Agonizing Mt.Gox Blames Bitcoin for Insolvency

Without unnecessary preambles – Mt.Gox is almost dead, and in its final convulsions the exchange service attempted to take Bitcoin with it in the Tartarus of the technological world. Of course, it is all lyrics, the facts of the pragmatic society state that insolvency was destined for the platform and Bitcoin carries no responsibility for the lack of foresight of the developers of the Mt.Gox.

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Agonizing Mt.Gox Blames Bitcoin for Insolvency

Without unnecessary preambles – Mt.Gox is almost dead, and in its final convulsions the exchange service attempted to take Bitcoin with it in the Tartarus of the technological world. Of course, it is all lyrics, the facts of the pragmatic society state that insolvency was destined for the platform and Bitcoin carries no responsibility for the lack of foresight of the developers of the Mt.Gox.

The indicator of some kind troubles in the Bitcoin environment is always a sudden drop of prices that are recognized at once by common private users of the cryptocurrency. On Friday the administration of the exchange platform, located in Japan and positioning itself as the leading player of its branch, noticed some unusual activity. The determined fault can be plainly explained as following – completed transactions are registered as uncommitted and the same amount of required coins is send to wallet twice. The Mt.Gox, being an experienced player, has tried to pass the buck on virtual currency claiming its inconsistency and mistakes in the underlying software. The attempt to come off clear was averted by the enthusiasts and specialists able to prove the opposite – the symptoms of a deadly illness could not be hidden anymore.

The Mt.Gox decided to publish a press release explaining their vision of the existing problem. The text can be observed on their official homepage, but while reading it the most experts were surprised to hear from the leader of the exchanger industry reasoning worth a newbie. The issue pointed out was the transaction malleability, which was determined in the 2011. Being conscious of it would mean to eliminate the problem and to forget about it. The Cryptolife expert in his article from the 10th of February gives a precise definition of the fatal mistake made by Mt.Gox:

“Since this issue has been well-known and well-documented for the past several years now, all it means is that if you’re an exchange, you should not be tracking transaction IDs to confirm if a payment has gone through or not. Rather, you should be tracking your inputs/outputs.”

The service platform continues to tighten the rope around its neck saying:

“A bug in the Bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of Bitcoins to a Bitcoin wallet did not occur when in fact it did occur. Since the transaction appears as if it has not proceeded correctly, the Bitcoins may be resent.”

Gavin Andresen, the chief scientist at the Bitcoin Foundation working on the development and control of the Bitcoin software, adds to the embarrassment:

“The issues that MtGox has been experiencing are due to an unfortunate interaction between MtGox's highly customised wallet software, their customer support procedures, and an obscure (but long-known) quirk in the way transactions are identified and not due to a flaw in the Bitcoin protocol.”

The users have trusted in their funds, but now the Mt.Gox, as if it would be naughty scholar, says: “I am sorry!” dropping his eyes. And to worsen the situation, adds: “It is not my fault – my pal Bitcoin was the ringleader.”

A trace of compassion has been shown by Garrick Hileman, a researcher of alternative currencies from the London School of Economics:

“It's a reason to be concerned, but it's a little early to say that there's something fundamentally flawed with Bitcoin software. Previous problems have been corrected. It reflects the immaturity of the software. Bitcoin is still a technology in the process of being developed.”

Even closing the eyes on the incompetent press release, it is hard to omit the fact that Mt.Gox has real problems with unfulfilling its debts in the form of dollars. One of their bank accounts is closed, but the operating process resembles partly a Ponzi scheme – the older transactions are performed with newer deposits. The point of consideration is the reserve in form of BTC owned by the platform – is it sufficient to cover the existing holes in the budget. Many believe that the deficit is proven by the publication.

Many question the terms of the existing fault. In case no alterations have been made by the developers of the company, the double spend process could have been possible ever since. Anytime, every individual capable to alter the hash, might pretend the requested transaction has not arrived, the administration would check that there is no note left on the Block Chain and retry. Are there many people who knew that and are not tormented by conscience? Is there a record to populate the crucial statistics?

The most users following the situation are really happy that Mt.Gox has at last crashed. Hopefully the place will be occupied by a more advanced and competent exchange. The overall sarcasm and skepticism was expressed by Andreas Antonopolous, the famous technical entrepreneur and security expert:

“A DnD geek wrote a currency exchange in PHP and three years later we’re still paying a price for that.”

The dances on the bones of the exchange service Mt.Gox still were a little bit late, as a Reddit user succeeded to publish an excessive report of the occasion already three days ago! The user under the nickname nullc definitely is the first to explain the situation in the most understanding and simple way. In comparison to other authors, he denotes that it is normal to run a wallet service by the platform of such size and experience, he even tries to calm down the society. There is not enough room for an error as the protocol of Bitcoin has been developed taking in account some possible violations. However, he warns:

“The reference client's wallet is basically suitable for small scale single party use. I would not recommend something like MtGox use the reference node wallet, at least not without a healthy layer of abstraction on top of it— relieving it of duties harder than key management and chain monitoring— or otherwise improving it greatly.”

Nullc is even capable to provide examples, when the interference in the Bitcoin protocol with the aim to correct some mistakes has led to bigger losses as funds were exposed to the outer world with no protection. He says that he has noticed the problem in September of 2013 (approximately), but the roots of it are slightly different. He continues to think (features of the original writing are preserved with no alterations from that point on):

“I looked into it and determined that Mtgox was spending immature coins. Freshly generated Bitcoins (from mining) can not be spend until they are at least 100 blocks deep in the blockchain. This prevents the funds from vanishing forever if the chain reorgs. I pinged magicaltux and after a couple tries got ahold of him. I think they also wasted some time on dead ends trying to resolve this before the actual nature of the problem was brought to their attention, e.g. raising their transaction fees with a mistaken belief that their fees weren't high enough.”

He also pretends that he offered a workaround to correct this issue and it was implemented, and been effective. The problem was reduced only by a part as excessively padded signatures were used as well. Nullc defines the next rule:

“There is a design flaw in the Bitcoin protocol where its possible for a third party to take a valid transaction of yours and mutate it in a way which leaves it valid and functionally identical but with a different transaction ID.”

It is also an aspect that should be considered while writing wallet software. He continues his monologue showing the reasoning of these complications. The left set of problems considered the generation of signatures that did not exist – a bug that can be easily removed. Nullc feels pity for Mt.Gox and explains:

“…in high value systems like Mtgox, even simple fixes aren't simple and it took them quite some time to deploy a fix. However, I believe that it is actually fixed now.”

Further in his text, nullc comes to the conclusions already populated by the most sources – the fact that multiple users received funds twice. He believes that this can be corrected by determining the wallets that received the doubled amount of coins, even knowing that such software needs time and knowledge to be developed.  

Finalizing his speech nullc advices not to make a fuss around the Mt.Gox:

“The claims that the delays indicate insolvency strike me as just hysteria: the technical background doesn't support this conclusion, and there may be a bit of opportunism at play from people who want to manipulate the market too. Don't get me wrong: I have not seen their books: Gox may well have financial problems— though with their income its hard for me to see how— but if any problems like that exist they're not being indicated here.

Of course, none of this suggests anyone should be happy with the service MtGox has been providing, but our anger should at least be well informed.”

Reviewing the most recent opinions published on the network, the Coin Telegraph would advise not to be agitated as long as all facts are not cleared. We are going to follow the situation and provide You with the most recent news and updates.  


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