Next Score View the next score

    Major Bitcoin player is trying to stay alive

    Japanese firm says program is flawed

    NEW YORK — A major player in the Bitcoin universe was struggling to stay alive Monday, raising questions about whether there is a fundamental flaw in the computer program that underlies the virtual currency.

    The price of Bitcoin has fallen sharply, to below $600 for a single Bitcoin from more than $800 a week ago.

    Mt. Gox, a Japanese company that was previously the largest Bitcoin exchange in the world, halted all customer withdrawals late last week.


    On Monday, the company said its problems were caused by a previously undetected glitch in the basic Bitcoin protocol that made it possible for users to falsify transactions.

    Get Talking Points in your inbox:
    An afternoon recap of the day’s most important business news, delivered weekdays.
    Thank you for signing up! Sign up for more newsletters here

    Gavin Andresen, chief scientist at the Bitcoin Foundation, disputed Mt. Gox’s account and said the problem was at the Japanese exchange.

    “The issues that Mt. Gox has been experiencing are due to an unfortunate interaction between Mt. Gox’s highly customized wallet software, their customer support procedures, and an obscure (but long-known) quirk in the way transactions are identified and not due to a flaw in the Bitcoin protocol,” Andresen said in a statement.

    The price of Bitcoin recovered a bit Monday morning, rising to nearly $650.

    Mt. Gox has been struggling for months to process transactions, leading many customers to take their business to other exchanges that have vaulted past Mt. Gox in popularity.


    But Mt. Gox’s claims were taken seriously because, if true, they raise basic questions about the soundness of the Bitcoin experiment, which has swept the technology and finance world over the last year, taking the price of a single coin up more than 3,000 percent.

    From the creation of Bitcoin in 2009, one of the most important and vaunted features of the Bitcoin program was its ability to prevent the same coins from being moved to two different places at the same time. In its announcement Monday, Mt. Gox said that a bug in the Bitcoin software made it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a Bitcoin transfer had not occurred when, in fact, it had.

    The company said, “We have discussed this solution with the Bitcoin core developers and will allow Bitcoin withdrawals again once it has been approved and standardized.”

    Other exchanges did not report similar problems, but none of the biggest companies immediately put out a response.

    Beyond Mt. Gox, Bitcoin users have been rattled by several setbacks in recent days. On Friday, the Russian government said Bitcoin transactions were illegal. They joined the Chinese government, which said in December that financial institutions in the country could not participate in Bitcoin transactions.


    Florida prosecutors, meanwhile, arrested people Friday who had met to exchange Bitcoins for dollars, the first such arrests.

    Mt. Gox’s claims, if true, raise basic questions about the soundness of the Bitcoin experiment, which has swept the finance world

    US authorities have generally given a tentative blessing to the Bitcoin experiment. But they have warned consumers about the dangers and the problems that could still pop up.