Bitcoin’s Oldest Exchange Died Overnight: Your Money Is In Purgatory

February 25, 2014 | Peter Yeh

The MtGox Bitcoin Exchange is dead. Their website is a “sorry we’re closed” message. Yesterday they deleted all their tweets. Their old office is empty and their new office is a virtual office — a PO Box with a secretary. The sudden collapse of MtGox has left MtGox investors with nothing and cost 15% for investors on other exchanges in just 24 hours.

MtGox was the oldest and once largest Bitcoin Exchange in operation, and with its death, the oldest Bitcoin business is now Buttcoin, a blog dedicated to making fun of Bitcoin. At time of collapse, they still held nearly 1/5th of all Bitcoin trading volume. Other Exchanges are distancing themselves as fast as possible.

This latest trouble at MtGox was caused by their exchange software falling for the well-known “transaction malleability” bug. Hackers tricked MtGox into thinking withdrawals had failed and attempted another withdrawal. This slowly bled MtGox dry.

An unverified document from MtGox – also published by Times and Ars Technica – says that 744,000 bitcoins, or about $350 million were stolen. It states their plan to simply rebrand in a different country, perhaps Singapore. Indeed, Gox.com’s domain records show it was just sold to MtGox’s CEO via a Singapore broker.

The slides read like they’re for begging institutional investors and other companies to inject capital into MtGox. Just like those kids that sell you candy on the subway with the implicit threat of “keep me off the streets,” there’s an implicit threat.

“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, at least for most of the public,” reads the document.

It’s not known what will happen to the millions of theoretical dollars trapped inside MtGox, and how many yet remain after the theft. A sad thread on reddit for those unlucky bitlords shows they’re now in the grief phase after denying that MtGox was in any trouble.

Bitcoin is a proof-of-concept distributed trustless cryptocurrency which uses said distributed network of computers to create and verify a public ledger or Blockchain by brute-forcing a math problem. Users are encouraged to link their computers to the network in exchange for transaction fees and bitcoins in an act called mining. There are a fixed number of bitcoins, and when they’re all “mined” out, the network is supposed to be maintained by the transaction fees.

The creator, “Satoshi Nakamoto”, almost surely a pseudonym, has long since vanished. Bitcoin was just a curiosity for fedora wearing libertarians who latched onto the ideology espoused in the white-paperGawker’s story on Silk Road, an online anonymous drug market powered by Bitcoins, made Bitcoins highly visible and speculators rushed in. Everyone is trying to cash in, including with expensive “Bitcoin courses,” like the “equal parts college classroom, sales pitch, and evangelical sermon” ANIMAL attended in the Financial District in January. 

Regulation is evil, until it benefits you. That explains the “fuck you, got mine” mentality of most bitcoiners. The speculators are the same people that made the dot com bubble work in the late 90s — starry-eyed, deluded by technobabble, investing in nerd money that relies on computers being on constantly for it to exist, and made by an anonymous man who left ages ago. Fold in some open source rhetoric and that bizarre San Fran “computer will solve everything” attitude and there you go. Bitcoin is a protocol. Bitcoin is some internet funny money. But most importantly, bitcoin is a ideology and the culture around it. That’s bitcoin. (The views and opinions expressed in this article are those of the author and do not reflect the official beliefs or position of ANIMAL. That author also wrote you this poem.)

“My name is Goxymandias, King of Bitcoin:
Look on my exchange, ye Mighty, and despair!”
Nothing beside remains. Round the decay
Of that blank website, boundless and bare
The lone and level blockchain stretch far away.

(Images: Data.Bitcoin.orgButtcoin.org