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Bitcoin Foundation blames Mt. Gox for Bitcoin's troubles

Bitcoin Foundation blames Mt. Gox for Bitcoin's troubles

What Mt. Gox called a bug is actually an underlying problem, the group said

A problem identified by Mt. Gox as a bug in Bitcoin software is actually a longstanding technical issue Mt. Gox should have prepared for, the Bitcoin Foundation said Monday.

Mt. Gox blamed problems with its currency exchange on a bug in Bitcoin's software allowing for so-called "transaction malleability," giving people the ability to change Bitcoin transaction details after the fact. Fraud could be the outcome and Bitcoin's value has been on a downward spiral since Mt. Gox called out the problem Monday after suspending transactions last Friday.

But actually there is no bug -- transaction malleability is an underlying issue in Bitcoin's software, and Mt. Gox should have prepared its exchange for it, the Bitcoin Foundation said in response.

Transaction malleability has been known about since 2011, said the group, which provides funding support and other resources for the Bitcoin technology. Mt. Gox's problems, the group said in a statement, are due to an interaction between Mt. Gox's so-called wallet storage software, its customer support procedures and unpreparedness for transaction malleability.

"This is something that cannot be corrected overnight," the Bitcoin Foundation said. "This is a good reminder that Bitcoin is still young and experimental," it said.

Mt. Gox did not immediately respond to a request for comment.

Bitcoin was trading at roughly US$570 during late morning Pacific time Monday on the Mt. Gox site, while for much of last week the currency was trading in the mid-$800 range.

Bitcoin took a dive Friday when Mt. Gox said it was temporarily suspending withdrawals on its site because of the software problem.

Bitcoin's value has been on a roller coaster ride for some time now. Besides Mt. Gox, other exchanges for buying and selling bitcoins include Coinbase, BTC China and Circle. But the fact that Bitcoin's value could drop so much with the problems of Mt. Gox suggests the site has considerable influence on the market.

Zach Miners covers social networking, search and general technology news for IDG News Service. Follow Zach on Twitter at @zachminers. Zach's e-mail address is zach_miners@idg.com

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