Breaking: MtGox Announces Homework Eaten by Dog

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In a premeditated move that has rocked Bitcoin at its very core, MtGox announced in a statement released today that Satoshi is to blame for the latest technical problems affecting its custom bitcoin wallet.

A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur. Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent. MtGox is working with the Bitcoin core development team and others to mitigate this issue.

The Japanese based exchange went on to say that bitcoin withdrawals will remain suspended until some unknown time in the future when the problem with their custom wallet can be resolved. In other words, “if you want to withdrawal your bitcoins from MtGox don’t be in any hurry.”

Since around 2011 there has been a known characteristic intrinsic in bitcoin known as transaction malleability. A member of Bitcointalk.org explained transaction malleability in a thread posted today using an easy-to-understand banking analogy.

So while the MtGox statement is technically correct, the real problem is the way MtGox implemented its custom wallet solution. When asked today by Cryptocoinsnews to respond to the allegations made by MtGox, bitcoin core developer Greg Maxwell had this to say:

The Gox press release seems a little ‘spun’ to me. They portray characteristics of the Bitcoin system well known since at least 2011 (which even have their own wiki page ) as something new.

The challenge for me in offering something here is that this isn’t news to me – for years – and it’s never been a particularly large concern. This wouldn’t make the top ten list of dangers in the Bitcoin technology.

The digital magazine CoinDesk in a story just released is also reporting now that bitcoin core developers Jeff Garzik and Gavin Andresen are in agreement. Garzik stressed that Mt. Gox seems to be attempting to shift the blame and Andresen agrees that “bitcoin is not broken”.

So while it’s clear that the bitcoin protocol isn’t perfect this particular issue has been known about for years and doesn’t impact desktop wallets or other consumer applications. The problem lies squarely on the shoulders of MtGox programmers and the real answer is for the exchange to fix the broken code implemented in their customized exchange wallet and to stop making excuses.

MtGox needs to stop blaming the dog for eating their homework and promptly restore customer withdrawals or they could soon lose all credibility as a legitimate and trusted bitcoin exchange.

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