Comment by swishercutter | Hacker News Reader

Comment by swishercutter | Hacker News Reader

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This is impossible...every bitcoin has to be verified every time it is transferred...there is tracking no matter what anyone says.

http://blockexplorer.com/

You can see any and all transactions.

Any bitcoin in/out of Mt.Gox has to be verified by the network...a "fake" bitcoin would never get out and it would not benefit Mt.Gox to transfer fake BTC around internally.

A bitcoin cannot be counterfeited easily...hence the beauty of the system.

People can claim that there was never 500k bitcoin in Mt.Gox but the fact still remains there was a transfer of 500k just days before this incident that was discussed as possibly being Mt.Gox moving their internal wallet around.

Now if someone controlled over 50% of the network hashing capability that would be a different story...possibly they could inject false info or something like that (I admit I know very little about this part, just briefly reviewed it enough to know its bad) but that's why you see postings in the forums telling people to switch "guilds" to spread things out. Deepbit approached 50% last month and there was a mass exodus. Most of the people involved in this know the risks and work very hard to self regulate.

No, you're missing the point. Mt. Gox is not publishing the transactions that occur inside their exchange to the blockchain; they are tracking them themselves. All the bitcoins deposited at Mt. Gox are in one big wallet. Only when a user deposits or withdraws coins does a transaction get posted to the blockchain. (I'm not 100% sure of this, admittedly, but I've seen no evidence to the contrary and lots of indirect evidence that supports it.)

So what could happen, as the result of bugs in their code, or of an attack, or (hypothetically) of deliberate fraud on their part, is that the total BTC balance of all account holders could become greater than the total BTC they have in their wallet. As the above posters noted, this would have the effect of creating BTC; no one outside the exchange would be able to tell that it had occurred until someone tried to withdraw their BTC and found it wasn't there.

Now what they could do is make a separate wallet for each user and post all trades to the blockchain. This would perhaps be more in the spirit of Bitcoin as it would prevent the totals from getting out of whack. But as I say, I'm pretty sure they're not doing that -- for one thing, if they were, rolling back trades, as they have recently done, would be impossible. (And although I was not involved in this 500k selloff, on either side, I think they have to roll it back to preserve any hope of Bitcoin being taken seriously.)

I assure you I get that point...I just doubt it...and I believe it could be easily figured out. Just a lot of speculation that this is actually happening...its funny how they can be criticized for not having their site secure enough and for not "rushing" to get it back up at the exact same time.

So far there has been no evidence that Mt.Gox did anything except get hacked...even Tradehill was using the same encryption that Mt.Gox was until the hack...everyone upgraded after the incident.

My point exactly. I guess my explanation is lacking, but what I meant when I said that the exchange would be left with a deficit in bitcoins, is that they would not be able to create more "real" bitcoins, than there were initially deposited by its users. It's a zero sum game(if you ignore the fees).

But, that does not mean that MtGox could not create "fake" bitcoins inside their system, and extract their value by selling real bitcoins from the bitcoin pool that the users contributed to. For such a thing to pass under the radar, MtGox would need to keep enough real bitcoins in the system to satisfy the bitcoin liquidity the exchange needs. That would not qualify that much as an exchange anymore, but it would be more similar to a ponzi scheme.

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