The 11 Myths of Bitcoin – #7: Bitcoin was hacked?

Category / Featured posts / Bitcoin / 11 Myths Series Published on

Welcome back to our blog series: 11 Myths of Bitcoin. Continuing with Myth…

 

#7: Bitcoin was hacked.

 

In February of 2014, MtGox, the first and largest Bitcoin exchange, filed for bankruptcy. At the time of the bankruptcy it held over $400 million in client funds. At that time MtGox CEO Mark Karpeles declared that the losses were not the fault of MtGox, fault but a problem known as “Bitcoin malleability” . It was quickly pointed out by the Bitcoin community that this issue had previously been identified as early as 2011 and other exchanges had taken measures to prevent it from occurring.
 

The failure of MtGox was not a problem within the Bitcoin protocol but a problem within the management of the MtGox organization itself. The backstory is that MtGox actually stands for “Magic the Gathering Online Exchange” and was created in 2011 to exchange playing cards. MtGox identified Bitcoin as an opportunity and changed focus in 2012. As the first exchange, it quickly established itself and began to dominate the market.
 

While this could have been the success story of a revolutionary company on the front lines of the Bitcoin industry, it turned out to be a case of poor management, mismanagement and lack of proper controls. In short, MtGox was an operational disaster.
 

But make no mistake, Bitcoin itself was not hacked. The Bitcoin master public ledger was not hacked or in any way compromised. This is a very, very, important distinction that has to be made. What failed was a poorly managed and poorly run Bitcoin exchange.
 

Stay tuned for next week when we will publish myth #8 – Bitcoin is too volatile for merchants to accept.

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