole transaction malleability perforation. The leaked documentation claims that cold storage got wiped out, too, which simply means Mt. Gox was automatically transferring coins into the wallet as required.

The ascertainment of the leaked information’s validity will remain at hold until someone directly from Mt. Gox provides udpates, which actually makes the current situation sound worse all the more. Mt. Gox’s wallet software drawbacks prove to be severe with the 744,408 Bitcoins stolen through the course of numerous years. For now, Mt. Gox has decided to suspend operations causing the site users to cultivate a skeptical outlook, doubting that they will ever retrieve their precious Bitcoins. Virtual currencies indeed hold a vast range of appallingly negative contingencies.

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