News

Bitcoin's good news-bad news week

February 27, 2014

The good news: Bitcoin ATM installations are motoring right along, with the installation of the first unit in Singapore this week. The bad news: The horsepower behind that motor has taken a massive hit with the mysterious meltdown at the world's biggest Bitcoin exchange, Tokyo-based Mt. Gox.

On Thursday, CoinDesk ran an article about the Singapore Bitcoin installation by Tembusu, which designed and built the ATM. The machine features several security and anti-theft measures, including biometric security features like thumbprint scanning and elaborate know-your-customer features.

The machine can be fine-tuned to achieve regulatory compliance in different markets and, CoinDesk said, its makers tout its customizability (which extends to the dispensing of fiat currency), and its intuitive touch-screen interface.

The CoinDesk story was preceded by a Tuesday report by Businessweek that said Mt. Gox had gone offline. The company had suspended Bitcoin withdrawals on Feb. 7, amid reports of a glitch in the Bitcoin protocol whose existence Mt. Gox was aware of, but did nothing to correct.

The problem, a second Businessweek article said, could be summed up in two words:

[T]ransaction malleability. A hacker can tinker with the code that makes a Bitcoin transaction happen, so that it looks like it didn’t go through. The person who was supposed to receive a payment then asks again and, in Mt. Gox’s case, is paid again automatically. Mt. Gox has acknowledged this was happening. It seems that someone has been slowly bleeding it for months, leaving it without the funds to pay out legitimate withdrawals. But with the company being pretty tight-lipped about it for now, that’s only the best theory.

But if the details of the theft are murky, the damages are clearly defined — 744,408 Bitcoins stolen. At today's average closing price of $575, that's a total of $428 million.

Today's price reflects the fall of Mt. Gox itself, however. Had the firm prevented the thefts, the value of those stolen bitcoins to their owners might be calculated at something closer to their Dec. 4 price of $1,151 — a total of $856.81 million. It's a bitter pill for Mt. Gox customers whose wealth vanished overnight.

What's worse, the same anonymity that has made Bitcoin attractive to so many will also make it practically impossible for authorities trace and recover any of the stolen currency for those who were robbed.

But for Tembusu and its newly installed Bitcoin ATM at the Spiffy Dapper bar in Singapore, even the bad news isn't all bad. The Bitcoin price has already improved by about $40 since Mt. Gox went dark on the 25th. It seems there are still Bitcoin believers to be served by the currency converting ATM.