An anonymous reader tipped us to news that
several Bitcoin exchanges have joined Mt Gox in suspending withdrawals after being forced out of sync with the Bitcoin network at large. After
Mt Gox blamed transaction malleability for forcing them to suspend withdrawals, miscreants started flooding at least Bitpay and Btc-e with bogus transactions. Quoting the Bitcoin Foundation:
"Somebody (or several somebodies) is taking advantage of the transaction malleability issue and relaying mutated versions of transactions. This is exposing bugs in both the reference implementation and some exchange’s software. We (core dev team, developers at the exchanges, and even big mining pools) are creating workarounds and fixes right now. This is a denial-of-service attack; whoever is doing this is not stealing coins, but is succeeding in preventing some transactions from confirming. It’s important to note that DoS attacks do not affect people’s bitcoin wallets or funds. "
Re:Is this the begining of the end for BTC
By jythie
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2014-Feb-12 13:26
• Score: 4, Informative
• Thread
In theory yes, there are exchanges that support short sells, in practice I have heard that they are not terribly reliable and trying to collect generally does not work. Shorting regular commodities tends to work because you have the weight of federal regulation and law enforcement behind it, but few of the exchanges are really mature enough to have that kind of confidence behind them.
Re:Is this the begining of the end for BTC
By QilessQi
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2014-Feb-12 13:33
• Score: 5, Insightful
• Thread
Hmm. If I recall correctly, flooding a country with counterfeit currency to destabilize its financial system has actually been done (or at least proposed) before.
What's interesting about this DOS attack is it doesn't matter if every single counterfeit transaction is discovered as such and rejected... what's being attacked is the efficiency of the system itself. If transactions get inefficient enough, the currency becomes burdensome to use, so people forgo it and turn to other mediums of exchange.
(Whether you're a BTC fan or not, it's fascinating to watch Bitcoin's pristine mathematical world rocked by thousands of years of lessons-learned in real world financial competition. Vires in Numeris indeed.)
Re:Government(s) intervention?
By mythosaz
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2014-Feb-12 13:41
• Score: 5, Interesting
• Thread
Interestingly enough, this potentially benefits legitimate BTC speculators.
We see what's going on. We know that BTC is under attack, and we know it's going to drop, and we suspect it's going to rebound. Time for tech-savvy legitimate investors to make a few gambles as well -- if you're the type that's already gambling on BTC.
One of the things about BTC is that, since it's unregulated, you can't just freeze the exchange rate until the storm blows over. Anarchy!
No, it's not a conspiracy.
By Animats
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2014-Feb-12 14:40
• Score: 5, Insightful
• Thread
This isn't a "government conspiracy" sending out bogus transactions. It's some jerk.
If you need to sell Bitcoins right now, Coinbase and Kraken are still up and running. Bitstamp is off line, and Mt. Gox is, as usual, screwed up. Mt. Gox hasn't paid out US dollars since June 2013. Whether they are incompetent, broke, or crooked is a subject of considerable speculation.
There's a technical fix in the works, but it will have the annoying side effect that when you spend Bitcoins in your own wallet, some Bitcoins you are not spending will be tied up for an hour or so. Bitcoin wallets don't really have an "account balance". What they have is a collection of items of different values. When you spend Bitcoins, the wallet software tries to put together a set of items that's over the value to be spent, with one output to the recipient and one output ("change") sent back to you.
Until now, you could can spend that "change" immediately, even though the distributed network hadn't yet confirmed it. It looks like that will be disallowed, and only confirmed items will be usable. The way this looks to the user with a wallet program is that you have a "Balance" and an "Unconfirmed" amount. Soon, when you spend, the "Unconfirmed" amount (which you can't spend) will go up for a while, then go to zero when the network catches up. Bitcoin is a distributed "consistent eventually" system. "Eventually" is about an hour. Longer during busy periods. (That's the next Bitcoin problem. The whole network has a limit of about 7 transactions per second. A few times in 2013, that limit was hit.)
Expect everyone except Mt. Gox to have this straightened out in a few days.
Re:Is this the begining of the end for BTC
By Dachannien
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2014-Feb-12 14:46
• Score: 5, Informative
• Thread
It's not just the exchanges that have to have confidence behind them. The exchange (or, at least, some Bitcoin owner out there) has to have confidence in the short seller as well. This is because the short seller borrows BTC to sell on the exchange. The short seller is then expected at some point to pay back the lender in BTC to cover the loan. Because of the additional routes for anonymity that Bitcoin provides, the short seller could abscond with the non-BTC currency as long as they can launder it, leaving the lender high and dry.
As you noted, regulations, law enforcement, and substantial recordkeeping on the part of brokerages keep this from being particularly successful in normal equities trading. If nothing else, a brokerage might require a short seller to keep cash on hand sufficient to cover the short sale, and then call in the debt if it looks like their cash on hand is coming close to being insufficient to cover. (Some brokerages let you use a margin account for this as well, if you have good credit.) The short seller would then be unable to run off with the cash because the brokerage would not release the funds until the short sale is covered. This is a solution that some Bitcoin exchanges might have problems with, because they would be keeping government-issued cash on hand in a customer account as well as BTC, which opens up several other cans of worms.