Bitcoin exchange MtGox goes offline

Tokyo based MTGox, once the world’s largest bitcoin exchange, has gone offline after spotting what it described as “unusual activity”.

The Bitcoin exchange has recently had technical problems which hampered customer withdrawals of the world’s most popular digital currency.

Analysts say MTGox going offline is a major setback for Bitcoin supporters who have been hoping the digital currency can eventually become as commonly used as other major currencies.

Major Bitcoin exchanges close ranks

The MTGox Bitcoin exchange move has triggered a joint statement by six other Bitcoin exchanges distancing themselves from it. MTGox’ move to stop withdrawals has caused Bitcoin to devalue again.

The six Bitcoin exchanges described MTGox’ move as a tragic violation of trust and was the result of its actions and in no way reflects the resilience or value of Bitcoin and the digital currency industry.

They emphasized that Bitcoin is currently being used by hundreds of trustworthy companies which will carry on building the future of money by making bitcoin more secure and easy to use for merchants and consumers.

In a statement, the six exchanges – Coinbase, Kraken, Bitstamp.net, BTC China, Blockchain.info, and Circle – wrote:

“These companies will continue to build the future of money by making bitcoin more secure and easy to use for consumers and merchants. As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. Mtgox has confirmed its issues in private discussions with other members of the bitcoin community.”

“We are confident, however, that strong Bitcoin companies, led by highly competent teams and backed by credible investors, will continue to thrive, and to fulfill the promise that bitcoin offers as the future of payment in the Internet age.”

“In order to re-establish the trust squandered by the failings of Mt. Gox, responsible bitcoin exchanges are working together and are committed to the future of bitcoin and the security of all customer funds. As part of the effort to re-assure customers, the following services will be coordinating efforts over the coming days to publicly reassure customers and the general public that all funds continue to be held in a safe and secure manner: Coinbase, Kraken, BitStamp, Circle, and BTC China.”

“We strongly believe in transparent, thoughtful, and comprehensive consumer protection measures. We pledge to lead the way.”

“Bitcoin operators, whether they be exchanges, wallet services or payment providers, play a critical custodial role over the bitcoin they hold as assets for their customers. Acting as a custodian should require a high-bar, including appropriate security safeguards that are independently audited and tested on a regular basis, adequate balance sheets and reserves as commercial entities, transparent and accountable customer disclosures, and clear policies to not use customer assets for proprietary trading or for margin loans in leveraged trading.”

Millions stolen from MtGox exchange

MtGox halted Bitcoin transfers to external addresses. It claimed to have discovered a loophole in which crooks could trick the transaction process into sending twice the correct number of Bitcoins.

The Tokyo company added that the problem left it vulnerable to attacks which considerably slowed down the Bitcoin exchange trading process. It is thought the loophole facilitated the theft of approximately $2.7 million in Bitcoins from the Silk Road 2 website.

Last week Silk Road 2 said customers would be able to withdraw Bitcoin currency soon.

Wired reports that MTGox lost hundreds of millions of dollars during a years-long hacking effort that the company had not detected. It quotes sources saying that the Bitcoin exchange is insolvent after losing 744,408 Bitcoins, i.e. $350 million at Monday’s trading price. It adds that MTGox is the worst-run business in the history of the world.

No official statement has been issued by MtGox explaining why its site has gone offline and whether it will be active again.

What is Bitcoin?

Bitcoin is a digital currency that can be sent person-to-person without any need for it to go through a central authority. It is the first totally decentralized digital-payment system in the world that operates as “Internet cash.”

The Bitcoin idea was thought up by developer Satoshi Nakamoto in a 2008 paper, titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. For more information on what a Bitcoin exchange is and the currency itself, go to What is Bitcoin?

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