Last week we reported that one of the world’s largest Bitcoin exchanges, Mt. Gox, had suspended Bitcoin withdrawals due to technical issues and this week, Mt. Gox has released the details as to exactly what happened.
According to a recent statement released by Mt. Gox,
“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. MtGox is working with the Bitcoin core development team and others to mitigate this issue.”
This of course is a huge concern as it allows users to take advantage of this bug to steal Bitcoins, which prides itself as having transactions that are both irreversible and untraceable. Further, the issue is one that plagues Bitcoin’s core software, which means that it’s not only limited to Mt. Gox, but any Bitcoin transfer that takes place on any exchange.
Following the Mt. Gox’s announcement last week, Bitcoin values dipped as low as $650 USD and following the latest announcement this week, the value of Bitcoin is currently sitting at a mere $550 USD.
Mt. Gox has announced that “…bitcoin withdrawals to outside wallets once the issue outlined above has been properly addressed in a manner that will best serve our customers.” although no timetables have been given at this time.
Source: Mt. Gox
Image Source: Blockchain.info
Per the core bitcoin developers, this issue was discovered in 2011, so it is very old news, and does not pose any security risk. Mt Gox was managing bitcoins in their virtual wallets using unconfirmed transactions using a certain attribute that is not a recommended implementation. So basically Mt Gox is blaming bitcoin but it is really their own technical ineptitude (and not the first time they have proved themselves inept). Miners/nodes will not confirm the double spend tx’s so no it is not a risk. What is in fact a risk is mt Gox mismanaging large amounts of peoples bitcoin and then halting all withdrawals while they untangle the mess they created for themselves internally.