back to article MtGox has VANISHED. So where have all the Bitcoins gone?

Almost one in 10 of the world's Bitcoins disappeared during the collapse of MtGox, it has been claimed. The allegations were made in what was purported to be an "internal MtGox crisis presentation". The sloppily written briefing claimed that 744,408 Bitcoin were stolen over a period of several years. There are currently about …

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      1. GarethB

        Re: Were people really stupid enough to use MtGox as a bitcoin wallet

        Yes but at least with a bank account if the bank goes bust the first 50K or whatever is covered by the state.

        1. Destroy All Monsters Silver badge

          Re: Were people really stupid enough to use MtGox as a bitcoin wallet

          Yes but at least with a bank account if the bank goes bust the first 50K or whatever is covered by the state.

          It's not covered by the state, it's covered by everyone through inflation (i.e. a tax). While the people who got rich through fractional reserve banking ... stay rich.

          Or it could be that like in Cyprus, your money suddenly is just gone by decree. Works too.

          1. I ain't Spartacus Gold badge

            Re: Were people really stupid enough to use MtGox as a bitcoin wallet

            A banking account with a positive amount is just a very risky loan given to the bank...

            Destroy all Monsters,

            Not quite. A bank account balance (liability) is backed up by a corresponding bank loan (asset) on the banks' books. Plus a UK bank has at least 7% of it's total liabilities in its own assets - and the ability to borrow against this with the Central Bank.

            If that all fails, then there's the bank guarantee.

            You mention Cyprus. But no-one in Cyprus lost any amount of cash less than the €100k (or was it €80k) deposit guarantee. They did discuss doing it, but didn't.

            Even there, you can lower that tiny risk, by sticking your money in a bank in a country whose government is able to bail out its own banks without help. The problem for Cyprus was it had too many bank desposits for the size of its economy, and required a bail-out from the EU/IMF/ECB. Who were fucking about, and trying to make up an economic policy that would get Angela Merkel re-elected, rather than one that actually worked.

        2. gibman70

          Re: Were people really stupid enough to use MtGox as a bitcoin wallet

          Were people really stupid enough to use MtGox as a bitcoin wallet

          Fixed that for you.

      2. TheOtherHobbes

        Re: Were people really stupid enough to use MtGox as a bitcoin wallet

        >A banking account with a positive amount is just a very risky loan given to the bank...

        Banks have liquidity reserves of <10% of deposits. Usually a lot less.

        In the UK, reserves are voluntary. Banks can define their own liquidity ratio. Reserves can and do become negative.

        What about capital requirements? 7% core, 3% leverage.

        So even if Mt Gox has lost 6% of all its Bitcoins, it's still massively more solvent than any bank.

        Except for that 'Not talking to anyone' thing that's happening now, anyway.

        1. I ain't Spartacus Gold badge

          Re: Were people really stupid enough to use MtGox as a bitcoin wallet

          TheOtherHobbes,

          The banks have to agree their liquidity reserves with the Bank of England (Prudential Regulation Authority). Which is apparently 30 days of their net funding requirements under stress conditions, so I'd assume that's going to be whatever the BofE decided when it set up its stress tests, applied to the banks' figures.

          Mark Carney is going to reduce this to 80% of that 30 days needs, in order to allow them to make more loans. As there's been a battle for the last 5 years between governments telling banks to lend more to boost the economy, and regulators telling banks to build up more reserves.

          As they still have to have over 7% capital reserves, they can use the repo market to get cash, if required, or give the BofE sufficient assets to get cash from them.

          Mt.Gox has apparently lost far more than 6% of its Bitcoins.

          However the bit that you and Destroy all Monsters have missed is that Mt.Gox is an exchange not a bank.

          When a bank is short of liquidity it's usually because they've lent too much money out - and therefore don't have the cash on hand to meet requirements. Normally this is no problem, because they've got loads of assets (the loans they're slowly getting repaid), it's just that they can't meet their immediate cash requirements. So they put up an asset (loan) as collaterol, and borrow the cash. When the global repo market froze up during the financial crisis, Central Banks took on this role - as they're designed to do in emergencies.

          An exchange has to hold cash for all its accounts, because it doesn't make loans. So if it's giving out loans, or trading with its clients' cash, it's commiting fraud. One, because it's trading without a banking license, and two, because it doesn't have its customers permission to use their money in such a way. Particularly as it's not paying them interest, so they'd be taking risk with no reward.

    1. This post has been deleted by its author

    2. Justin Pasher

      Re: Were people really stupid enough to use MtGox as a bitcoin wallet

      And this is where I get confused. Was MtGox not (supposed to be) used just as sort of an escrow service that facilitated the transfer of bitcoins from one address to another? I'm only moderately versed in how bitcoin operates, but you only need the private key to send money from one address to another, so why would you ever give the "keys to the kingdom" away to someone else? I would think the process was "pay X bitcoins to a MtGox address, they take a cut, then send the payment along to the person that bought it".

      Did it operate differently where MtGox was the judge, jury, and executioner for your wallet?

      1. Old Handle

        @Justin Pasher

        Did it operate differently where MtGox was the judge, jury, and executioner for your wallet?

        Pretty much. All the exchanges work that way though. You give them money, either bitcoins or dollars, and they say "OK you have that much in your account" then you you can buy or sell with other users more or less instantly while the exchange plays matchmaker (and takes a cut, of course). But it all happens on their books only until you actually take the money back out. I'm not show how that would be possible without trusting the exchange to hold your money for a while.

        I am certainly in agreement that this is very risky though. Unless I was doing day trading (which I don't because I'm terrible at it) I would never leave a large amount of money sitting in an exchange.

    3. Dr Dan Holdsworth

      Re: Were people really stupid enough to use MtGox as a bitcoin wallet

      Yes, it would appear that indeed they were. Bitcoins are cryptographically secure, but only if you are holding them. If some other entity is holding them on your behalf then you'd better hope that said organisation isn't run by stunned muppets who're still amazed that this moneymaker has landed in their laps.

      "Mt.GOX" actually stands for "Magic: The Gathering Online Exchange". The site started out as a PHP page bodged together by some spotty herbert who wanted to try to make a percentage off trading playing cards in some poxy role-playing game. The key thing to remember is this: the site was PHP, written by an amateur and never needed to be audited in the early days as the money flows were peanuts; this was a site so insignificant that not even the tax men took much interest.

      When said operator switched to bitcoins, once again the cash flows were peanuts because bitcoins were worth next to nothing. The site got away with abysmal security and a complete lack of auditing because it was too small a minnow for anyone to be bothered with, and bitcoins were not considered to be money as such.

      Just because nobody has broken into a site does not mean that it is secure. It might be completely insecure, but even script kiddies do have standards. Very low ones, it must be said, but pulling a heist for a few hundred worthless coins is not the stuff that online crime legends are made of. As soon as bitcoins came to be worth something, then the sharks moved in and it would appear that the MtGox operators were so dumb that they never spotted that they were being swindled blind.

      The lesson here is simple: don't trust idiots with money, or shiny money-like stuff.

      1. veti Silver badge
        Headmaster

        Re: Were people really stupid enough to use MtGox as a bitcoin wallet

        @Dr Dan: Calling 'Magic: The Gathering' a role-playing game is like calling Monopoly a role-playing game. It just isn't.

        Thank you for observing correctness in insults.

        1. Tom 13

          Re: @Dr Dan: Calling 'Magic: The Gathering'

          It's been a while since I played it so I looked it up. The BoardGame Geek description claims the actual company that sells it describes it as a "...game where you take on the role..."

          While I concur it is a card trading game, I can also see where someone who hasn't played it and just looked it up on the interwebs might think it was an RPG. Heck, it wouldn't have surprised me if someone had turned it into one by now.

  1. Anonymous Coward
    Anonymous Coward

    Disregard that, I Mt. Gox

    I said this elsewhere, but please excuse my scepticism on that "oops, we inadvertantly left that dead giveaway placeholder comment in the HTML". It smacks of an attempt to obviously, but not *too* obviously "leak" a rumour.

    They couldn't have left it in visible plaintext as everyone would have asked why it wasn't spotted and fixed immediately, but a... whoops!... stray comment might plausibly slip past and "give away" the "secret" they want everyone to know, and know that someone *will* spot sooner rather than later.

    Rather too convenient-looking, especially as there's nothing else in the HTML returned. In addition, it was still there some time after someone else spotted it, i.e. they didn't even try to yank it.

    One other question- Mt. Gox is based in Japan, yet was started by someone with a very American-sounding name ("Jed McCaleb") and sold to someone with another Western-sounding name ("Mark Karpeles"). What's the story behind that? Are they Westerners or (part-)Japanese, or what?

    1. Destroy All Monsters Silver badge

      Re: Disregard that, I Mt. Gox

      Who is Gox and why do you mount him?

      1. This post has been deleted by its author

  2. Destroy All Monsters Silver badge
    Headmaster

    The web age has arrived! Fasten your seatbelts!

    “transaction malleability”

    Fuzzy transactions, then?

  3. Chris Miller

    Where have all the bitcoins gone?

    Into the bit-bucket?

  4. jb99

    Time to buy

    Yay, cheap bitcoins. I'll be buying. Some. Not going to spend my life saving on it, but it seems like it might be a good time to risk 1% of them as nothing fundemental has changed about why it's a good idea.

    1. gibman70

      Re: Time to buy

      Except that any time at all these mickey mouse exchanges can steal/lose/disappear with all your pretend money?

    2. Old Handle
      Meh

      Re: Time to buy

      That may very well work out great for you. I sure wish I had bought more when they crashed the first time. Then again I also wish I sold them when they were worth $1000.

      1. Dave Bell

        Re: Time to buy

        I wonder if the rise and fall since the last crash are the result of speculation. People buy at the low price, see the price skyrocket, and want to get the money back by the end of the tax year, so they can put it into safe, well-understood, tax-efficient places.

        And the sort of business typified by the Silk Road crashes. Not enough people are buying.

  5. Herby

    Fool, Money...

    Soon parted.

    BitCoin, more so, and apparently quicker as well.

  6. Anonymous Coward
    Anonymous Coward

    This is the trouble, geeky types love this sort of stuff, this "fuck the system" mentality. Except that they don't realise that real currency systems and banks are generally secure and safe. Most will guarantee deposits up to a certain amount (£90,000 in the UK?) in a current account.

    Anyone who thinks storing their money on their hard disk or on some website is a total twit. PayPal is bad enough.

    1. Anonymous Coward
      Anonymous Coward

      "Except that they don't realise that real currency systems and banks are generally secure and safe."

      Ha ha ha ha ha ha ha ha ha..... ha ha ha ha ha ha ha ha

      1. gibman70

        I hope you're laughing at the stupidity of Bitcoin exchange users?

        banks are safer than Mt Gox - ask any of those who have lost a small, large or life-changing amount in there...do you think they're giggling?!

        I am though.

    2. Daniel B.

      Heh.

      Except that they don't realise that real currency systems and banks are generally secure and safe.

      Banks are safe, indeed. As long as they don't do stupid things like sub-prime loans or any kind of high-risk loan with most of their money, they'll remain safe. I should know as my line of work has mostly been in the financial sector, including banks.

      Any currency system, however, is as stable as its backer. My country's currency (MXN) has ups and downs, so most people would rather have their life savings in something that doesn't have sudden drops every now and then. Bitcoin itself has been very volatile and as such is also not the currency I'd use for my life savings … though I do wish I had kept my 0.96 BTC I had last year (of course, NOT in Mt. Gox).

      Interestingly, Mt. Gox ceased to be relevant to me when they were cut off by OKPAY. That was my only easy route in and out of that. Maybe it was the universe warning me to get out of there?

      1. Tom 13

        Re: As long as they don't do stupid things like sub-prime

        As recent history proves, even then the banks are safe. It's all the rest of us wot get wolloped.

  7. Anonymous Coward
    Anonymous Coward

    "Some people have suggested that Mt Gox is set to be sold to an undisclosed buyer, a theory supported by the source code of its homepage on Tuesday morning..."

    Please be Facebook please be Facebook please be Facebook please be Facebook please be Facebook please be Facebook

  8. Vociferous

    And so the bitcoin death spiral turns into a dive.

    Where's my popcorn?

  9. TrevorH

    "So even if Mt Gox has lost 6% of all its Bitcoins, it's still massively more solvent than any bank"

    Err, no, it lost 6% of *all* Bitcoins. Not 6% of "its Bitcoins".

  10. Primus Secundus Tertius
    Angel

    Singalong

    "where have all the Bitcoins gone?"

    Sung to the tune of "Where have all the flowers gone?".

  11. Mike Moyle

    Pronunciation question

    So is MtGox SUPPOSED to be pronounced like "Empty Box", or is that just serendipity?

    1. Anonymous Coward
      Anonymous Coward

      Re: Pronunciation question

      I wish I could upvote this 100 times.

    2. I ain't Spartacus Gold badge
      Happy

      Re: Pronunciation question

      So is MtGox SUPPOSED to be pronounced like "Empty Box"

      Only if you're a rubbish ventriloquist...

    3. DaveK

      Ah. Smug mode.

      I made that joke back in December, and am now feeling smugly prescient!

  12. wolfetone Silver badge

    Keep your sodding BitCoin

    I'm happy with my Trillion Dollar Bill, thank you very much!

  13. Matt Bryant Silver badge
    Facepalm

    LOL!

    That is all.

  14. Crazy Operations Guy

    "put announce for mtgox acq here"

    'acq' could also mean acquittal...

  15. Anonymous Coward
    Anonymous Coward

    tidy bit of html that ,

    If theyd used a package it would still be 100 lines

  16. Tim Brown 1
    Mushroom

    It's not like this came out of the blue

    Mt.Gox has been a weak link in the whole Bitcoin setup for a long time, you only need to look back through the Register's archive, e.g:

    http://forums.theregister.co.uk/forum/1/2013/04/05/bitcoin_ddos_analysis/

    and a perceptive analysis of that incident on another blog

    http://trilema.com/2013/its-been-an-epic-few-days-what-happened/

    made it clear that Mt.Gox was just an accident waiting to happen. Tulip anyone?

  17. Winkypop Silver badge
    Alert

    ALL

    GONE

  18. Neil Barnes Silver badge

    Yesterday, upon the stair

    I found a Coin that wasn't there

    It wasn't there again today

    I wish that coin would go away!

  19. Moosh
    Paris Hilton

    Dazed and Confused

    Bitcoin's destiny is to crash and burn. Its as plain as day. The very simple reason for this is because, well, people are just hopping on board, hoping to buy low and sell high. This is all very well when you're trading stocks or legitimate currency, but when its with a currency that no one really uses in a practical way with little to no international oversight, then you're asking for a crash. The whole thing was intentionally designed as a bubble. What do you think happens to the value of Bitcoins when the people hoarding them all realize its time to cut their losses/make a profit and attempt to sell huge amounts of bitcoins over a short period of time? The same thing that happens to stock, only Bitcoin doesn't have a real way to claw its way back up apart from hoping people randomly start trusting it as a money making scheme again.

    1. Glenn Amspaugh

      Re: Dazed and Confused

      I believe there is a coffee shop in Santa Fe, New Mexico tha will accept bitcoins. In exchange for cups of coffee, of course. Might want to bring a large tote for the large withdrawals.

  20. HKmk23

    There's always another mug....

    In Totnes, Devon, UK they started their own currency in Acorns......but then of course they wore different coloured shoes on each foot as well!

  21. Toastan Buttar

    "One of the existential threats to bitcoin."

    You keep using that word but I don't think it means what you think it means.

    I prefer to keep my money in the bank of Kierkegaard and Nietzsche.

    1. Anonymous Coward
      Anonymous Coward

      Re: "One of the existential threats to bitcoin."

      The philosophy of existentialism is named for the pre-existing word "existential", in its meaning of "of, relating to, or dealing with existence". An existential threat is one that relates to the existence of the threatened entity or organisation; the usage is perfectly valid.

  22. TakeTheSkyRoad

    For an Technical IT site the level of ignorance here is shocking.

    Ok, I am going to get heat for this but for the ignorant bitcoin is not....

    Fiat Currency (eg GBP/USD/whatever)

    Trading Tulips

    A Barter system

    Totally Anonymous

    It is some and all of the above and it is different to anything which has come before.

    It can be used as a currency since people trade it and this gives it value just like pounds or dollars, often it is exchanged for other currency and trading good is in it's infancy but it does happen.

    It can be traded as a commodity but not in the same way as say Tulips since Tulips die and can be copied (you make more from seeds) where as a bitcoin balance in a wallet is fixed and forever until the balance is moved elsewhere.

    You could argue it is a barter system but only in the same way any physical object can be bartered including paper money.

    Yes most bitcoin addresses are anonymous but the transactions between these addresses are public and documented forever online. However anyone wanting to change bitcoins for pounds or dollars is going to find an exchange will want to know who they are and the exchanges have (already) applied "know your customer" regulations. Yes you can meet someone in the street and exchange in person bitcoin for cash but that is impractical for large 6 figure amounts and someone will at some point will encounter a regulated system (exchange or payment processor) and have to explain where the bitcoins came from. As a result the bitcoins will be below market rate and it's just easier to launder money in cash pounds/dollars than bother with bitcoins.

    Thinking of a snappy put down already ?

    If you also claim to have any IT smarts then read up first and try to understand what you are commenting on. If not you're like someone saying "why will mobile phones catch on when everyone has a phone at home. Also text messages to mobiles ? Much quicker to call someone, that'll never catch on !"

    http://en.wikipedia.org/wiki/Bitcoin

    In my opinion the killer app here is international money transfers and international purchases.

    This is in it's infancy and money transfers will evolve as more of these cash machines are installed globally and the cash machine rates drop. A typical exchange charges 0.2% but the cash machines are charging a premium on top. In theory though it should be easily possible to buy bitcoins and send them in about 30 minutes to your uncle Bob in Auz who can then withdraw dollars. As soon as this becomes cheaper than western union then this will take off, think of all those foreign workers sending money home to africa/india/asia.

    As for international orders Overstock is a good example, once they enable international delivery you can take your bitcoins purchased at an exchange with a 0.2% fee and buy goods in america for delivery to the uk. Since Overstock do the conversion to dollars you just pay in bitcoins.

    That means no hassle with credit card fees for Overstock (you might even get a discount) plus you don't have to worry how much that dollar payment will be when it hits your debit/credit card since the card companies make money from the exchange rates. Now apply this to online shopping for china, asia, europe etc.... bitcoins could easily become the "currency" of preference for online retailers. Oh, another bonus for the retailers is that there are no charge backs, Visa/Mastercard can & do ask for the money back sometimes but all payments are irreversible with bitcoin.

    If you're traveling abroad then why not pay in bitcoins ? I was in europe recently and I would have been much happier not having to get together the Euros in cash and simply paying electronically in bitcoins. Ok it was only a short trip so it wasn't much cash but it was still a hassle, I still paid an unfavorable exchange rate and I still had to keep what I wasn't using that day in the hotel safe. Yes you can get travel cards you fill with electronic euros but that's just the same as bitcoin with all the same negatives of the extra cost.

    Yes there are risks associated with traveling with a bitcoin wallet but I expect that the insurance companies would extend insurance to cover this in time. Plus if you give the insurance company your private key with one call they could move your money from the compromised wallet to a secure wallet ready for when you got a new mobile (or other electronic payment device).

    This is the near term vision..... the long term vision is much bigger and more intangible and if you want to look into that try googling for "bitcoin colored coins".

    I don't know what will become of bitcoins in the long term but I'm confident about the international money transfers and as a online payment method. Traveling on bitcoins requires much wider support unless you plan on just eating in that one Cafe your entire stay but it is going to be appealing to the masses.

    Got questions ? Good... now do your research because answers are not straight forward and frankly I should be working :)

    1. Tom 13

      Re: For an Technical IT site the level of ignorance here is shocking.

      Let me simplify that and save you time:

      Bit coin is unicorn farts.

      See, that was easy.

      1. Solmyr ibn Wali Barad

        Re: For an Technical IT site the level of ignorance here is shocking.

        More along the lines "oh, this is so sophisticated, it cannot be just a scam".

        Alas, smart people can be easily deceived, if their attention is channeled at those wonderful complexities, and the most fundamental questions are neglected.

        What questions?

        Qui bono, for one.

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