Mt. Gox and the demise of Bitcoin

Bitcoin has made about as many headlines — for good reasons and bad — as Osama Bin Laden did when American forces raided his compound and killed him. With so many people still on the fence about the digital currency, every story seems to sway them back and forth like a pendulum ticking down to bitcoin’s ultimate success or impending doom.

The most recent story involves Mt. Gox, once the world’s third-largest bitcoin exchange, and its melt down. 

The security issues the exchange encountered 

According to this leaked document, 744,408 bitcoins with an estimated market value of $350 million are missing because of malleable-related theft that went unnoticed for years. Mt. Gox was apparently aware of the transaction bug in its system but chose to ignore it, resulting in the exchange shutting its doors for at least the next month. 

When filing for bankruptcy, the exchange reported that it didn’t know the techniques that attackers used to steal the bitcoins or exactly when the thefts occurred. It does suspect attackers hacked its exchange, but there’s no information to confirm this claim. The mystery as to whether it was the exchange’s fault through its own incompetence or that it fell victim to the work of hackers is still unknown. One of the most prevalent theories claims that the exchange had many coding flaws that were discovered only after it came under attack.

Japanese authorities are investigating Mt. Gox. Yoshide Suga, Japan’s chief cabinet secretary, said recently, “I understand that ministries and agencies concerned — financial services, police, and the finance ministry — are looking into the matter to learn the full scope of the issue. Once we have full knowledge of what happened, we will take action if necessary.” 

But that doesn’t solve anything for the people who lost money on bitcoins on the exchange. 

How other brokerages are responding to the attack

According to recent news, Japan will set new rules on how to handle the digital currency, which is the first sign that the government is taking action to regulate it after the collapse of Tokyo-based Mt. Gox. But getting a grip on the bitcoin market is going to take international support from governments in the U.S., China, Russia, and Britain. 

This article in The Guardian claims that the Mt. Gox bitcoin scandal is the best thing to happen to the digital currency in years. The article says that the collapse clears out another attic of ethical cobwebs from the currency’s past, making a point to state that there are other exchanges on the market that didn’t flinch to bail Mt. Gox out. 

The future of Mt. Gox and Bitcoins

Even with the mess of scandal on its plate, Mt. Gox still has enough assets and liabilities to launch a new exchange as part of the outlined four-step process.

• Reduce liabilities. The exchange will need to inject fresh coins into the system to establish a basis to eventually clear the books by running it (about 200,000 coins). 
• Launch new brand focusing on the future. The exchange will need the CEO to resign while admitting his errors, allowing for a new CEO to step up (in Japan, a CEO can’t resign until a new one is appointed). 
• Transition while updating the industry. The exchange will need to have complete transparency with the public about how it’s transitioning (new marketing, progress on implementing technology, creation of advisory board, etc.). 
• Rename from “Mt. Gox” to “Gox.” Although it’ll be a challenge, with a new team, image, and offering, the exchange can resurrect itself from the dead and have an impact on bitcoin’s popularity again.

There’s no doubt that the Mt. Gox scandal sent shockwaves through the bitcoin world. But, as with anything else in the news, people move on, and as stated earlier, it could turn out to be a blessing in disguise for the digital currency. Even with the news, people are still accessing their Bitcoin Wallet on their Android phones, buying bitcoins and waiting for the currency to jump back in prices so they can sell high and cash out.

With that said, what do you think about what’s happened with Mt. Gox? Are you investing in bitcoin?