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Why Mt. Gox, the World’s First Bitcoin Exchange, is Dying

69 pointsby beniaminmincuover 11 years ago

9 comments

dgreenspover 11 years ago
Dear god, I hope so.<p>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&#x27;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.<p>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&#x27;s what it&#x27;s like. Or if everyone used Google&#x27;s DNS servers but they typically took 3 seconds to respond. And yet people use Mtgox, and talk about it, and it&#x27;s listed on all the sites and apps that track the market price on different exchanges.<p>At first, everyone chalked up Mtgox&#x27;s problems to the sheer difficulty of running a Bitcoin exchange, and then, to the difficulty of running the biggest. Well, now it&#x27;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&#x27;t comment on the difficulty of establishing relationships with banks to move millions of dollars -- I&#x27;m sure it&#x27;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&#x27;ve been hacked before. I have heard only negative things about their engineering competence.<p>I&#x27;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.
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sillysaurus2over 11 years ago
This is FUD. As incredible as it seems, MtGox&#x27;s problems are, in fact, technical. And it was quite a relief to realize this.<p>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&#x27;s BTC.<p>For anyone who wants the truth, rather than speculation, here it is: <a href="http://www.reddit.com/r/Bitcoin/comments/1x93tf/some_irc_chatter_about_what_is_going_on_at_mtgox/cf99yac" rel="nofollow">http:&#x2F;&#x2F;www.reddit.com&#x2F;r&#x2F;Bitcoin&#x2F;comments&#x2F;1x93tf&#x2F;some_irc_cha...</a>
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cromwellianover 11 years ago
Looks like a Bank Run? Bitcoin exchanges that engage in some kind of fractional scheme need insurance coverage. I don&#x27;t know if Mt Gox is doing that, but it kind of smells like they don&#x27;t have enough BTC on hand to allow withdrawls.<p>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 &quot;communist&quot; FDR imposed banking regulations which are still hated today by some. :)
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gojomoover 11 years ago
There&#x27;s plenty to warrant suspicion, but it turns out there <i>is</i> a credible explanation for the seize-up in BTC payouts being a technical problem that will take some time to resolve:<p><a href="http://www.reddit.com/r/Bitcoin/comments/1x93tf/some_irc_chatter_about_what_is_going_on_at_mtgox/cf99yac" rel="nofollow">http:&#x2F;&#x2F;www.reddit.com&#x2F;r&#x2F;Bitcoin&#x2F;comments&#x2F;1x93tf&#x2F;some_irc_cha...</a><p>This analysis describes a Bitcoin transactional defect of which I wasn&#x27;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.
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captainchaosover 11 years ago
Reading this thread on Reddit actually puts in perspective how hard it must be for governments to design and implement effective economic regulations. It&#x27;s a real balancing act.
Tenokeover 11 years ago
I can&#x27;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&#x27;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.
Techskepticover 11 years ago
I&#x27;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 &quot;bank run&quot; liquidity crisis based on them taking inventory and not having the capital to accommodate withdrawals.
Larrikinover 11 years ago
I never had any problems withdrawing money, but I live in Japan
gaiusover 11 years ago
Because it&#x27;s Magic the Gathering Online eXchange.
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