Okay, so what if a large number of bitcoins were essentially “lost” either because a number of people misplace their wallets, or because some central repository gets shut down. Since you can’t create more, and isn’t it a pretty big problem if you don’t know the number of “active” coins?
Also, how do these exchanges avoid large coordinated buyers doing pump and dump schemes?
There was a thread on that issue back before Christmas:
Hmm. I’m not sure how that is different in principle from a bank being robbed and going bankrupt, in an environment without deposit insurance. Could these exchanges band together to get deposit insurance? What if they were bought by banks?
From what I’ve heard, nothing stops this. Which is a big part of the reason Bitcoin’s value fluctuates so wildly.
In Canada, only the federally chartered banks can get deposit insurance, through a federal program ( and provincial credit unions through analogous provincial programs). Don’t know if there are similar restrictions in other countries with deposit insurance. Whether you could get it on the open market? Don’t know.
In principle, I don’t see why not, although as Northern Piper notes, it would have to be some system separate from the deposit insurance that protects banks. In practice, it seems to me that pricing that insurance would be difficult, since the risks are still so unpredictable. Also, I wonder if there would be difficulties in identifying depositors, even for the purpose of paying off a loss via insurance.
Next up, Anonymous bought by AOL. Film at eleven.
That’s how I’ve been pronouncing it all this time.
As a bitcoin enthusiast, my response to this debacle is good, it’s about bloody time, MtGox were a ridiculously unprofessional outfit that now appears to be rather sleazy as well. It’ll do wonders for Bitcoin in the long term to have them out of the game. That said I feel sorry for anyone who still has sizeable amounts of money, either fiat money or bitcoins, with MtGox. Unlikely they’ll see any of it again. Then again, no one in their right mind should store a lot of money with an exchange over a long period. You keep your money in your wallet or your bank until you want to trade it. Then you send it to the exchange, do the trade, and send the other money straight back out again.
The ‘flaw’ that MtGox purports to have found is called ‘transaction malleability’ by the boffins. It’s an irritating design flaw that cannot be easily removed, but CAN very straightforwardly be accounted for and sidestepped, and it’s inexcusable that MtGox failed to do so properly. It isn’t something that Joe Schmo sending bitcoins to his aunt Flo would need to worry about. The developers knew about it for two years, it was on the bitcoin wiki. Joe Schmo shouldn’t have to read the bitcoin wiki. Mark Karpeles, MtGox CEO, definitely SHOULD have to read it.
[… if anyone cares…]
Basically (and somewhat simplistically), when you broadcast a bitcoin transaction, it’s got a ‘from’ address, a ‘to’ address, an amount of bitcoins, and a transaction id. For example, from Joe Schmo to Flo Schmo, 3.25 BTC, transaction ID 84395673.
The important details - how much, who from, who to - cannot be altered in transit. The transaction ID can. This means two versions of the transaction will circulate. This in itself is NOT a problem. Only one of them will confirm, and once it has, the other will be rejected as invalid.
So, suppose a nefarious person wants to withdraw 5 BTC from their MtGox account to their own wallet. They do the transfer, they look at the first version of the transaction that comes out: “MtGox to E. Doer, 5BTC, ID 89247976”. They rebroadcast with a modified ID: “MtGox to E. Doer, 5BTC ID 27461120”. Either version could win the race, but only one will. The evildoer can only do the scam if the second ID wins the race. Assuming it does, the evildoer emails MtGox support, “Hey, I withdrew 5 BTC but nothing’s come up, please send me my coins”.
Here’s where it gets cretinous. MtGox helpline, or MtGox badly-programmed software or whatever, says, “Huh well we sent it out, ID 89247976, let’s have a look for it… oh, it doesn’t seem to be there. Weird. Let’s send out another transaction: MtGox to E. Doer, 5BTC, ID 92400425”
:smack: :smack: :smack:
So it’s a scam, where the person who has a legitimate request to get paid, changes the transaction ID, claims they didn’t get paid, and the IDIOT payer pays them a second time. Whereas if the idiot payer had any idea what they were doing they would NOT say “let’s look for transaction ID 8924796”, they’d say “let’s look for a transaction where we paid 5 BTC to E.Doer just now”. Or rather they’d START by asking the first question, and if the transaction didn’t come up, they’d ask the second question. This would also show that someone had changed the ID, which is not an innocent thing to do. It might not necessarily be the payee, it could be a third party wanting to cause mayhem, but at least it would highlight that somebody somewhere is being naughty.
Yeah, this.
Mrs. Beanfinger: “This are Beanie Babies, Mr. Bond. All my life I’ve been in love with their texture… their compliance, their divine flopiness.”
Nope, it doesn’t work. Plus, if you nuke the Beanie Babies, the world supply will still be measured in megatons in the rear windows of Ford Festivas all over the Midwest.
As for Bitcoins, I have to admit to a bit of schadenfreude over all the people who have tried to argue that there is some inherent and enduring value to the “work” performed by automatic cryptology algorithms. Really, this is a great practical study of a completely synthetically created commodity traded in a completely unregulated market. I predict that many doctoral theses will be the only lasting product of Bitcoin mania.
Stranger
Fiat money or bitcoins? Aren’t bitcoins sort of the ultimate in fiat money?
Because few users truly understand the theory of bitcoin and the consequences of this theory, so instead use the types of strategy one has dealing with ordinary currencies–where it is better to keep your money in a bank than under the mattress.
Thanks for your explanation - it was helpful.
I could see this working once or twice, but I’m guessing they would check correctly a support call for $350,000,000.00 worth of bitcoins. I’m going to go out on a limb and guess this was many transactions - no one got suspicious of the bug? Or was this all automated?
Did these bitcoins still belong to the individual depositors when stolen - and Mt. Gox held on to their keys/password whatever - or did you have to transfer your bitcoins to Mt. Gox (which then credited their Mt. Gox account with so many Bitcoins)?
Yeah, I guess so. Like so many other technical terms, I’ve started using it by observing the context in which it occurs. Which may not be a good idea if it has a proper, exact meaning in the jargon of economics. The distinction I meant was ‘government-printed money or bitcoins’. I wanted to say ‘pounds or bitcoins’ before I remembered most people aren’t British.
The value is in the desirable properties that the crypto work brings to the currency. Well ‘desirable’ depends on politics but I consider non-counterfeitability, non-inflatability* and a certain degree of transparency to be desirable.
*or more accurately predetermined, decreasing inflation that can’t be changed at will just to rescue hucksters who have made themselves ‘too big to fail’.
It’s entirely possible that the theft was an inside job. So the “sloppiness” at MtGox might not have been sloppy at all.
It wasn’t an inside job. And it wasn’t recent.
IMO, Gox was hacked, repeatedly. They had money seized in the Coinlab fiasco. They’ve been running what amounts to a Ponzi scheme for the last year or two, attempting to recover the lost BTC in transaction fees.
A stiff wind would have blown them over at any moment. One last hacking, and voila! They can no longer operate.
(Now if you want to talk crazy conspiracy, ask me who I think DID the hacking in the first place. And my #1 guess is the US government. )
Money that spends more time being repaired than it does in one’s wallet? Certainly looks that way, at least regarding Mt. Gox.
How do you know?