Bitcoin price plunges as Mt. Gox says flaw in protocol allows fraud

The Mt. Gox bitcoin exchange said it will suspend withdrawals from bitcoin wallets it holds until the bug is resolved

Bitcoin software has a bug that allows fraud, Tokyo-based bitcoin exchange Mt. Gox said Monday. The news was followed by a new fall in the value of the digital currency.

Mt. Gox said it will continue its suspension of bitcoin transfers from wallets it holds to external bitcoin addresses, announced Friday, while it works to resolve the problem.

Conversions of bitcoins to conventional currencies and bitcoin transfers to other Mt. Gox addresses are not affected.

"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," Mt. Gox said in a statement.

"Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent. MtGox is working with the Bitcoin core development team and others to mitigate this issue."

The flaw, called "transaction malleability," is already known to some of the core Bitcoin software developers, Mt. Gox said. It allows a third party to alter the hash associated with a freshly issued transaction without invalidating its signature, resulting in two similar transactions, only one of which can ultimately be validated and included in the log of Bitcoin transactions called the blockchain.

An attacker with access to sufficient computing power could ensure that the modified transaction is included, and the original rejected. With current Bitcoin applications, it is easy to determine that the original transaction failed, but much less obvious that a modified transaction succeeded, Mt. Gox said.

"This means that an individual could request bitcoins from an exchange or wallet service, alter the resulting transaction's hash before inclusion in the blockchain, then contact the issuing service while claiming the transaction did not proceed," the exchange warned.

Mt. Gox had said its investigation had been triggered by "unusual activity" detected in its Bitcoin wallets.

It added that the problem is not limited to the exchange, and affects all transactions in which bitcoins are sent to a third party.

The company did not immediately respond to calls or emails requesting further information..

The digital currency fell as low as US$535 late Monday Japan time before recovering to $636.37 at press time, according to CoinDesk, which publishes an average of the prices at several coin exchanges. It had been trading around $850 for much of last week before diving to $750 on Friday.

Mt. Gox had said Friday it was putting withdrawals to external bitcoin addresses on hold due to unspecified problems linked to an uptick in withdrawal requests.

As one the most popular places to buy and sell bitcoins, Mt. Gox has seen its dominance decline over the last year with the rise of competitors including BTC China, Bitstamp and BTC-e.

Mt. Gox has long experienced banking problems that have caused lengthy delays in the processing of overseas wire transfers.

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Tags Internet-based applications and servicesMt. Goxfinanceindustry verticalsinternetBitcoin

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Tim Hornyak

IDG News Service
Show Comments

Cool Tech

Crucial Ballistix Elite 32GB Kit (4 x 8GB) DDR4-3000 UDIMM

Learn more >

Gadgets & Things

Lexar® Professional 1000x microSDHC™/microSDXC™ UHS-II cards

Learn more >

Family Friendly

Lexar® JumpDrive® S57 USB 3.0 flash drive 

Learn more >

Stocking Stuffer

Plox Star Wars Death Star Levitating Bluetooth Speaker

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest News Articles

Resources

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?