“This could be the end of Bitcoin”: leak shows huge theft at Mt. Gox, price falls below $500

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“This could be the end of Bitcoin”: leak shows huge theft at Mt. Gox, price falls below $500

http://gigaom.com/2014/02/24/this-c...ox-price-falls-below-500-amid-pleas-for-calm/

“This could be the end of Bitcoin”: leak shows massive theft at Mt. Gox, price falls below $500 amid pleas for calm

The Bitcoin community is on edge as a leaked document (below) shows that the Mt. Gox exchange, a longtime pillar of the virtual currency, is missing hundreds of millions of dollars worth of customer money and is heading for bankruptcy.

Meanwhile, the leaders of high profile Bitcoin companies, including Coinbase and Circle, issued a public letter promising to re-establish the trust “squandered” by Mt. Gox even as the value of bitcoin continues to fall. As the Winkdex shows, it’s off more than 17 percent in the last 24 hours.

Taken together, the events represent an existential crisis for Bitcoin at a time when the virtual currency is starting to get mainstream consumer adoption, and governments are granting it cautious approval. As the leaked document, which is a crisis management guide for Mt. Gox, noted:

...with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public.
Click to expand...
 
eduardo89 said:
How do you steal a BitCoin?
Click to expand...
People put bitcoins on the Gox exchange, or money in and purchased bitcoins on Gox but left them there. Due to flaws in Gox's programming others were able to remove bitcoins from Gox they did not own. Or it appears they were able to remove bitcoins, say they didn't get them, remove more, say they didn't get them, repeat...

This drained Gox of actual coins as they were transferred out of their exchange. So not stealing bitcoins directly but removing them from Gox's pool of deposited coins due to their bad website.
 
So these nonexistent bitcoins, backed by nothing, magically disappeared. Wow what a shocker.. :rolleyes:
Looks like fractional reserve banking to me, they loaned out more than they had, a call came in, and they got stuck.

Same thing happened with the online poker.
They payed out people with other people money, meanwhile they lost there shirt in the stock market and couldn't pay it back.

Personally I hope it crashes and burns. It is no better than FRN, it is backed by nothing...
 
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eduardo89 said:
Still makes no sense to me. If a BitCoin is just a series of letters and numbers, who do you steal it? Couldn't the person who originally owns it just write them down?
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I know just about as much as you do. But I believe there is a way to run them through a virtual machine and change the numbers.

In my mind, I liken it to stock certificates. When you buy stock and hold it at your broker, the actual shares have a serial number and are held in a cage somewhere in the name of the firm that holds your account. When you transfer your account to a different broker, they don't go digging through the pile to find the certificates that were assigned to you, they just grab whatever is on top, transfer them into the name of your new broker and put them in a different pile.
 
LibertyRevolution said:
So these decentralizedtent bitcoins, backed by nothing, magically disappeared. Wow what a shocker.. :rolleyes:
Looks like fractional reserve banking to me, they loaned out more than they had, a call came in, and they got stuck.

Same thing happened with the online poker.
They payed out people with other people money, meanwhile they lost there shirt in the stock market and couldn't pay it back.

Personally I hope it crashes and burns. It is no better than FRN, it is backed by nothing...
Click to expand...

It is backed by the utility value of the decentralized payment processor that answers to no firewall or economic sanctions imposed on a country. It can get around anything.
 
The big mistake being made here is that the mainstream media apparently still believed that MtGox was the current "pillar" if the Bitcoin community. They're a bit late on that one. It's like saying MySpace is the current cornerstone if the Social Media crowd.

Bitcoin will survive this. Gox won't. But there will always be winners and losers in any new technology.
 
eduardo89 said:
Still makes no sense to me. If a BitCoin is just a series of letters and numbers, who do you steal it? Couldn't the person who originally owns it just write them down?
Click to expand...

They can write down the secret password to their wallet which is associated with a certain amount of bitcoins. But if someone else can get into their wallet they can transfer the bitcoins to a new wallet that the original person can't get access to.

I imagine many bitcoin adopters are in favor of free information. And since bitcoins resemble information moreso than property it is a bit confusing to develop a cohesive philosophy of ownership. I think I come down on the side of bitcoins not being property and should not be protected by law. I reserve the right to change my opinion on this though.
 
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brandon said:
They can write down the secret password to their wallet which is associated with a certain amount of bitcoins. But if someone else can get into their wallet they can transfer the bitcoins to a new wallet that the original person can't get access to..
Click to expand...

OK. Sounds like you grok this. So, victims can't go digging through other people's wallets to find those missing bitcoins, but won't they show up again when that person spends them?
 
angelatc said:
OK. Sounds like you grok this. So, victims can't go digging through other people's wallets to find those missing bitcoins, but won't they show up again when that person spends them?
Click to expand...

Yes they will show up again in the network. The original owner has no way to get them back still. All claims of ownership were lost when the thief transferred them to the new wallet. But when the coins show up again they can track what wallets they are sent from/to to try and track down the identity of the thief. Most thieves are smart and use many layers of obfuscation and laundering services to make it very very difficult to ever track them down though.
 
After hearing it on the radio today, and reading it on the 'net, I think the best wording would be 'Bitcoin exchange got hacked and lost customer's deposits, while a majority of bitcoin users keep their coins in their own wallet and have no problem. '
 
A grossly incompetent exchange certainly won't be "the end of Bitcoin" lol.
 
Speaking of which, does anyone have the "true" url for downloading the btc wallet? I have never known the authentic address, and have been storing mine on btc-e. Not that I have much, but the little I have should be out of an exchange.
 
Looks like the price stabilized a bit in the lower $500s. I was going to make my first major bitcoin purchase if the price came down another 25%. Oh well, I'll keep waiting for an opportunity.
 
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