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Mt Gox Bitcoin fallout is small change in a big industry

Analysis Industry reacts, Bitcoin rolls on
Wed Feb 26 2014, 11:08
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BITCOIN EXCHANGE Mt Gox has gone offline, taking money with it and shaking up the nascent market.

Mt Gox has appeared to be on slippery ground for a little while, and last week there was speculation about what, if anything, was happening at the outfit.

What was happening was revealed last night in an update on the Mt Gox website, after its homepage had gone blank previously.

Now in a note to its customers, Mt Gox has admitted that it has closed its doors, at least for the time being.

"In light of recent news reports and the potential repercussions on Mt Gox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users," wrote the Mt Gox team in the brief note. "We will be closely monitoring the situation and will react accordingly."

While Mt Gox users have lost or are losing money, the rest of the market has advised Bitcoin holders to remain calm. In a joint statement, representatives of Kraken, Coinbase, BTC China and Blockchain said that they expect the Bitcoin market to survive.

"There are hundreds of trustworthy and responsible companies involved in Bitcoin. These companies will continue to build the future of money by making Bitcoin more secure and easy to use for consumers and merchants. As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. Mt Gox has confirmed its issues in private discussions with other members of the Bitcoin community," they said.

"We are confident, however, that strong Bitcoin companies, led by highly competent teams and backed by credible investors, will continue to thrive, and to fulfill the promise that Bitcoin offers as the future of payment in the internet age."

The statement is critical of Mt Gox and accuses it of damaging trust in the market. The other Bitcoin exchanges said that by combining and offering shared statements and transparency, they hope to turn this around.

"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," they said.

"As part of the effort to re-assure customers, [our] services will be coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner."

Pirate Party spokesman and civil liberties supporter Rick Falkvinge laid the blame for the Mt Gox failure at its own feet. He said that the website relied on bad code.

"Mt Gox is running its own homebuilt Bitcoin software, and has not cared to update and upgrade that software along with the developments of the Bitcoin protocol," he explained.

"Mt Gox's lack of code hygiene and lack of very basic IT release processes led to the Mt Gox code getting out of sync with the Bitcoin protocol itself. Mt Gox is dying from the lack of a very basic leadership and management toolkit."

Although its value dropped at the news, Bitcoin jumped back up. Exchange Robocoin agreed that the currency is sturdy and will remain viable.

"Bitcoin is robust and resilient. The protocol and fundamentals remain unchanged. Its businessmen and engineers are building tools to give consumers confidence that Bitcoin security, accessibility and storage are trustworthy. It's a shame that many people lost money, but when underperforming businesses are replaced by innovative ones, the economy grows stronger," said Robocoin CEO Jordan Kelley.

"It's a good day as Bitcoin continues to grow up - a few blemishes along the way are natural and healthy. We expect Bitcoin to grow even faster in the days ahead." µ

 

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