MtGox, the major bitcoin exchange, says it has stopped transactions due to a bug in the bitcoin software. However, a core developer of the bitcoin protocol says that this problem has been known since 2011 and that MtGox could have prevented the problems.
MtGox speaks of a ‘design flaw’ that has so far been ignored, but is known to the group of core developers of the bitcoin protocol. Any service that allows bitcoins to be sent to external addresses would have to deal with the problem. Transaction malleability allows a third party to modify the hash of a new transaction without invalidating the signature. If the abuser is quick, his version of the two transactions can be validated.
For providers of wallets and exchanges, it will appear that the transaction has not been made, because it does not appear with the original hash in the blockchain. Users can take advantage of spoofing the transaction IDs with rogue transactions. MtGox tracked down the issue after a surge in withdrawals and responded by halting transactions from a MtGox wallet to an external bitcoin address. As a result, the bitcoin price entered a free fall.
However, according to core developer of the bitcoin protocol Greg Maxwell, MtGox is twisting the news. According to him, transaction malleability has been known since 2011 and there is even a wiki page for it. “The problem is slowly being addressed, but it will probably take years to fix, as all wallet software has to be adapted for it,” he told CryptoCoinsNews. According to Maxwell, properly written wallet software can easily handle the consequences of the problem until then, and MtGox’s internal system should be able to too.
MtGox was once the largest bitcoin exchange in the world, but had to give up that place some time ago.