Computer Business Review

Cryptocurrency exchange closure - the end of Bitcoin?

by Joe Curtis| 25 February 2014

Mt. Gox ‘leaked document’ says flaw could set Bitcoin back five to 10 years.

One of the largest Bitcoin exchanges has gone offline following an alleged loss of $350m, warning it could spell the end of the digital currency.

Mt. Gox seems set to close for a month according to an apparent leaked document, because of the reported loss of 744,408 bitcoins through a flaw in the implementation of the Bitcoin protocol.

The issue means thieves can and allegedly have fooled the transaction process into sending double the correct number of bitcoins in a transaction.

CEO Mark Karpeles is also set to stand down, as the problem prompted a plunge in the price of Bitcoin to $419 and six other exchanges issued a joint statement denouncing Karpeles's trade house.

The document, entitled Crisis Strategy Draft, read: "The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company.

"However, 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."

The problem emerged earlier this month, which Mt. Gox called "a bug in the Bitcoin software" that made it appear as if a legitimate transaction had not sent correctly, prompting it to be re-sent, thus effectively doubling the number of bitcoins sent.

But the Bitcoin community has laid the flaw at the door of Mt. Gox, after Karpeles admitted to Forbes earlier this month that the exchange had failed to keep pace with updates to the digital currency's code.

Six other exchange houses including Coinbase distanced themselves from Mt. Gox in a statement.

It read: "This tragic violation of the trust of users of Mt.Gox was the result of one company's actions and does not reflect the resilience or value of bitcoin and the digital currency industry.

"As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today.

"In order to re-establish the trust squandered by the failings of Mt. Gox, responsible bitcoin exchanges are working together and are committed to the future of bitcoin and the security of all customer funds."

Mt. Gox has not confirmed the legitimacy of the allegedly leaked document, which outlines a four-part strategy to "avoid a chaotic situation", including going offline for a month and rebranding the exchange.

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