Mtgox is the giant raging zit on the face of Bitcoin. The software and service are so terribly, inexcusably bad, and they have always been that way. The market price on Mtgox has been artificially high ever since I can remember, because no one can withdraw their money. Users wait for their withdrawals for weeks, and sometimes months. As a result, a dollar in your Mtgox account is worth less than a dollar. Now it is artificially low, because people can't transact Bitcoins either! The other exchanges, meanwhile, tend to agree pretty closely, because it is actually possible to move bitcoins and dollars between them.
Imagine if ETrade, say, was so bad at moving money that you had to pay an extra $100 for a share of Google stock. That's what it's like. Or if everyone used Google's DNS servers but they typically took 3 seconds to respond. And yet people use Mtgox, and talk about it, and it's listed on all the sites and apps that track the market price on different exchanges.
At first, everyone chalked up Mtgox's problems to the sheer difficulty of running a Bitcoin exchange, and then, to the difficulty of running the biggest. Well, now it's no longer the only or the biggest exchange, and no one else is having the same problems, at least at this service-destroying level. I can't comment on the difficulty of establishing relationships with banks to move millions of dollars -- I'm sure it's hard -- but Mtgox has also had a lot of plain old scaling issues, and the transaction load is not even that high by web scaling standards. Last time I checked it was 30 per second or so. Their security is nothing special; they've been hacked before. I have heard only negative things about their engineering competence.
I'm a casual fan of Bitcoin but a big hater of bad software, bad customer service, and companies that act in a sleazy manner. I hope Mtgox dies.
This is FUD. As incredible as it seems, MtGox's problems are, in fact, technical. And it was quite a relief to realize this.
Also, there is minimal danger of a bank run. MtGox makes a profit off of every transaction. Therefore they control more BTC than users are able to deposit. Hence, since Magical Tux (the owner) is motivated not to go to jail, he will not run off with people's BTC.
>Hence, since Magical Tux (the owner) is motivated not to go to jail, he will not run off with people's BTC.
Except if, like every fraudster ever, he believes that he has a good plan to run off AND avoid going to jail. I mean, what kind of bizarro logic is this? Are we supposed to listen to further "rational" arguments now?
Also, seriously, people place their money (in whatever form) in someone who calls himself "Magical Tux"?
A guy whose profile in Twitter reads "PHP Developer working on some weird stuff, like a mail server (POP3/IMAP4/SMTP) written in PHP"? Sure, that inspires confidence in a money exchange. Might as well invest your money directly to that Nigerian prince too.
> Also, there is very minimal danger of a bank run. MtGox makes a profit off of every transaction. Therefore they control more BTC than users are able to deposit. Hence, since Magical Tux (the owner) is motivated not to go to jail, he will not run off with people's BTC.
What if the technical problems lead to a situation where they are short BTC? Your link mentions they could have double paid people which would lead to that situation. Then there's the issue of seizure which apparently has happened at least once.
Relying on your unlicensed money changer to be fair because "he is motivated to not go to jail" is precarious. Madoff's client's probably said the same thing... That's the beauty of the FDIC and the terrifying part about BTC exchanges.
If he had 440k coins then, imagine how many he has now.
Yes, he could have lost a lot, but on the other hand we'd probably have heard if someone pulled off that kind of heist.
Here's how I expect things will happen: Gox will refund all "stuck" withdrawls. (Mine have already been refunded.) Then they will fix the technical problem, hopefully by Monday, but certainly within a couple weeks. Then they'll re-enable bitcoin withdraws. At that point, everybody will yank their bitcoin out of Gox. But then people will realize that there is value in trading on Gox as a platform, and Gox will be used for what it's meant to be used for: Trading, not storage.
EDIT: To clarify, I don't believe it's possible they had a technical problem that led to them losing more bitcoins than the profits they've made from trading fees. (This is me being hopeful that people can't be that incompetent.)
It's not a technical problem. The problem is Mt. Gox is almost certainly doing arbitrage with the cash on hand, and the BTC on hand. The delays with withdrawals were almost certainly because they needed to liquefy some instruments to pay out.
Of course seeing their origins and backing, they've screwed up - and BTC being volatile it has probably moved against them - so low and behold "technical problem" while they try to figure out how to get solvent again.
Punchline: real cash gets refunded, the BTC will not be, anyone holding BTC is going to lose big as the price tanks.
The delays with withdrawals were almost certainly because they needed to liquefy some instruments to pay out.
I would guess this is a fraud-stopping measure. Time is a fraudster's enemy; you may have guessed someone's password, but if they read the email that says someone changed their email address, they can react before the money disappears into the ether.
Furthermore, Mt. Gox can probably predict in advance how much cash they'll need to fulfill withdrawals, and liquidate the instruments in advance to make withdrawals instant, if they so chose.
Everyone loves a good conspiracy theory, but the reality of running a money transfer business makes Mt. Gox look pretty normal.
Hence, since Magical Tux (the owner) is motivated not to go to jail, he will not run off with people's BTC.
For those of you who are wondering, this is because MtGox is Japan-based. In Japan, virtual/digital goods are considered property that can be "stolen." There have been a few cases on this in Japan, though it's never been tested outside of the gaming context and AFAIK nobody's actually gone to jail for stealing a virtual good (yet).
I don't know what will happen to MtGox, but you sound just like the SheepMarketPlace defenders when they kept coming up with all kinds of ways to downplay all the events leading up to SMP's disappearing act. I don't know how you're so sure they won't fall into oblivion. They've been a big mess for months.
Anyone else reading this who's new to crypto-coins, at the _minimum_ I do not recommend you send any of your coins/fiat to MtGox at this time.
Looks like a Bank Run? Bitcoin exchanges that engage in some kind of fractional scheme need insurance coverage. I don't know if Mt Gox is doing that, but it kind of smells like they don't have enough BTC on hand to allow withdrawls.
On the upside, Bitcoin seems like a perfect laboratory to re-run the experiments in banking leading up to the 1930s when you know, the "communist" FDR imposed banking regulations which are still hated today by some. :)
> The US Department of Homeland Security and the Secret Service seized three accounts linked to Gox containing more than $5m. As research from The Genesis Block shows, the executed seizure warrant was dated 19th June, the day before Gox announced it would halt dollar withdrawals.
It might be non-trivial to get large amounts of cold storage BTC up and running? This could be a good thing in the case of cold storage coins, for security reasons.
First we liked Bitcoin because it had low transaction costs. Then Bitcoin became more valuable, and we decided that we "need insurance coverage." Now we are headed back where we started: insurance isn't free, and it's sort of the main reason why other payment systems have higher costs.
There's plenty to warrant suspicion, but it turns out there is a credible explanation for the seize-up in BTC payouts being a technical problem that will take some time to resolve:
This analysis describes a Bitcoin transactional defect of which I wasn't previously aware. However, from a vaguely-similar much-smaller incident involving the default client, I know that having a local wallet confused about what prior transactions are truly spendable can take significant time and custom effort to unwind.
>There's plenty to warrant suspicion, but it turns out there is a credible explanation for the seize-up in BTC payouts being a technical problem that will take some time to resolve
Would you be as OK with your bank holding money like that?
Who said they were "OK" with anything? It's just information for understanding the situation.
I'm unhappy when ATM outages or erroneous fraud alerts prevent me from using my cash or credit, but I understand that such situations are different from dishonesty or insolvency.
The casual tone by which people (including you) were discussing this. If a bank had even week long issues like that people would be frothing at the mouths (and rightly so).
>It's just information for understanding the situation.
Yes, it's the "understanding" part that I don't get (except if it's pure technical curiosity, but from the excuses people make in this thread it doesn't seem so).
They messed up, they are not a worthy exchange, that kind of fiasco is insurmountable -- end of story. I wouldn't try to "understand" a restaurant that served my cochroaches in my pizza, I'd just avoid it and bad mouth it to everybody I know.
> I wouldn't try to "understand" a restaurant that served my cochroaches in my pizza, I'd just avoid it and bad mouth it to everybody I know.
This is Hacker News, where we like to "understand" enormous failures, even if we don't have "patience and understanding" for them.
I think the point of the people talking about the technical glitch, is to counter everyone saying "BTC is perfectly frictionless, therefore if Gox can't give me BTC they must not have any!" nullc/gmaxwell gives credible technical explanations for why spending thousands of BTC in daily volume from various sources through a volume-necessitated custom implementation of Bitcoin, can actually be non-trivial. You're free to think Gox is incompetent, or that the pizzeria is unclean, but that doesn't mean you can't have interest in how they got that way.
Reading this thread on Reddit actually puts in perspective how hard it must be for governments to design and implement effective economic regulations. It's a real balancing act.
I can't really feel sorry for anyone who is having troubles with Mt Gox. People have known for ages now that Mt Gox is unreliable and they kept using it to take advantage of the higher prices which come with the higher risk.
Hell, If anything, they are the problem since things would've likely been better right now if more people had moved away from Gox from before instead of waiting for the ship to start sinking.
I'm ignorant as to how BTC exchanges work. Is there a market maker providing liquidity or do the exchanges take inventory themselves? Any info for this would be appreciated. Insofar as uneducated guesses go, I suspect they are facing a "bank run" liquidity crisis based on them taking inventory and not having the capital to accommodate withdrawals.
Thanks. It's a complete mystery why people think that a website set up to trade playing cards can act like a bank. And completely unsurprising that it finds itself embroiled in all these hilarious situations.
Mtgox is the giant raging zit on the face of Bitcoin. The software and service are so terribly, inexcusably bad, and they have always been that way. The market price on Mtgox has been artificially high ever since I can remember, because no one can withdraw their money. Users wait for their withdrawals for weeks, and sometimes months. As a result, a dollar in your Mtgox account is worth less than a dollar. Now it is artificially low, because people can't transact Bitcoins either! The other exchanges, meanwhile, tend to agree pretty closely, because it is actually possible to move bitcoins and dollars between them.
Imagine if ETrade, say, was so bad at moving money that you had to pay an extra $100 for a share of Google stock. That's what it's like. Or if everyone used Google's DNS servers but they typically took 3 seconds to respond. And yet people use Mtgox, and talk about it, and it's listed on all the sites and apps that track the market price on different exchanges.
At first, everyone chalked up Mtgox's problems to the sheer difficulty of running a Bitcoin exchange, and then, to the difficulty of running the biggest. Well, now it's no longer the only or the biggest exchange, and no one else is having the same problems, at least at this service-destroying level. I can't comment on the difficulty of establishing relationships with banks to move millions of dollars -- I'm sure it's hard -- but Mtgox has also had a lot of plain old scaling issues, and the transaction load is not even that high by web scaling standards. Last time I checked it was 30 per second or so. Their security is nothing special; they've been hacked before. I have heard only negative things about their engineering competence.
I'm a casual fan of Bitcoin but a big hater of bad software, bad customer service, and companies that act in a sleazy manner. I hope Mtgox dies.