Mt.Gox, DDoS & Proposed Regulation: Mainstream declare ‘Bad Time for Bitcoin’

February 12, 2014 10:13 UTC
The mainstream are declaring it a “bad time for Bitcoin”

The distorted truths voiced by Mt.Gox about Transaction Malleability has prompted a relentless Distributed Denial of Service (DDoS) attack seeking to exploit the, so-called, “vulnerability”. As the Bitcoin developers have pointed out, there is little chance of success in trying to exploit this well-known issue. Instead, a disruption to various exchanges’ services, as well as a swath of negative publicity from the mainstream media has resulted.

Both Bitstamp and BTC-e have stopped processing Bitcoin network transaction as a result of a strong and sustained DDoS attack on Tuesday. Although the flood of mutated transactions being injected into the network does not pose a threat to customer wallets, the exchanges have had to stop all BTC withdrawals to prevent mutated transaction from disrupting legitimate transaction flow and, hence, creating an accounting nightmare. Trading of BTC-related instruments can continue since funds already held in users’ exchange accounts are unaffected by the network disruption.

A Reuters article, being widely published in national media outlets, uses the DDoS headline to piggy-back a story that “US Regulator prepares Clampdown”. Whilst there are planned regulatory attempts and they are in the pipeline in Canada and New York State, these proposed eventualities are nowhere near as imminent (or certain) as the mainstream would have readers believe. According to the Reuters piece, Benjamin Lawsky, superintendent of New York’s Department of Financial Services, is seeking [vis-a-vis Bitcoin] to instate consumer disclosure rules, capital requirements and “a framework for permissible investments with consumer money.”

Lawsky expected to release the regulations in the spring or the summer of this year, and said the agency would seek public comment once it had published the plan in a so-called notice for proposed rule-making.

Poor comprehension of the Transaction Malleability issue and the nature of the type of DDoS being conducted is leading some of the biggest media organizations to publish additional distortions of the facts as well as some cracking Old World mistaken beliefs:

But because a computer-generated currency isn’t backed by a central bank, there is no government to intervene…   (Wall Street Journal)

Bitcoin is being hit by attacks from unknown computer hackers who are sending “mutated” lines of code into the program that runs the virtual currency   (Reuters)

[Lawsky’s] agency is still wrestling with the question of whether to ban or restrict the use of “tumblers”, which obscure the record and source of virtual currencies.  (Sydney Morning Herald)

Its value moves faster than you can, and the size of these price moves makes heroin street pricing look like cotton on the commodities exchange.   (Forbes)

Meanwhile, the Bitcoin Foundation has made an official public statement in an effort to communicate the facts and restore some calm:

“This is a denial-of-service attack,” said the spokeswoman, Jinyoung Lee Englund. “Whoever is doing this is not stealing coins, but is succeeding in preventing some transactions from confirming. It’s important to note that DoS attacks do not affect people’s bitcoin wallets or funds.”

At the time of writing, BTC charts have resumed a moderate downtrend although the lows of Monday remain untested.

Last modified: February 12, 2014 10:48 UTC

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