The problems affecting the Japan-based exchange Mt. Gox have caused the price of Bitcoin to plunge in the last five days, from a bit over $900 to $590. The company halted all withdrawals on Friday (7), after several days dealing with difficulties that affected hundreds of customers.
So far, Mt. Gox has amassed more than $38 million in over 41,000 unfulfilled withdrawals, all the transactions being made from a Mt. Gox wallet to an external address. To avoid any more complaints regarding incomplete transactions, the exchange decided to suspend all withdrawal operations and issued a statement this Monday (10) blaming the situation on a “bug in the Bitcoin software” that is allegedly affecting “all transactions where Bitcoins are being sent to a third party”.
According to the statement, “Mt. Gox has detected unusual activity on its Bitcoin wallets and performed investigations during the past weeks. This confirmed the presence of transactions which need to be examined more closely”.
The company also offered two explanations for the problem, one for the tech-savvy readers and another one for the laymen. The latter says that “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. Mt. Gox is working with the Bitcoin core development team and others to mitigate this issue”.
The explanation offered to the experts is a bit more complex and focuses on the main problem that is supposedly affecting the exchange: a Bitcoin feature known as “transaction malleability”, which “makes it possible for a third party to alter the hash of any freshly issued transaction without invalidating the signature, hence resulting in a similar transaction under a different hash”.
Mt. Gox assures it is working to solve the problem as soon as possible and that “will resume Bitcoin withdrawals to outside wallets once the issue outlined above has been properly addressed”, but the reaction from the community to their statement is largely negative.
Several Bitcoiners and digital currency enthusiasts have been talking about the issue on Reddit and Twitter for the last hours.
Oleg Andreev, a software developer and Bitcoin fan, wrote the following message in his blog: “If you need a quick answer: there’s no bug in the Bitcoin itself. You may go to Bitstamp/Coinbase/BTC-E/Bitcoin-Central and buy more BTC with a huge discount before it gets back to $800-$900″.
He adds that “MtGox had this problem[transaction malleability] because they didn’t know about this Bitcoin property. And for most of the time transactions were not deliberately modified by anyone, so it was okay for most of the time”.