Bitcoin Forum

The crisis document claims they've lose 742,400 out of 744,400 coins and that they only have 2000 coins left.

Here is my prediction.

The theft related to the transaction malleability was small and probably only 5-20% of their actual funds - all it did was empty their hot wallet and force them to try to redeem their cold wallet. Imo, there is no chance that they lost 99.9% of their bitcoin from that theft, since it would have equated to 500-600 coins per day since mtgox's inception; or $50,000 a day in the long, sustained stable period of a average price of $100 usd/btc.

Upon trying to redeem their huge cold wallets with around 80% of the customer's 774,000 coins; Mark discovered that the private keys could not be recovered due to some bug in his own custom coded software. Ever since he's been stalling for time, trying to recover the keys to the private storage. The document is in fact real, and mark would rather cry theft than admit that he accidentally lost the keys to 772,000 coins. The document was being circulated to potential investors so that Mtgox could be bought and no one would ever know the true depth of Mark's incompetence.

The document was leaked by someone involved in the potential acquisition and that immediately destroyed some interest in the acquisition.

I still believe that Mtgox may be acquired or some outside experts may be brought in to recover the private keys.

The private keys may not be recoverable, and 600,000-700,000 coins are lost forever.

i agree, there's no way a leak that big goes unnoticed for years.   losing private keys to that many btc would be the mother of all eff- ups. 

nonsense theory

In case of such a large loss of BTC he could if he was able to prove without doubt that this cold storage is his, work together with the trusted core devs and the community to give him back control of those lost coin in an update of the client.

It should not be too hard to prove that such a huge cold storage is his, especially if they kept some records of the transactions, along with other records a security expert could easily figure out.

nothing of what karpeles spouts out makes sense or connects in a rational way, which is an indication of lying.

In such a data-sensitive company, any private key to a cold storage must have more than 1 backups.
I don't believe they get all of them lost?

You have a poor understanding of the way a wallet works.  You do not hold any bitcoins.  You merely hold a private key to unlock them.  Think of the cold storage not as a vault, but a big ring of keys containing access to the vaults.  You lose the keys, good luck getting into the vault.  Even if the vault maker (the devs) could help you, why would they?  It would open a bigger can of worms.  Imagine the clamor for rollbacks every time someone felt cheated.  You could not hire enough people to process it, or even analyze the validity of any one of the party's claims.   

If I understand correctly, no transaction would be rolled back, and no extra coins would be generated. Make a hard fork with a special block in the future, that destroys the cold wallet, and regenerates the coins with a new key pair. Now lost Gox coins could be reimbursed to Gox victims. Of course this could destroy Bitcoin as Gox victims use the new fork, and many others insist on the pure blockchain.

Why would they restore 750k  BTC that got lost and help thousands of people restore their savings? I DON'T KNOW, BUT MAYBE BECAUSE IT WOULD FEEL LIKE IT IS THE RIGHT THING TO DO.  ::)

either way, it does not even make sense to discuss this, because this is not even in the snowball's chance of hell territory of what really happened as i pointed out.

Either that or their backend wallet software was completely messed up, which is not a hard stretch to those who have seen and analyzed some of their code. Once lost, the private keys are almost impossible to recover. However, Mark probably doesn't realize there is a possibility of public recourse for locked up wallets and he will continue not to realize this until he opens candid dialogs with the community. Yes, there should and will be a way to revive dead/lost coins if the magnitude of impact is as large as what's being speculated in this case. If Mark start being honest and communicating he will see the collaborative power of the community. Here is a quick run-down proposals on reviving dead coins:

1. The effort needs to be justified and warranted by the case. The loss must exceed certain threshold (e.g. > 100K) and its recovery must be for the common public interest.
2. The claiming party must produce proof that can indisputably substantiate their claims, such as the address or addresses where the dead coins are sitting at as well as all relevant evidence showing how it happened.
3. There must be a public announcement and advertisement of the revival request for a reasonable amount of time (e.g. 3-6 mo depending on the amount) to prevent potential harm to innocent 3rd parties.
4. There then should be some kind of voting and census process to ensure the majority of the community and the miners won't object to it.
5. After all of these, the request should be made to the core dev team.
6. A revival measure should only be hardcoded in the next public release of the client and the mining software. These are extraordinary measures, and they should be regarded as major historical events leading to the greater maturity of Bitcoin. Thus, leaving these limited "corrections" in the code is well justified and a good refection to Bitcoin's future elegancy.
7. Such measures are deemed to be controversial by some within the community. Idealists may consider such measures flat  violations of Bitcoin's self-governence and zero tolerance of human intervention. Others may view such measures as detrimental to the system's objectivity and thus a stain to Bitcoin network's long-term security and integrity. These people just need to be either persuaded or out voted.

I have seen this theory floated several times today, so I very much doubt it your idea.

More to the point: Where are the addresses of these mythical cold storage wallets with lost keys?  They would need to contain 700k coins, and never have seen a single withdrawal (otherwise the keys are not lost).  Unless we are talking about thousands of addresses where keys were lost, it just doesn't make sense.  And why would Mtgox spread cold storage over so many addresses? They certainly didn't use a large number of hot addresses.

I have hinted the idea at here and elsewhere before. No, I'm not suggesting this was indeed the case. Obviously, none of us knows exactly what happened for sure without Mark being open and transparent with us. Until then we can only speculate. I can see the advantage of distributing the funds in cold storage to multiple addresses, perhaps not thousands though. For multi-custodians and partitioned access. But the point here is there could be a public recourse for major wallet lock-ups. Gox may or may not be the first one calling for it depends on what happened and Mark himself.

This theory could also be cover story.

If that is true my speculative interpretation of controlled supply means that 6% of all bitcoins in circulation just poofed
But we will need more information and time to see if that really pans out what happened (Still don't believe that is the most plausible theory, rather someone sold then didn't have enough to cover aka a Fractional Reserve on Mtgox seems the most plausible to me) But since we don't have evidence all we can do is speculate


I messed up the interpretation too much on a press post and it kind of spread from there *Facepalm*
That said we don't know which wallets belong to Mtgox
http://bitcoinrichlist.com/top100

I would not waste too much effort on guessing which addresses belong to Gox. I think they're obligated to provide the addresses and transaction IDs linked to the lost funds if they blame technology or theft for their insolvency. Check out my previous post on this.

If he has been lying before, it's a good thing that he now has a lawyer. No attorney that I know of would advise him to acknowledge theft of money if there was not enough evidence of that.

Considering that both the United States and Japan have opened an investigation on this I presume we will know the truth soon enough
http://www.usnews.com/news/articles/2014/02/26/us-japan-officials-investigate-mt-gox-bitcoin-exchange

Some leaked draft that unknown sources is behind. Confirmed by Mark to be "-ish" correct.

Is that a proof that they have lost anything?? Do there appear any double transactions out of gox when people now are scrutinising their wallets?

The 740K story is only a spoof to make him look like a victim, and lessen the chance of civil suit. Don't presume he is broke beforehand.

You can't claim to have bad book keeping skills, and then be very sure on how much you lost. That something an external audit will show.

Amazing point. good to know that there are some brains out there thinking still. We should certainly be able to see if double transaction were made if malleability was the reason he lost that much...

What kind of hashing power is required to recover keys? :-)

It depends. If it was "frapachino123" not much.  If it was a truly random 256 bit encryption key we are talking heat death of the universe before that happens.  Then again maybe the cipher will be broken sometime in the next century. 

If we are talking about a lost private key scenario then I think your suggestion has merit, but at the same time it's a very slippery slope to get onto. Re-animating a large block of lost coins on the grounds of public interest is commendable, but I can't see that being the case here if the outcome is simply to give Gox back access to their coins. It's doesn't matter how big a voting consensus you try and get, at the end of the day you are trying to go against the basic tenant of Bitcoin and what it stands for.

The only truly democratic way that adheres to Bitcoin principles that might work here would be for you to fork the current blockchain to resurrect the coins and then let the public decide whether to adopt your "recovered" blockchain or keep using the old one.

One last thing to consider: If Gox's private keys to 750K BTC has truly been lost forever, then any BTC people have in their own private wallets are now just that bit rarer making them more valuable in the long run.

Human nature being what it is - do you see a majority of people voting for something that devalues the coins they currently hold?

You took your prediction from here:

Summary

1. A substantial amount of the missing 740k bitcoins are still in addresses that MtGox believed they had control over

2. Transaction malleability thefts did take place, but not nearly 740k coins

3. MtGox believed they were solvent because their watch-wallet continued and continues to show expected cold storage balances

4. MtGox’s deepest coldest-cold storage reserves were never tested until the transaction malleability situation

5. MtGox can not recover the keys to the coldest-cold storage. (possibly a software problem.. custom deterministic wallet? or some other hardware/organization failure)

6. Mark has reason to think that the keys might be recoverable

7. The 2,000 odd coins mentioned in the crisis document represent whats left of the first stage cold wallet/hot wallet coins

http://letstalkbitcoin.com/somethings-not-right-at-gox/

They could just destroy the Silkroad coins that were stolen by the US government while they are at it. This would compensate for the lost deflation. Also, many of the thousands of people who lost their savings would quit bitcoin alltogether. It is not in the interest of bitcoiners to alienate other users from bitcoin.

I'm a big fan of technologies but I also believe technologies were invented to serve the greater common good and better lives of human beings. I don't see how such beliefs could contradict with Bitcoin's basic tenants. Human nature calls for righting the wrongs. We do agree someone forgot his paypal password is not the website's fault, but...you guessed what I'm about to say. I'm optimistic about the majority of the Bitcoin adopters voting for a transaction overwrite if there is a strong justifiable cause for it, and I believe doing so would only further strengthen the public's faith in the new currency and thus a stronger support to its value. 

True, coinstealing bitches deserve all that they get.

As much as I really really want my GOXIOUBitcoins back and as awesome as it would be to see the FBI's stash ruined this is a slippery slope I hope we don't go down for the good of bitcoin :'(  Man was super hard to say that :'(

While i have to admit i would love to see those FBI coins vanish back into the rightful owners' pockets, i can see why the core devs and many others, including myself would refrain from taking such dramatic steps to make it happen.

However, if it turns out that behind the 750k lost coins is also the FBI, i am all for it to take those dramatic steps. This would be nothing short of a declaration of war to BTC and we would have to defend ourselves if we were to be true about supporting BTC.

just my 2 cents

+internets

If the FBI steal it and yes I do mean steal it then yes its all out war.

Okay so then it is tabled:

If it is another bag stealing, then fork the blockchain exactly prior to SR bag snatchers.

It's not up to me, but the FBI has nothing to do with the Constitution of the United States.  And theft of property, violates the spirit of the COTUS, that is plain.

I think I'm going to message one of the devs, just remembered I lost the private key from this address: http://bitcoinrichlist.com/address/1e6AzmPF35S3JTE8QMXD3k7oczJ7QgCSa?charttype=balance

Think I lost it on Mar 9, 2012.  :P

Bad idea imo to open that can of worms.  ;)

I vaguely remember a day when BTC withdrawals from MtGox were delayed, and some people said that MtGox was sending coins to unowned addresses instead of addresses given by customers effectively destroying the bitcoins. The date was around Nov 4th, 2011. Could it be that MtGox also moved cold wallets that day and accidentally destroyed them? Does anyone remember how it turned out? Could we check the blockchain for large transfer around that day, and try to find out if it was MtGox cold wallet accidentally being destroyed?

It would be nice to see a lot more work on forensic analysis of Mt. Gox transactions, and less effort on pointless hot air, I agree. We have a public blockchain for goodness sake.

Yes, absolutely. The only way we will finally determine what happened is when Karpeles is answering questions under oath in a court of law and all documents and evidence have been obtained and examined.

Seconded.

While I still stand by my previous posting, that related only to coin loss due to carelessness or bad business practice.

This scenario to suggest is completely different - if it can be unquestionably shown an active campaign is being waged against Bitcoin then the community should discuss and collectively vote on a response.

I may not personally support or vote in favor of such a move but it but in the spirit of Bitcoin if it is under attack a public consensus must be recognized. So to quote E. Hall: "I may disapprove of what you say, but I will defend to the death your right to say it"

I mean the private key that the cold storage is encrypted with... Maybe Bitcoin 2.0 is going to be trying to "remine" those coins somehow.

If the keys really are lost, what kind of computing power is required?

Actually, that's a good point. I'd be in favor of a system that could somehow re-absorb inactive coins into the mining process for redistribution.

I'm not a technical expert so I don't know if this is possible, perhaps every time the mining process reaches a block reward halving event any addresses with coins that remained inactive longer than say the previous two halving events for example will have their coin balances cleared. The total amount of cleared coins would then be divided equally between each block being mined up to the next halving as a "subsidy".

So for example at the next halving down to 12.5 BTC the actual per block reward would become 12.5 + [subsidy] allowing all "lost" coins to eventually be reintegrated gradually and fairly via the mining process.

It's just a thought, I don't even know if it's possible but it could be one way to get these coins back in the long term.

So summarized you favor the confiscation of wealth which belongs to others and ex post facto changes to the core rules of the network agreed upon by everyone?
Inactive doesn't mean lost.  

It's technically possible, but unlikely to ever be adopted as it's a pretty fundamental change to the operation of bitcoin.

I suggested something like this a few months ago: https://bitcointalk.org/index.php?topic=359679.msg3860940#msg3860940.  As you can see, someone stomped on it pretty quickly :)

True, and the problem here is where do you set the threshold between inactive coins vs lost coins.

It's not a real problem right now but in the long-term it could be. Every year a certain percentage of Bitcoins becomes lost due to missing private keys, sent to wrong address etc. Right now the mining process mints 25 new coins into existence about every ten minutes so - more than enough to compensate for permanently lost coins right now but as the block reward declines we eventually reach a point where the annual rate of coin loss will exceed the rate of coin generation.

Anyhow, it's an academic argument for now, by the time we reach that point I'm sure the community will come up with something to handle the situation.

Interesting read, good to see I'm not the first person to consider this problem.

I guess need will drive innovation on this, the only other alternative I see would be to allow new coins to be mined beyond 21M at a rate designed solely to compensate for the estimated rate of coins lost. How that might be determined though I have no idea.