Bitcoin Price Resilient as Antonopoulos, Andreessen Weigh in on Mt. Gox Debacle

Andreas Antonopoulos, a bitcoin thought leader and current chief security officer at hosted wallet Blockchain.info has released a statement regarding the ongoing issues at once-leading bitcoin exchange Mt. Gox.

The announcement comes less than a day after Mt. Gox halted transactions, and amid growing reports that the once high-profile company may soon close for good.

Wrote Antonopoulos in his official response:

“I fear the worst. Everything I see makes me believe that Gox will never recover and that the funds are most likely lost.





I am devastated by the impact this will have on customers of Gox and I am angry at the irresponsible behavior of Mt. Gox and especially [CEO] Mark Karpeles that will damage the lives of many people.”

The remarks echo the increasing frustration of bitcoin supporters, who have been highly critical of Karpeles and his handling of problems at the exchange for much of the last month, and are notable as Antonopoulos, despite his critical stance to the company, had moved to ease concerns in recent weeks.

Gox’s incompetence

Antonopoulos offered a blow-by-blow account of the issues that have affected Mt. Gox in the past two weeks on his personal blog. He points out the transaction malleability issue Mt. Gox was supposedly experiencing has been a known issue since 2011:

“I publicly excoriated Gox’s incompetent and clownish management and disputed their claim that their problems were due to a ‘bug in bitcoin’.”

During this time, many exchanges were attacked via DDoS, according to Antonopoulos. The goal, he says, was to uncover other bitcoin exchanges that might be vulnerable:

“In response, some exchanges temporarily suspended withdrawals to investigate their implementations and confirm they were robust.”

Gox did develop a fix for the problem on its platform, and Antonopoulos later expressed optimism that the Japan-based exchange might be able to resume normal operations:

“As we started seeing Gox transactions posted on the public blockchain ledger, as reported on reddit and other sites, it appeared to me as if Gox might recover from their latest mess.”

The outage

The statement from Antonopoulos makes clear that he did not know in advance Mt. Gox was headed for massive failure:

“Yesterday afternoon at approximately 3pm PST, Monday February 24th, I heard unconfirmed reports that Gox was in crisis mode and their funds were mostly, if not entirely, gone. This was the first hint I had of any solvency issues.”

It appears that the writing was on the wall for Mt. Gox for some time. But Antonopoulos stated he did not believe that there was any intent of fraud by Mt. Gox CEO, Mark Karpeles.

“I stated that while I had serious misgivings about the competence of Mt.Gox executives and especially Karpeles, I had not seen any indication of bad faith or fraud in the past two years.”

Coinbase Security

As the head of Blockchain.info’s security, Antonopoulos volunteered to examine the measures put in place at Coinbase, and recounted his experience visiting the San Francisco-based hosted wallet the same night of Mt. Gox’s shutdown.

“While Coinbase publicly states that up to 97% of customer funds are in cold storage, at the time of my visit, their internal reporting tool showed that the cold storage system contained 98.8% of customer funds.”

Working into the night, Antonopoulos found that Coinbase had solid processes in place to secure bitcoin for its customers.

“Based on what I observed during my visit and my experience in security, it appears that the Coinbase system contains the expected funds and their cold storage system and process appear to be operating according to security best practices.”

Comparison to MF Global, not the end

While companies like Coinbase have procedures in place to protect bitcoin wallets, the ultimate fate of Mt. Gox is still murky.

Marc Andreessen’s venture capital firm Andreessen Horowitz has invested heavily in bitcoin startups. On CNBC this morning he liked the current situation to that of another financial fraud:

Legendary entrepreneur Marc Andreessen @pmarca tells @beckyquick why he is defending #bitcoin pic.twitter.com/hDcQQVqoj5





— Squawk Box (@SquawkCNBC) February 25, 2014

Despite a serious systematic failure of a major bitcoin exchange, the price of BTC has been surprisingly resilient.

When asked for comment, the Bitcoin Foundation offered the following statement:

"This is certainly not the end of Bitcoin. Perhaps the end of one chapter, but certainly not the end. As our industry matures, we are seeing a second wave of capable, responsible entrepreneurs and investors who are building reliable services for this ecosystem."

CoinDesk is monitoring this developing story, and will post updates as they become known.

Gold coins via Shutterstock