Popular altcoin exchange Vircurex just announced that it has stopped withdrawals for BTC, LTC, FTC (Feathercoin) and TRC (Terracoin). Any incoming deposit will not be credited. Furthermore, on 24 March, all BTC, LTC, FTC, and TRC accounts will be frozen until Vircurex can redistribute available funds to users. Last year, the exchange was hacked twice, resulting in a large loss of coins. Vircurex promised to cover the losses from their own income, and the plan seemed to have been working until recently.
“We had enough coin balances in our cold wallet to upkeep our platform and the positive cashflow enabled us to gradually refill the wallets.
Unfortunately we had large fund withdrawals in the last weeks which have lead to a complete depletion of our cold wallet balance and we are now facing the option of either closing the site with significant unrecoverable losses for all or to work out a solution that allows the exchange to continue to operate and gradually pay back the losses.”
The exchange has decided to go with the latter option, and has outlined the following plan:
The freezing of the balances is a one-time action, it does not affect future deposits in anyways.
50% of the amount will be distributed top-down and the other 50% will be distributed bottom-up.
Top-down means: credit the amount from the largest account balance down to the smaller accounts Bottom-up: credit the amount from the smallest account balance to the larger accounts.
User 1: 5 BTC
User 2: 4 BTC
User 3: 3 BTC
User 4: 3 BTC
User 5: 3 BTC
User 6: 3 BTC
User 7: 1 BTC
Amount to distribute: 12 BTC:
Step 1: Top-down distribute 6 BTC:
Step 2: Bottom-up distribute 6 BTC:
This approach has the advantages that
Vircurex seems fairly confident that this plan will work. However, bitcoiners are skeptical after the recent Mt. Gox disaster. Few people will want to use the exchange and make deposits after this announcement. Furthermore, some users are claiming that Vircurex has been operating as a fractional reserve, meaning that only a fraction of deposits is backed by cash-on-hand and are available for withdrawal.
Overall, bitcoins are displaying little to no optimism regarding this announcement, even though the exchange is being significantly more transparent than Mt. Gox. It remains to be seen whether or not Vircurex’s plan will actually work, though.
Headline image by Zach Copley .