$40 Million in Bitcoins on the Brink at MtGox While CEO is Still MIA

In possibly the biggest challenge bitcoins have faced, MtGox customers continue to be unable to withdraw funds from their accounts in either fiat or Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term form. As written about yesterday, until recently, customers have been able to process bitcoin transfers even as fiat withdrawals have experienced month long or more delays. However, that has changed with customers who have requested bitcoin withdrawals having their transfers delayed and stuck without verification. As a result, according to data compiled by Coinsight, there are currently 42,000 bitcoins waiting for confirmation for withdrawal for MtGox customers, with over 10,000 fresh coins being requested and stuck from today. The sheer amount has led to new withdrawals being rejected as MtGox’s transfer wallet address is reported to be empty.

Currently there are numerous questions as to what is taking place at MtGox. Among theories, are that MtGox is experiencing a programming failure in how it handles bitcoin transactions. According to this report, which has been cited by figures attributed to part of MtGox’s support team on the #MtGox IRC feed, the firm’s code has a compatibility issue with handling newly created bitcoins. As such, as MtGox uses a general wallet to combine customer funds, when withdrawals include new coins, the transfer reports an error and is rejected by the Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term. If this is indeed true, than it would explain why MtGox has stated that specifically larger size transfers are being delayed, as they are more likely to contain problematic coins.

Another potential item is that MtGox is involved with ongoing investigations about Silk Road which recently revealed involvement with Bitinstant. The company itself did provide a statement earlier this week that customers that had received transfers from Bitinstant will experience delays and require additional customer identification to verify their accounts.

Where’s CEO Mark Karpeles

While the above theories are plausible, one of the biggest questions being asked is where is MtGox CEO Mark Karpeles. Since delays have struck bitcoin transfers, the CEO has yet to make a public statement on the matter. In actuality, Karpeles has been rarely heard from publicly since the middle of last year when the firm first began to experience problems with fiat transfers.

His absence is troubling as there hasn’t been any other public face of the company to provide updates and calm concerns. As such, there is little to dispel the notion that the problems at MtGox run deeper than just a programming glitch or government investigations. With that the case, the silence from the top could possibly be the result of the company facing insolvency due to insider theft or misappropriation.

Prices remain strong

In terms of prices, bitcoin has held steadily at around $800 on BTC-e and Bitstamp even as problems are swirling around MtGox. The trading action points to steady demand at current levels which has been able to support bitcoin prices as news has been negative. The lack of much effect among other exchanges is curious given the potential that of MASSIVE headline risk if MtGox is in fact insolvement, or at the very least also the target of Silk Road investigations which could impede its day to day activities indefinitely. Also, with around $40 million currently unavailable for withdrawal and possibly millions more in bitcoin transfers now being rejected, even were MtGox to issue money back to clients, in all likelihood MtGox will experience a bank run. With such a scenario, MtGox’s days as an ongoing concern look numbered which could trigger a credibility problem for all exchanges.