Bitcoin bubble could burst as investors rush to withdraw cash

Summary:Investors have been left high and dry holding on to plummeting bitcoin as a bug in the software has prevented them trading in the currency.

The bitcoin bubble seems about to burst. The price of the online cryptocurrency has dropped significantly as investors try to get money out of the online trading exchange. 

mt gox
Image: Mt Gox

Last week Mt.Gox, the oldest venue for trading in bitcoin blamed a bug in its software for an “issue with the way that bitcoin withdrawals are processed”. It had noticed a set of spikes in transactions after months of steady trading and looked to investigate.

When bitcoin is traded, the bitcoin wallet is accessed and currency is transferred to another account. Mt.Gox said last week that the issues only refer to transactions from a Mt.Gox bitcoin wallet to an external bitcoin address and not to transactions to another Mt.Gox address.

Furthermore Mt.Gox said that the issue occurs to all bitcoin transactions sent to a third party. The company took the decision to suspend bitcoin withdrawals until the issue had been resolved.

“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” the company said.

Mt.Gox believes that the issue this can be addressed “by using a different hash for transaction tracking purposes”. It goes on to say that the “new hash's purpose will be to track a given transaction and can be computed and indexed by hashing the exact signed string via SHA256”. This is the same way transactions are currently hashed.

Today the company issued an apology and told its customers that it has now implemented a “solution that should enable withdrawals and mitigate any issues caused by transaction malleability”.

The workaround now uses a “unique identifier created by Blockchain to show whether transactions have been modified or not”. Mt.Gox hopes that the workaround will “prevent any fraudulent use of the malleability issue and protect the assets of customers”.

The workaround included re-indexing approximately 32 million entries in the Blockchain, fully deploying the new NTX ID and implementing a new bitcoin withdrawal queue to be tested”.

The current price of bitcoin on Mt.Gox is $360 but this does not actually matter if you cannot get to your currency or trade in it. There are concerns over the online currency, which was created in 2009.

There is no regulation for customers and the currency is subject to hacking attempts. The anonymous way that the currency is transacted leaves it open to illicit transaction attempts. 

Mt.Gox said that it will update everyone again by Thursday on its progress. Its investors might find that when they finally get access to bitcoin, its value has fallen to nothing.

All they will have left of their fast-growing investment is a screenshot of a now defunct — and empty .CSV file.

Topics: Social Enterprise

About

Eileen Brown is a social business consultant who has been working with collaborative technologies for 20 years. Eileen creates the social business, energises communities and ignites social commerce and social CRM. She develops social business strategy, customer reach and online branding. Her book, Working The Crowd: Social Media Marketi... Full Bio

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