What caused the collapse of Mt. Gox
The collapse of Mt. Gox, once the largest bitcoin exchange in the world, was caused by a combination of security breaches, internal mismanagement, and a flaw in the bitcoin protocol known as "transaction malleability".Over the years, Mt. Gox suffered multiple security breaches and hacks, resulting in the loss of thousands of bitcoins. In 2011, hackers gained access to the exchange using stolen credentials and transferred $8.75 million worth of bitcoins from user accounts. Later that year, deficiencies in the bitcoin network protocols caused several thousand bitcoins to be "lost".By early 2014, Mt. Gox users were experiencing problems withdrawing funds, which was attributed to the "transaction malleability" issue - a flaw in the bitcoin software that allowed users to manipulate transaction IDs. This exposed vulnerabilities in how Mt. Gox was tracking and managing customer deposits.Compounding these technical issues, Mt. Gox was also plagued by poor management and accounting practices. The company allegedly never conducted a single audit of its customer deposits, and it's unclear how long it had been operating with insufficient funds to cover all deposits.In February 2014, Mt. Gox suspended all bitcoin withdrawals due to "suspicious activity" in its digital wallets. It later announced that it had "lost" 850,000 bitcoins, worth hundreds of millions of dollars at the time. This massive loss pushed the exchange into insolvency and bankruptcy.The collapse of Mt. Gox was a pivotal moment in cryptocurrency history, exposing critical vulnerabilities and leading to important lessons about the need for robust security, transparency, and proper governance in the industry.
