Mt.Gox wallet issues

Mt.Gox Announcement 10 February 2014

In a draft release made available via IRC freenode/#mtgox just now, Mt.Gox states that it will not resume BTC withdrawals to outside addresses until a flaw in the Bitcoin protocol that makes “transaction maleability” possible has been fixed.

[edit: official release here]

The news announcement outlines the Transaction Maleability issue and concludes:

To put things in perspective, it’s important to remember that Bitcoin is a very new technology and still very much in its early stages. What MtGox and the Bitcoin community have experienced in the past year has been an incredible and exciting challenge, and there is still much to do to further improve.
MtGox will resume bitcoin withdrawals to outside wallets once the issue outlined above has been properly addressed in a manner that will best serve our customers.
More information on the status of this issue will be released as soon as possible.
We thank you for taking the time to read this, and especially for your patience.
Best Regards,
MtGox Team

The announcement comes after close of business at 19h00 JST with traders already anxious when Mt.Gox failed to make a statement by 5pm JST. Staff were on the freenode/#mtgox IRC channel to respond to queries and one of the first questions were: “Are you insolvent?” to which came the reply: <SarahCoinBit> No.

The current lockdown of all BTC comes in the wake of months of BTC transaction failures caused by bugs in their custom exchange wallet software. The exchange had failed to communicate the exact reason for their technical woes in previous months, leading to rumors and speculation of pending insolvency. Mt.Gox customer disgruntlement reached fever pitch over the weekend after Mt.Gox halted all BTC deposits and withdrawals last Friday with a brief announcement explaining only that their system needed to be in a “static state”.

Bitcoin Developer, Greg Maxwell, stepped to the podium, via Reddit, to give a technical explanation of the difficulties being experienced by Mt.Gox – something they could easily have done themselves as the nature of the compound problems became evident in past months. Today’s announcement confirms Maxwell’s explanation and Mt.Gox has officially appealed to the Bitcoin core developers to fix the transaction “maleability” flaw.

Although the cat is out of the bag now, the Bitcoin community is still concerned about Mt.Gox communication policy. Lack of transparency and outright failure to reply to communications resembles that of a “couldn’t care less” bank and not that of a stake-holding partner in a close-knit Open Source innovation. There are also untold numbers of customers who had effectively been told to “talk to the hand” since September last year. Their ire and frustration has created much negative sentiment toward Mt.Gox and one can only surmise that their collective action will be to sell or abandon ship once BTC withdrawals are re-enabled. Hence, Mt.Gox would be responsible for more volatility in the BTC price chart – an eventuality that investors and stakeholders have been trying to avoid on the eve of mainstream adoption.

With the information made available today it is apparent that the entire Bitcoin community (and Bitcoin itself) will benefit from planned security fixes. However, some uncomfortable questions remain as to why this issue had not been addressed earlier. According to Maxwell it had been fixed via tightening transaction signature encoding, yet now Mt.Gox are declaring it an existing security flaw.

CCN will update readers with news from the Bitcoin Core Developers later today.