Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Mt. Gox Files for Bankruptcy Protection

online.wsj.com

Post reply on HN
Print view View original

71–80 of 305 posts

Re: Mt. Gox Files for Bankruptcy Protection

#71

Post by JumpCrisscross »

When you make a deposit you are extending credit. In the case of Mt. Gox, or any other Bitcoin exchange, that credit is secured by nothing and insured by noöne.

Advice, going forward, for managing counterparty risk:

(1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure at any given time at a manageable level. The downside is it increases exposure to BTC/USD volatility.

(2) Split a $100 into 5 $20 transactions executed simultaneously on many exchanges. This keeps exposure to any single institution at a manageable level. The downside is it increases the number of institutions which must be dealt with.

(3) Draft a special arrangement with the institution for a large transaction. This should include credit and speedy withdrawal guarantees. The downside is the legal cost.

*edit: I am illustrating a hypothetical $100 transaction. Substitute, in place of $10, the most you are willing to lose in the event the exchange proves insolvent.

Re: Mt. Gox Files for Bankruptcy Protection

#72

Post by akerl_ »

If only Bitcoin exchanges had some degree of regulation to ensure they were properly securing their users' funds, or perhaps some level of insurance to prevent their users from suffering financial losses due to the exchange's misfortune.

Re: Mt. Gox Files for Bankruptcy Protection

#73

Post by davedx »

egeozcan wrote: post #55
ck2 wrote: post #9

It's easy to be angry at them and/or see how stupid they were about accounting, security, etc. But I guess on the other hand we do have to realize they are victims of massive theft, as far as we know this massive loss was not due to their own profiteering or internal theft, it was an organized outside force targeting them. It occurs to me it is like blaming someone for getting mugged, although they were stupid enough…

You are running an antique accessory business. You have a van to carry all the valuable stuff you borrow from people to sell in their name. Your van starts to leak oil. You figure out how to fix it yourself. Check engine light of the van is still blinking though, but you happened to put a post-it in your dashboard blocking it. By the way, you also never have it serviced. You keep driving for years while the situation…

Sounds like the definition of gross negligence to me.

Re: Mt. Gox Files for Bankruptcy Protection

#74

Post by steven2012 »

ck2 wrote: post #9

It's easy to be angry at them and/or see how stupid they were about accounting, security, etc. But I guess on the other hand we do have to realize they are victims of massive theft, as far as we know this massive loss was not due to their own profiteering or internal theft, it was an organized outside force targeting them. It occurs to me it is like blaming someone for getting mugged, although they were stupid enough…

Your analogy is terrible. They are actively in the financial services industry, and by default protection from criminals is one of their mandates. People put money into mtgox expecting them to be secure. They claimed to be secure.

For them to turn around and lose 750,000 BTC is not analogous to being innocently mugged. It's more like a taxi driver guaranteeing a safe trip, actually driving drunk, then crashing and killing the passenger.

Re: Mt. Gox Files for Bankruptcy Protection

#76

Post by hackerboos »

Oculus wrote: post #48

To all the HN members who lost a lot of money in this closing, remember the community is here for you. Don't do anything too rash and if you need someone to talk to, myself and most other people would be happy to lend an ear.

http://www.suicidepreventionlifeline.org/

Re: Mt. Gox Files for Bankruptcy Protection

#77

Post by gnaritas »

theklub wrote: post #53
hanswesterbeek wrote: post #17

Hilarious. Can't wait to hear from the choir of libertarian crypto-currency-zealots, who will sing the praises of the Ponzi scheme that is Bitcoin. On a serious note: who benefits?

Unfortunately I get the feeling more and more everyday that this really is just a ponzi scheme built on really cool new technology. I mean honestly most people who buy bitcoin aren't looking to spend it or use it because of convenience, they are looking to hold it in the hopes that the price continues to go up and on the way encouraging everyone they know to buy in to drive up the price.

> I mean honestly most people who buy bitcoin aren't looking to spend it or use it because of convenience, they are looking to hold it in the hopes that the price continues to go up and on the way encouraging everyone they know to buy in to drive up the price.

Even if that's true, that doesn't make it a Ponzi scheme. A Ponzi scheme is an investment in a phony entity run by a fraudster (the Ponzi) who's promising guaranteed returns and lying about the existence and nature of what the investment is. New money making early investors rich is not a defining feature of nor unique to Ponzi schemes.

Ponzi schemes require a Ponzi, intentional fraud, and a fake investment. Bitcoin is none of these things; it's not even remotely similar to a Ponzi scheme. No one is being lied to about what Bitcoin is, there's no fake investment here, Bitcoin is a real and functional payment network. There's no guarantee of returns here. Stop spreading FUD. Gox is not Bitcoin, Mark being a criminal doesn't make Bitcoin a Ponzi scheme.

Re: Mt. Gox Files for Bankruptcy Protection

#78

Post by bbosh »

mtgoxloser wrote: post #37

In this incident I lost a bit more than $500,000 USD that was in my MtGox account. I sold my Bitcoins a few months back, but the USD have been sitting in my account waiting to be withdrawn. This was a massive fuck up by MtGox, but I really do feel sorry for Mark Karpeles. He seemed really enthusiastic about Bitcoin. Right by MtGox's offices in Japan was a Bitcoin Cafe being built. You can [see here]( http://si.wsj.ne…

Did you invest $500,000 in real dollars, or earn it from mining?

Re: Mt. Gox Files for Bankruptcy Protection

#79

Post by thefreeman »

So are they claiming they literally lost ALL of their bitcoin? How is that even possible to have happened without them noticing... It just seems much more likely somebody got greedy on the inside.

I am sure they lost some. But I can't help but wonder if that was taken as an excuse to loot the ship as it was sinking.

Re: Mt. Gox Files for Bankruptcy Protection

#80

Post by mtgoxloser »

smtddr wrote: post #66
mtgoxloser wrote: post #60

Earlier quoted context omitted.

> the writing was on the wall for a long time I wish I had hindsight like you. It was only up until these few months that Bitstamp became of any competition to MtGox. Its liquidity sucked, which was why many early adopters like me stayed.

>> hindsight I'm only making this comment because you used the term "hindsight". Let me first start off by saying I feel very, very sorry for all the people who lost funds in MtGox. It'll take awhile before you get over the pain of losing a life-changing amount of money. But let's be very clear about this; hindsight wasn't needed here. The warning signs that MtGox was a house of cards became visible a long time ago.…

I will say that the article you linked is almost garbage. It glances over the "clues" very quickly which I will assume due to lack of knowledge.

The complaint that passwords were displayed in plain text is not anywhere near recent. Even in 2011 when I started using MtGox, passwords were hashed. Granted, early on the passwords were only hashed with 1 pass of SHA256, but later on passwords were stored to much better standards.

How do I know this? Because they got hacked twice in 2011, both through SQL vulns. Once a database dump being leaked, and another time a user's account balance was changed and the attacker cleared the bid side of the market book. Trades were rolled back, and MtGox took the loss; nothing remote of this severity ever happened again.

Another thing I do remember [is this](http://imgur.com/xMeW43a), and it seems much more aligned to what the article is talking about. But seriously, look at the URL. The only issue is when someone looks at that user's browsing history, but even this wasn't an issue in 2011.

--

Banking problems were not apparent until last year. It was well understood that banks and Bitcoin exchanges had harsh relationships. Bitfloor, the most popular US-based exchange was shut down due to banking problems; they were unable to find any banking partner that were willing to accept them. MtGox having delays in fiat withdrawals were understandable since it was by far the biggest exchange.

--

Most people who call us idiots for not connecting the dots earlier are those who haven't been here long enough. For many of us, MtGox went down over the years but all to recover. Both Luke-Jr and gmaxwell (core dev) had a significant sum of coins stored on MtGox too. It shows the trust we had in MtGox over the years.

--

One last thing though, is that I will attribute Bitstamp's late popularity causing them to dodge a bullet. The reason MtGox had written their own bitcoin implementation was because the bitcoin reference client was unable to handle their volume of Bitcoin transactions at the time.

Transaction malleability was documented, but not well known issue for Bitcoin. Even the reference Bitcoin client was affected.

So the fatal flaw that MtGox's implementation made when resending transactions (because a different transaction id was accepted and their system did not see it) was it did not reuse the same inputs when resending the transaction.

In the reference bitcoin client (bitcoind), it makes sure to use at least one of the same coin inputs, so if the original transaction (but different tx id) did get accepted into the network, the client would attempt to resend using the same input, but it would get rejected by the network because it was a double spend.

Post reply on HN