Bitcoin
Reuters

Mark Karpeles, chief executive of troubled bitcoin exchange Mt Gox, has spoken out in an attempt to calm the growing anxiety among his customers.

Bitcoin's inability to handle the amount of traffic Mt Gox customers create was blamed for the problems which led to the exchange imposing a temporary ban on bitcoin withdrawals.

Karpeles also admitted Mt Gox's highly customised bitcoin wallet and transaction system wasn't kept in line with regular updates issued by the developers of bitcoin itself.

The Tokyo-based exchange halted bitcoin withdrawals earlier this month, claiming an inherent flaw with the way bitcoin transactions work had slowed its services to a crawl, and a temporary ban on withdrawals was needed to rectify the situation.

Customer backlash

Having remained quiet during a customer backlash which saw one angry Mt Gox user fly 12,000 miles to stage a three-day protest, Karpeles has now revealed his exchange's problems are the result of the currency being unable to handle the huge amount of traffic its users have created.

"Over time bitcoin changed and started implementing changes that would require people using previous versions of the [Mt Gox] software to upgrade. While we followed most of those updates we were more and more busy and couldn't keep up with all the changes," Karpeles told Forbes over email.

Karpeles reveals that one change, released with bitcoin version 0.8.0 and preventing transactions from being accepted without the right number of zeroes in front of the signature value, reducing risks of transaction malleability, went unnoticed by Mt Gox and caused "a few transactions" to "become invalid."

Altered by 'people with ban intentions'

In an attempt to be transparent about the problems, Mt Gox made public a full list of pending transactions which were unable to be completed due to having the wrong number of zeroes. Unfortunately for the exchange, doing this meant "some of our invalid transactions were listed publicly, making it rather easy for someone with bad intention to alter these, hence the reason why many people claim there was an issue in our code."

To solve the problem, which affects other exchanges, but to a lesser degree, Mt Gox has proposed a solution "that would allow people sending bitcoins to track sent coins no matter what happens in terms of malleability" - a solution Karpeles claims can be applied quickly and "without breaking anything."

In the longer term, the Mt Gox boss says bitcoin developers are "preparing ways to prevent modified transactions from being relayed by the network," but he admits this will "take a lot of time and may break some custom bitcoin clients."

Karpeles' comments have split the bitcoin community, with some users accepting his explanation, while others continue to call for the death of Mt Gox, claiming it has insolvency issues and cannot pay out the bitcoins its customers have stored there.