<p>This issue shows that centralizing anything Bitcoin related is the wrong approach.  The community will benefit the most from decentralized exchanges which are being designed and built as we speak.  Also educating customers that exchanges are not banks is a critical aspect of protecting the ecosystem.  Monitoring such systems should not be the responsibility of end users, but of the people running them.  If Mt. Gox had been proactive and performing regular daily audits on account balances etc it would have been easy for them to identify the issue when it began rather than after it was too late.  </p>

CC BY-SA 3.0
2014-03-06T19:57:10.647Z
aka [too big to fail TBTF](http://en.wikipedia.org/wiki/Too_big_to_fail) which originates in nonbitcoin banking theory...
vzn
CC BY-SA 3.0
2014-03-07T23:40:00.867Z
Bitcoin does not need banks thus Mt Gox is not TBTF
Mark S.
CC BY-SA 3.0
2014-03-07T23:49:22.437Z
huh. ok. sounds like mere semantics to me. $½B seems "too big" to me & didnt even have money in it. am in favor of decentralization but some degree of centralization seems unavoidable incl to the contd growth of the currency.
vzn
CC BY-SA 3.0
2014-03-08T03:25:01.263Z
Based upon Mt Gox's reputation they had already began to loose market share, (because of previous issues i.e. Tibanne and the illegal MSB in the US)  volume on other exchanges had Mt. Gox.  This will drive the decentralization of exchange on a much larger scale, people will begin exchanging on local markets such as localbitcoin.com and other alternatives that we have yet to see built.   Using other p2p technologies such as bitmessage and open transactions it is possible to have an open marketplace that is not controlled by a single entity thus removing the trust from any one centralized point.
Mark S.
CC BY-SA 3.0
2014-03-06T19:44:32.137Z
2014-03-06T19:44:32.137Z
Mark S.
<p>last heard, estimates are Mtgox lost about ~$½B ... apparently the current bitcoin market cap is around ~$8B ie Mtgox failure roughly somewhere around 1/16th the entire market cap of bitcoin, a massive amt (although the market value of bitcoin has been affected up to ¼ of total value during the crash, showing an outsize impact many times beyond total value stored by Mtgox, ie impacting overall currency user confidence). (was Mtgox possibly the largest single bitcoin bank?)</p>

<p>there is some talk in news articles about doing "forensic analysis" on the public bitcoin blockchain. not sure what this will turn up but it raises another question... if any kind of "forensic analysis" can be done <em>a posteriori</em>, why not also <em>a priori</em>? in other words</p>

<blockquote>
  <p>does the Mtgox failure have any implication or lessons for bitcoin/ecurrency protocol design/architecture? is there a way to run algorithms by 3<sup>rd</sup> parties that can identify "banks" like Mtgox that seem to have accountability/stability issues, and esp identify them before they reach massive stability-threatening scale? (aka "too big to fail"?) ie can the architecture itself be built/adjusted with some kind of "fault tolerance" which mitigates such large (near-systemic) failures?</p>
</blockquote>

CC BY-SA 3.0
2014-03-07T23:51:37.477Z
["too big to fail"](http://en.wikipedia.org/wiki/Too_big_to_fail) wikipedia
vzn
<blockchain><security><mtgox><error><transaction-verification>
mtgox failure... any implications for bitcoin/ecurrency protocol design?
vzn
# mtgox failure... any implications for bitcoin/ecurrency protocol design?

(Asked by: username_0 on 2014-03-06)

last heard, estimates are Mtgox lost about ~$½B ... apparently the current bitcoin market cap is around ~$8B ie Mtgox failure roughly somewhere around 1/16th the entire market cap of bitcoin, a massive amt (although the market value of bitcoin has been affected up to ¼ of total value during the crash, showing an outsize impact many times beyond total value stored by Mtgox, ie impacting overall currency user confidence). (was Mtgox possibly the largest single bitcoin bank?)

there is some talk in news articles about doing "forensic analysis" on the public bitcoin blockchain. not sure what this will turn up but it raises another question... if any kind of "forensic analysis" can be done *a posteriori*, why not also *a priori*? in other words

> does the Mtgox failure have any implication or lessons for bitcoin/ecurrency protocol design/architecture? is there a way to run algorithms by 3rd parties that can identify "banks" like Mtgox that seem to have accountability/stability issues, and esp identify them before they reach massive stability-threatening scale? (aka "too big to fail"?) ie can the architecture itself be built/adjusted with some kind of "fault tolerance" which mitigates such large (near-systemic) failures?

**Tags:** blockchain, security, mtgox, error, transaction-verification

> **Comments:**
> **username_0**: ["too big to fail"](http://en.wikipedia.org/wiki/Too_big_to_fail) wikipedia  

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## 1 answers

### Answer by username_1 on 2014-03-06. Score: 1

This issue shows that centralizing anything Bitcoin related is the wrong approach. The community will benefit the most from decentralized exchanges which are being designed and built as we speak. Also educating customers that exchanges are not banks is a critical aspect of protecting the ecosystem. Monitoring such systems should not be the responsibility of end users, but of the people running them. If Mt. Gox had been proactive and performing regular daily audits on account balances etc it would have been easy for them to identify the issue when it began rather than after it was too late.

> **Comments:**
> **username_0**: aka [too big to fail TBTF](http://en.wikipedia.org/wiki/Too_big_to_fail) which originates in nonbitcoin banking theory...  
> **username_1**: Bitcoin does not need banks thus Mt Gox is not TBTF  
> **username_0**: huh. ok. sounds like mere semantics to me. $½B seems "too big" to me & didnt even have money in it. am in favor of decentralization but some degree of centralization seems unavoidable incl to the contd growth of the currency.  
> **username_1**: Based upon Mt Gox's reputation they had already began to loose market share, (because of previous issues i.e. Tibanne and the illegal MSB in the US)  volume on other exchanges had Mt. Gox.  This will drive the decentralization of exchange on a much larger scale, people will begin exchanging on local markets such as localbitcoin.com and other alternatives that we have yet to see built.   Using other p2p technologies such as bitmessage and open transactions it is possible to have an open marketplace that is not controlled by a single entity thus removing the trust from any one centralized point.  

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