Why Mt. Gox’s Legacy Continues to Haunt Bitcoin: The Greatest Hack in Crypto History

"Mt. Gox: The Rise and Fall of the Infamous Bitcoin Exchange that Started with 20 BTC Traded at 5 Cents Each"

In 2010, Jed McCaleb created the Mt. Gox Bitcoin exchange. The exchange was launched to trade Bitcoin, which was not an easy feat at that time. To purchase Bitcoin, early enthusiasts would barter the “coins” for things such as T-shirts and Visa gift cards. McCaleb’s exchange made it easier to buy and sell Bitcoin without any major headaches. It was a centralized exchange, but many people felt that it was easier to let someone else handle the nitty-gritty of security.

Despite an early hack in 2011, which temporarily sent the price of Bitcoin to almost zero, Mt. Gox accounted for 70% of all Bitcoin transactions, making it the Bitcoin market. Along the way, the ownership of Mt. Gox changed hands. In 2011, McCaleb sold Mt. Gox to a French coder named Mark Karpelès, who had tremendous difficulty with human interaction.

Many of the 24,000 users of Mt. Gox didn’t care who owned the exchange. They just liked that it worked. However, in January 2014, many users noticed that they could not withdraw their Bitcoin. Daniel Kelman, a lawyer who began buying Bitcoin when it cost $100, had 44.5 Bitcoin in Mt. Gox, each worth around $1,000 at the time. He was so anxious he couldn’t sleep. He was confused and he was pissed. So were thousands of fellow Mt. Gox customers, especially when they read vague and unsatisfying explanations from Karpelès.

In a post on Reddit, Mt. Gox stated that “it is necessary to temporarily pause all withdrawal traffic to obtain a clear technical view of the current processes.” Burges had 250 Bitcoin tied up in Mt. Gox – then worth a quarter of a million dollars. He wanted them back. So he booked a flight from London to Tokyo and he staged a mini-protest outside of Karpelès’ office. It was cold and snowing, but he slapped together a sign that said “MT. GOX WHERE IS OUR MONEY?” Burges intentionally did not say, “Where is our Bitcoin?” because at the time no one would know what he meant.

Burges soon met a reporter from The Wall Street Journal and a reporter from a new website that had begun covering the crypto space – CoinDesk. Burges’ protest soon gained more attention and became one of Bitcoin’s early crossover stories into mainstream media. The Japanese onlookers, meanwhile, seemed bewildered by the protest as no one had heard of Bitcoin. But this didn’t deter Burges. He patiently waited for Karpelès to show up to work and when he did, he confronted him. Karpelès had no adequate answer for Burges, and he had no adequate answer for the other 24,000 Gox customers. Eventually, the hard truth emerged: Mt. Gox had been hacked. The Bitcoin was gone. It seemed that nothing was left.

In February 2014, Karpelès announced Mt. Gox’s bankruptcy. 750,000 Bitcoins were stolen, which was roughly 7% of all Bitcoin that existed at the time. At present market value of roughly $30,000 per Bitcoin, this tallies up to a crime of over $22 billion. Mt. Gox isn’t just the largest hack in crypto’s history; it’s the largest bank heist in all of recorded history. The stolen loot from Mt. Gox is now over three times more valuable than the top 10 bank heists in all of recorded history.

Martin Reid

Martin Reid

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