As an aside, caution urged with bitcoin. I saw this a few days ago.
Bitcoin exchange fears $400m theft
By Ben McLannahan in Tokyo and Stephen Foley and Kara Scannell in New York
Bitcoin is facing the biggest test of confidence in the nascent virtual currency, after its oldest and most famous exchange went dark and customers feared the loss of $400m worth of Bitcoin.
Mt Gox – a contraction of Magic the Gathering Online Exchange, after its origins as an exchange for the trading cards game – suddenly deleted its Twitter history and then pulled its website offline on Tuesday, prompting a swirl of rumour and recrimination.
In the hours that followed, a document circulated online alleging that the exchange had lost 744,000 Bitcoins – equivalent to almost 6 per cent of the 12.44m coins in circulation – in what the document referred to as “theft” by outside hackers.
Calls and emails to Mt Gox spokespeople seeking comment on the allegations were not returned, but while it remains unclear exactly what has happened, the exchange’s customers were coming to terms with the likelihood that they will not see their funds again.
Mt Gox had suspended customer withdrawals last month, but continued to allow trading, even as concerns mounted. It blamed the restrictions on a “bug” in Bitcoin, which allowed fraudsters to make it difficult for exchanges to track transactions, but other exchanges said they had implemented fixes for the problem.
Last week, Mt Gox said it was relocating its Tokyo office for security reasons. Senior Mt Gox staff also refused to engage with two protesters who spent days on the pavement outside the company’s headquarters in Tokyo’s Shibuya district, demanding their Bitcoins back.
One of the protesters, London-based developer Kolin Burges, said on Tuesday that his faith in Bitcoin as an alternative payment system had not been shaken.
“If Gox is finally disappearing, it is bad news for everyone with their money in there, but good news for the rest of the industry.”
Nicolas Cary, chief executive of Blockchain.info, whose software can be used to store Bitcoin on a user’s own computer, said: “The Mt Gox saga has been slowly unravelling over weeks. This latest development looks like the last sad chapter in their turbulent history.”
He added, however: “Bitcoin is much stronger than one service, and it is important to note the alleged losses of fiat and Bitcoin are limited to those balances in Mt Gox’s custody. We feel terribly for Mt Gox customers and hope they come forward with more details soon.”
Mr Cary was one of several Bitcoin entrepreneurs to append his name to a joint statement condemning “the tragic violation of trust” at Mt Gox, and promising to work together to restore confidence.
Regulators around the world, including the US Securities and Exchange Commission and the European Banking Authority, have warned repeatedly of the risks of fraud and losses in virtual currencies.
For a currency which is not backed by any central authority, Bitcoin’s value lies in people’s confidence to use it, and entrepreneurs recognised that the threat of huge losses at Mt Gox represented the biggest crisis in its five-year history. On other exchanges, however, the Bitcoin price was down only 8 per cent by late Tuesday, to $521.
The Mt Gox debacle is different only in scale from the problems that have plagued the currency’s development. Users have repeatedly reported having Bitcoin stolen or losing money from exchange businesses, with incidents blamed variously on malicious hackers, the technical incompetence of entrepreneurs, and fraud.
Jim Angel, economics professor at Georgetown University, said that a Bitcoin was like an ebook: only as good as the infrastructure for using it. “With a totally unregulated infrastructure based on a nascent technology, one should expect there to be problems of this type.”
Venture capital backers of a new wave of Bitcoin companies hope that increased resources will lead to better security for customers and improved confidence.
Marc Andreessen, whose firm Andreessen Horowitz led a $25m investment in Coinbase, compared the debacle to the failure of a single brokerage, rather than a systemic failure. “This is like MF Global,” he told CNBC. “Not some huge breakdown of the underlying technology or other exchanges.”
Bitcoin aficionados were bracing themselves for an onslaught of attention and criticism. In a statement posted on Reddit, Erik Voorhees, co-founder of Coinapult, admitted that he “should have known better” than to store more than 550 Bitcoins at an exchange with a history of operational problems.
“The lesson is not that nobody can be trusted,” wrote Mr Voorhees. “We are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world,” he said: “We are building the channels, the bridges, and the towers of tomorrow’s finance, and we put ourselves at risk in doing so.”
Bitcoin exchange fears $400m theft
By Ben McLannahan in Tokyo and Stephen Foley and Kara Scannell in New York
Bitcoin is facing the biggest test of confidence in the nascent virtual currency, after its oldest and most famous exchange went dark and customers feared the loss of $400m worth of Bitcoin.
Mt Gox – a contraction of Magic the Gathering Online Exchange, after its origins as an exchange for the trading cards game – suddenly deleted its Twitter history and then pulled its website offline on Tuesday, prompting a swirl of rumour and recrimination.
In the hours that followed, a document circulated online alleging that the exchange had lost 744,000 Bitcoins – equivalent to almost 6 per cent of the 12.44m coins in circulation – in what the document referred to as “theft” by outside hackers.
Calls and emails to Mt Gox spokespeople seeking comment on the allegations were not returned, but while it remains unclear exactly what has happened, the exchange’s customers were coming to terms with the likelihood that they will not see their funds again.
Mt Gox had suspended customer withdrawals last month, but continued to allow trading, even as concerns mounted. It blamed the restrictions on a “bug” in Bitcoin, which allowed fraudsters to make it difficult for exchanges to track transactions, but other exchanges said they had implemented fixes for the problem.
Last week, Mt Gox said it was relocating its Tokyo office for security reasons. Senior Mt Gox staff also refused to engage with two protesters who spent days on the pavement outside the company’s headquarters in Tokyo’s Shibuya district, demanding their Bitcoins back.
One of the protesters, London-based developer Kolin Burges, said on Tuesday that his faith in Bitcoin as an alternative payment system had not been shaken.
“If Gox is finally disappearing, it is bad news for everyone with their money in there, but good news for the rest of the industry.”
Nicolas Cary, chief executive of Blockchain.info, whose software can be used to store Bitcoin on a user’s own computer, said: “The Mt Gox saga has been slowly unravelling over weeks. This latest development looks like the last sad chapter in their turbulent history.”
He added, however: “Bitcoin is much stronger than one service, and it is important to note the alleged losses of fiat and Bitcoin are limited to those balances in Mt Gox’s custody. We feel terribly for Mt Gox customers and hope they come forward with more details soon.”
Mr Cary was one of several Bitcoin entrepreneurs to append his name to a joint statement condemning “the tragic violation of trust” at Mt Gox, and promising to work together to restore confidence.
Regulators around the world, including the US Securities and Exchange Commission and the European Banking Authority, have warned repeatedly of the risks of fraud and losses in virtual currencies.
For a currency which is not backed by any central authority, Bitcoin’s value lies in people’s confidence to use it, and entrepreneurs recognised that the threat of huge losses at Mt Gox represented the biggest crisis in its five-year history. On other exchanges, however, the Bitcoin price was down only 8 per cent by late Tuesday, to $521.
The Mt Gox debacle is different only in scale from the problems that have plagued the currency’s development. Users have repeatedly reported having Bitcoin stolen or losing money from exchange businesses, with incidents blamed variously on malicious hackers, the technical incompetence of entrepreneurs, and fraud.
Jim Angel, economics professor at Georgetown University, said that a Bitcoin was like an ebook: only as good as the infrastructure for using it. “With a totally unregulated infrastructure based on a nascent technology, one should expect there to be problems of this type.”
Venture capital backers of a new wave of Bitcoin companies hope that increased resources will lead to better security for customers and improved confidence.
Marc Andreessen, whose firm Andreessen Horowitz led a $25m investment in Coinbase, compared the debacle to the failure of a single brokerage, rather than a systemic failure. “This is like MF Global,” he told CNBC. “Not some huge breakdown of the underlying technology or other exchanges.”
Bitcoin aficionados were bracing themselves for an onslaught of attention and criticism. In a statement posted on Reddit, Erik Voorhees, co-founder of Coinapult, admitted that he “should have known better” than to store more than 550 Bitcoins at an exchange with a history of operational problems.
“The lesson is not that nobody can be trusted,” wrote Mr Voorhees. “We are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world,” he said: “We are building the channels, the bridges, and the towers of tomorrow’s finance, and we put ourselves at risk in doing so.”
