The recent Mt. Gox development is fascinating to watch. Some important details:
- There's no hard evidence at any point that anyone has lost their bitcoins. Bitcoin transactions are permanently recorded in a distributed ledger, whose distributed character makes it quite difficult to forge transactions. - What Mt. Gox has done is to take customers' hard cash and give them units of bitcoin in exchange. Those transactions were presumably permanently recorded in the ledger as a transfer. Then, as far as we know, there was a distributed attack that made use of a misunderstanding on Mt. Gox's part about how a quirk in the bitcoin protocol works to trick Mt. Gox into giving away part of its capital reserves to people who did not actually hold bitcoin with Mt. Gox. In practical terms, that appears to mean that Mt. Gox has given away money and is now undercapitalized (i.e., it cannot redeem the withdrawal requests of all of its account holders, taken together). - To the best of my knowledge, Mt. Gox may still have a significant portion of the capital amount still in its possession, and therefore would be able to redeem part of peoples' requests for withdrawal. Out of the estimated 400,000,000 USD in bitcoin managed by Mt. Gox, I have heard that somewhere on the order of 40,000,000 dollars were incorrectly disbursed, as a result of this attack. - Right now Mt. Gox appears to be in bunker mode, trying to figure out how to next proceed in what must be an incredibly tense situation for everyone involved. I have not been following the details closely, and all of this should be vetted. Please correct anything I might have gotten wrong. I'm no big fan of Bitcoin, but what this vulnerability seems to demonstrate is not a weakness in cryptocurrencies in general, or even in the core technology in Bitcoin (something that might become apparent at some point later on in the future), but instead a weakness in the implementation of a non-core detail relating to Bitcoin. The Bitcoin ledger itself has not been compromised, so unless we learn otherwise we can assume that all amounts in Bitcoin have been retained by the account holders. What seems to be at stake is whether they will be able to redeem with Mt. Gox and how it's going to unwind its position. Eric
