<p>People had bitcoins loaded on Mt.Gox internal trading accounts (trading wallets). This goes both for fiat currency and bitcoins.</p>

<p>Bitcoin withdrawals were shut-down for a few weeks now, which created concepts like "goxbucks" or "goxcoins" as you could not get any Bitcoins out.</p>

<p>Now, the Mt.Gox is closed completely, so you cannot get either fiat currency or Bitcoins out at all. People speculate that they will never get their funds back, as MtGox would have lost these assets they manage for their customers.</p>

CC BY-SA 3.0
2014-02-27T13:30:47.963Z
"LOST"...hehehe. Pretty sure some guy is now really happy with all that money. And he got away clean, no traces, no nothing. Angry geeks won't assassinate him either. Seriously, best business in 2013-2014 is stealing bitcoin. Even a steal like this gets away.
Apache
CC BY-SA 3.0
2014-02-25T13:52:51.273Z
2014-02-25T14:32:23.697Z
2014-02-25T14:32:23.697Z
Mikko Ohtamaa
<p>It also shakes confidence in BTC both for the BTC community and the public in general. When I say BTC I am encompassing all other *coin. It is analogous to the failure of a large bank--except without any insurance.   </p>

CC BY-SA 3.0
2014-02-25T15:25:56.383Z
Very similar situation happened to online poker when FullTilt Poker got shut down by the FBI and turned out to be insolvent. Players had hundreds of millions of dollars stuck in the site for years. Online poker has not recovered from the scandal to this day.
Emre K.
CC BY-SA 3.0
2014-02-25T15:01:03.793Z
2014-02-25T15:01:03.793Z
zaph
<p>The short answer to the question is that it is NOT a problem.  That is unless you are a Mt Gox customer that had deposits held by them on your behalf - then you probably do consider it a problem.</p>

<p>Mt. Gox in essence is like a bank holding bitcoins on people's behalf.  Apparently many of those bitcoins have gone missing and Mt Gox is now insolvent and unable to honor all its liabilities.  It is very much like a failing bank in the 1920's.  </p>

<p>Assuming that Mt Gox really is done for is a set back for bitcoin and may slow its a adoption but just like the failure of banks in the 1920's did not destroy the dollar neither will this destroy bitcoin.</p>

CC BY-SA 3.0
2014-02-26T19:36:47.217Z
2014-02-26T19:36:47.217Z
Shawn Nelson
<p>In answering the question related to a mass panic (for the financial concern: money might have been lost on the trading system if it wasn't stored off of it - same with currency), what was the reaction to US bank failures in 1929?  Bitcoin doesn't have as many exchanges as there were banks in the United States in 1929 (to my knowledge), but the reaction to bank failures caused a massive panic and also ended up resulting in the <code>FDIC</code> system.  MtGox, for a while, seemed to be leading the pack as far as its price (it was used a lot in places like Preev, for a time to calculate the price of bitcoin), so it would be like the largest bank in 1929 failing.  That would scare some people.</p>

<p>Note that this isn't to say bitcoin is in trouble, just that it's a similar scenario to a bank failure and some people respond by abandoning the system.</p>

CC BY-SA 3.0
2014-02-25T16:32:12.277Z
The bank failure of 1929 caused more government regulation and FDIC insurance (which is not free). Bank audits, reserve minimums, etc. But it seems that the Bitcoin community does not want government regulation, it want's to be free of it. It want's anonymity but that means you can't ask to be insured/reimbursed. You can't have both.
zaph
CC BY-SA 3.0
2014-02-25T20:24:06.470Z
@Zaph Agreed; and the hope of those users that want anonymity is that that users who may have lost don't try and ask politicians for help, which would still be limited considering what bitcoin is.
Question3CPO
CC BY-SA 3.0
2014-02-25T15:58:44.447Z
2014-02-25T15:58:44.447Z
Question3CPO
<p>The question of what this means has already been answered for the most part. People are dumping their Bitcoins now. This actually makes the US Dollar and other currencies worth slightly more, so if you don't have any crypto currency, don't worry :)</p>

CC BY-SA 3.0
2014-02-27T06:21:44.840Z
2014-02-27T06:21:44.840Z
MMMorshu
<p>To actually try and answer your question, Mt Gox acted as a trusted middleman in btc trading, and thus had to have control over their users money. </p>

<p>Let's say dude A has a few btc he wants to sell, and dude B has a few dollars he wants to buy btc for. B doesn't want to pay until A sends him the btc, and A doesn't want to send his btc to B until B pays. Unless they trust each other, they can not do business.</p>

<p>By putting money and btc in the hands of a supposedly trustworthy middleman (Mt Gox), A and B can do business. As soon as they agree on the price, the middleman, who has access to both the btc wallet of dude A and the dollar wallet of B, can make sure that both transfers are made, so that each person gets what they agreed on.</p>

<p>So essentially, users had dollar accounts and a btc accounts at Mt Gox, and it is from these that things seem to have gone missing.</p>

<hr>

<p>As has been pointed out below, it may be that accounts still show the right balance, but Mt Gox doesn't have that money anymore.</p>

CC BY-SA 3.0
2014-02-25T20:21:01.287Z
+1 for explaining *why* people stored their money with mt. gox
mart
CC BY-SA 3.0
2014-02-26T20:44:50.637Z
Well, it's not that money/coins are missing from people's accounts, it's that they don't have access to those accounts.
svick
CC BY-SA 3.0
2014-02-26T21:16:49.993Z
So it's roughly the equivalent of Google Wallet or Paypal shutting down?
Mooing Duck
CC BY-SA 3.0
2014-02-26T21:21:21.413Z
@svick As I understand the various news stories, Mt Gox dealt with transaction malleability the wrong way (or rather, didn't deal with it at all) and so bitcoins _are_ actually missing from some people's accounts...
Izkata
CC BY-SA 3.0
2014-02-26T21:38:50.367Z
@Izkata The way I understand that issue, the coins are missing from the actual Mt. Gox's bitcoin wallet, but not from random people's accounts. That means everyone's account will show the right amount, but Mt. Gox wouldn't be able to pay everyone if they all asked for their coins at once.
svick
CC BY-SA 3.0
2014-02-25T19:34:45.293Z
2014-03-03T22:38:46.583Z
2014-03-03T22:38:46.583Z
gibson
<p>I'm sorry if this is a stupid question, I'm not a bitcoin user and may lack important information. My understanding was that each bitcoin user has a wallet on his harddrive or wherever, where he stores his bitcoins with the transaction history proving that they are his.  So the system is pretty decentralized. Then why is it such a problem that Mt. Gox disappears? Don't the people losing money have it in their own wallets, if so why?</p>

<p><strong>Edit to add:</strong> In case the question was unclear, I was asking for why people lost money with Mt. Gox - not about the wider ramifications like potentially lost trust in *coin etc.</p>

CC BY-SA 3.0
2014-02-25T12:04:39.463Z
http://bitcoin.stackexchange.com/questions/2743/pros-and-cons-of-using-mt-gox-as-an-e-wallet?rq=1 contains all I need to know, I think.
mart
CC BY-SA 3.0
2014-02-26T01:55:36.993Z
an interesting related question, how could a trading entity like Mt Gox be built such that this type of failure can be mitigated or avoided, or is it possible? what types of safeguards are in place at other exchanges that are superior?
vzn
CC BY-SA 3.0
2014-02-26T07:35:13.090Z
The other related question is why so much money rests in Mt Gox, when it's mostly needed as an intermediary.
mart
<wallet><mtgox>
Why is the disappearance of Mt Gox a problem?
mart
# Why is the disappearance of Mt Gox a problem?

(Asked by: username_0 on 2014-02-25)

I'm sorry if this is a stupid question, I'm not a bitcoin user and may lack important information. My understanding was that each bitcoin user has a wallet on his harddrive or wherever, where he stores his bitcoins with the transaction history proving that they are his. So the system is pretty decentralized. Then why is it such a problem that Mt. Gox disappears? Don't the people losing money have it in their own wallets, if so why?

**Edit to add:** In case the question was unclear, I was asking for why people lost money with Mt. Gox - not about the wider ramifications like potentially lost trust in \*coin etc.

**Tags:** wallet, mtgox

> **Comments:**
> **username_0**: http://bitcoin.stackexchange.com/questions/2743/pros-and-cons-of-using-mt-gox-as-an-e-wallet?rq=1 contains all I need to know, I think.  
> **username_1**: an interesting related question, how could a trading entity like Mt Gox be built such that this type of failure can be mitigated or avoided, or is it possible? what types of safeguards are in place at other exchanges that are superior?  
> **username_0**: The other related question is why so much money rests in Mt Gox, when it's mostly needed as an intermediary.  

---

## 6 answers

### Answer by username_9 on 2014-02-25. Score: 23 | Accepted answer

To actually try and answer your question, Mt Gox acted as a trusted middleman in btc trading, and thus had to have control over their users money.

Let's say dude A has a few btc he wants to sell, and dude B has a few dollars he wants to buy btc for. B doesn't want to pay until A sends him the btc, and A doesn't want to send his btc to B until B pays. Unless they trust each other, they can not do business.

By putting money and btc in the hands of a supposedly trustworthy middleman (Mt Gox), A and B can do business. As soon as they agree on the price, the middleman, who has access to both the btc wallet of dude A and the dollar wallet of B, can make sure that both transfers are made, so that each person gets what they agreed on.

So essentially, users had dollar accounts and a btc accounts at Mt Gox, and it is from these that things seem to have gone missing.

---

As has been pointed out below, it may be that accounts still show the right balance, but Mt Gox doesn't have that money anymore.

> **Comments:**
> **username_0**: +1 for explaining *why* people stored their money with mt. gox  
> **username_10**: Well, it's not that money/coins are missing from people's accounts, it's that they don't have access to those accounts.  
> **username_11**: So it's roughly the equivalent of Google Wallet or Paypal shutting down?  
> **username_12**: @username_10 As I understand the various news stories, Mt Gox dealt with transaction malleability the wrong way (or rather, didn't deal with it at all) and so bitcoins _are_ actually missing from some people's accounts...  
> **username_10**: @username_12 The way I understand that issue, the coins are missing from the actual Mt. Gox's bitcoin wallet, but not from random people's accounts. That means everyone's account will show the right amount, but Mt. Gox wouldn't be able to pay everyone if they all asked for their coins at once.  

---

### Answer by username_2 on 2014-02-25. Score: 14

People had bitcoins loaded on Mt.Gox internal trading accounts (trading wallets). This goes both for fiat currency and bitcoins.

Bitcoin withdrawals were shut-down for a few weeks now, which created concepts like "goxbucks" or "goxcoins" as you could not get any Bitcoins out.

Now, the Mt.Gox is closed completely, so you cannot get either fiat currency or Bitcoins out at all. People speculate that they will never get their funds back, as MtGox would have lost these assets they manage for their customers.

> **Comments:**
> **username_3**: "LOST"...hehehe. Pretty sure some guy is now really happy with all that money. And he got away clean, no traces, no nothing. Angry geeks won't assassinate him either. Seriously, best business in 2013-2014 is stealing bitcoin. Even a steal like this gets away.  

---

### Answer by username_4 on 2014-02-25. Score: 10

It also shakes confidence in BTC both for the BTC community and the public in general. When I say BTC I am encompassing all other \*coin. It is analogous to the failure of a large bank--except without any insurance.

> **Comments:**
> **username_5**: Very similar situation happened to online poker when FullTilt Poker got shut down by the FBI and turned out to be insolvent. Players had hundreds of millions of dollars stuck in the site for years. Online poker has not recovered from the scandal to this day.  

---

### Answer by username_6 on 2014-02-26. Score: 1

The short answer to the question is that it is NOT a problem. That is unless you are a Mt Gox customer that had deposits held by them on your behalf - then you probably do consider it a problem.

Mt. Gox in essence is like a bank holding bitcoins on people's behalf. Apparently many of those bitcoins have gone missing and Mt Gox is now insolvent and unable to honor all its liabilities. It is very much like a failing bank in the 1920's.

Assuming that Mt Gox really is done for is a set back for bitcoin and may slow its a adoption but just like the failure of banks in the 1920's did not destroy the dollar neither will this destroy bitcoin.


---

### Answer by username_7 on 2014-02-25. Score: 0

In answering the question related to a mass panic (for the financial concern: money might have been lost on the trading system if it wasn't stored off of it - same with currency), what was the reaction to US bank failures in 1929? Bitcoin doesn't have as many exchanges as there were banks in the United States in 1929 (to my knowledge), but the reaction to bank failures caused a massive panic and also ended up resulting in the `FDIC` system. MtGox, for a while, seemed to be leading the pack as far as its price (it was used a lot in places like Preev, for a time to calculate the price of bitcoin), so it would be like the largest bank in 1929 failing. That would scare some people.

Note that this isn't to say bitcoin is in trouble, just that it's a similar scenario to a bank failure and some people respond by abandoning the system.

> **Comments:**
> **username_4**: The bank failure of 1929 caused more government regulation and FDIC insurance (which is not free). Bank audits, reserve minimums, etc. But it seems that the Bitcoin community does not want government regulation, it want's to be free of it. It want's anonymity but that means you can't ask to be insured/reimbursed. You can't have both.  
> **username_7**: @username_4 Agreed; and the hope of those users that want anonymity is that that users who may have lost don't try and ask politicians for help, which would still be limited considering what bitcoin is.  

---

### Answer by username_8 on 2014-02-27. Score: 0

The question of what this means has already been answered for the most part. People are dumping their Bitcoins now. This actually makes the US Dollar and other currencies worth slightly more, so if you don't have any crypto currency, don't worry :)


---

