The Inside Story of Mt. Gox, Bitcoin’s $460M Disaster

This is the relevant paragraph for &quot;our crowd:&quot;<p>&gt; Mt. Gox, he says, didn’t use any type of version control software — a standard tool in any professional software development environment. This meant that any coder could accidentally overwrite a colleague’s code if they happened to be working on the same file. According to this developer, the world’s largest bitcoin exchange had only recently introduced a test environment, meaning that, previously, untested software changes were pushed out to the exchanges customers — not the kind of thing you’d see on a professionally run financial services website. And, he says, there was only one person who could approve changes to the site’s source code: Mark Karpeles. That meant that some bug fixes — even security fixes — could languish for weeks, waiting for Karpeles to get to the code. “The source code was a complete mess,” says one insider.

Nothing new here if you have been following the story. It is a glossy, quick summary of all the conjecture that has been posited thus far in many other places, not delving into really any detail or saying anything new.<p>I am sure this story is going to get much weirder before it sees any semblance of sunlight or truth. And it might take many years for that to happen.

It&#x27;s pretty clear from this story that the &quot;CEO&quot; had no business running a half billion dollar business, much less a lemonade stand. It seems he mostly lucked into the business and luck doesn&#x27;t work as a business plan, especially in a financial business.

This is anything but the inside story. The only &quot;insider&quot; information is the one guy who interviewed at Gox and claimed they don&#x27;t use any VCS (but he made this claim a while ago).

When are we going to see a change in the rhetoric? This isn&#x27;t <i>Bitcoin&#x27;s</i> disaster, it&#x27;s wholly Mt. Gox&#x27;s.

Sounds like Karpeles is a guy with a short attention span who looks for low-hanging fruit and ignores the big issues because he may not be able to solve them. I have this issue with projects too, but of course I never ran a 9-figure Bitcoin exchange.

How did Mark Karpeles afford to buy MtGox from McCaleb?

Somewhere in an alternate universe, MtGox was run correctly, they brought on litecoin this week and lifted it into high double digits.

The biggest red flag for me was Mt.Gox not declaring itself as money transmitter and being fined by the U.S Government as a result.<p>Knowing it would have a great deal of American users and that it would have to abide to rules, Mt.Gox overlooked this. Everything that followed only validated my decision to stay away.

Am not sure when mobile phone became a requirement- &quot;Bitcoin promises to give a bank account to anyone with a mobile phone, no ID required.&quot;

Even if Bitcoin balances can be made bullet proof, the Achilles heal is that it is not a legal tender, and that there are no market fundamentals to contribute to its exchange rate. My 660 Trillion Zimbabwe dollars, sitting here on the desk, are solidly in my possession. So what? P=0 means they have zero use value other than as a conservation piece. Interestingly, when I show them to people and they handle them (Produced by the British Bank Note Company that makes currency for a lot of countries) they frequently falsely conclude that the are phony. They have a hard time reconciling &quot;real&quot; with &quot;worthless&quot; Whether or not Gox slid into fractional reserve banking is interesting, since if they did (I doubt it) they were basically betting against their depositors. To do that they would have had to taken Bitcoin balances as they came in, sold them for hard currency, wanted for Bitcoin to fall, buy it back, and pocket the difference, at the same time being able to honor withdrawals so there was not a bank run. The way this ended suggests that either something else happened, or they &quot;bet the farm&quot; and shifted virtually all of the Bitcoin deposits at a hard currency Bitcoin price below what it is worth now. The got caught &quot;short&quot; bigtime like in a margin call for stock bought on the margin.