What does it mean when a busy bitcoin exchange suddenly stops all activity? Then their website mysteriously goes offline. Then all of a sudden, their entire Twitter feed disappears. The company was hacked and the results were devastating. So let's start with the question " What is Mt. Gox?"
What is Mt. Gox?
The company was founded in 2010 by US programmer Jed McCaleb and sold to French developer Mark Karpelės in 2011. Mt. Gox has not only played a major role in the cryptocurrency world. At its peak in 2013, the exchange processed a whopping 70% of all Bitcoin transactions worldwide. This had been down slightly to 70% by early 2014, but the company was still doing well. Until...
Mt. Gox has been devastated in the biggest Bitcoin hack to date. The hacker stole 740,000 Bitcoins from Mt. Gox's customers and 100,000 Bitcoins from the company itself. This event quickly got out of hand and the company went bankrupt by the end of February 2014 .
How did it happen?
Everything blew up in February 2014, but it is suspected that hacking activity was already taking place in 2011.
In June 2011, the company experienced its first hack, when a hacker took possession of Mt. Gox auditor's computer and changed the price of Bitcoin to 1 cent. After that, Mt. Gox customer Hothe started buying bitcoins at this artificial price using the wallet's private key and received about 2,000 bitcoins. Additionally, the customer bought around 650 Bitcoins, of which 0 BTC was returned.
Mt. Gox has since increased security, but it wasn't enough to protect the exchange. Investigating the 2014 failure revealed that Mt. Gox's private key was not encrypted and was stolen in 2011. It is unclear whether this information was obtained through hacking or with the help of insiders.
From there, perpetrators began siphoning bitcoin from customer accounts over the next few years. Mt. Gox's system apparently interpreted the theft as a wire transfer to a more secure address, and the company was unaware of the leak.
Recover Bitcoin
Shortly after the 2014 hack, Mt. Gox reportedly found 200,000 bitcoins in an old-format digital wallet the company used before June 2011.
What have we learned?
The most important lesson learned from the Mt Gox fiasco is that cryptocurrencies, bitcoin, and altcoins are a whole new ballpark, very different from the financial world we know today.
Bankruptcy law is not enough to address the impact and the move to civil rehabilitation sets an important precedent for the crypto community. Six years have passed and people are still waiting for access to frozen assets. This is unacceptable and serves as a warning to the cryptocurrency community to create better disaster recovery structures.
Of course, the ultimate goal is to prevent these disasters once and for all, but hackers are getting more creative every year.
Now I hope you know the answer to "What is Mt. Gox?"
