Why Bitcoin Is Dropping – Two Major Exchanges Halt Bitcoin Withdrawals

Bitcoin is going through a rough patch right now, with a major security issue causing a temporarily halt in all withdrawals on two popular Bitcoin exchange websites, Mt. Gox and Bitstamp.

A bug in the Bitcoin network has been discovered and exploited, allowing criminals to commit refund fraud when attempting to withdraw Bitcoins from the exchange services.

The bug in a rather specific way. As we know, all Bitcoin transactions are publicly available on the Bitcoin blockchain. Exchange services use this to verify that withdrawals have successfully been completed.

Criminals have found a way to, in a sense, duplicate the information in the blockchain after making the initial transaction. Of course, only one of these will be verified, which leaves one that is left unverified. This tricks the exchange into thinking that the Bitcoin was not successfully sent, so the exchange sends the payment again. This has resulted in thousands of Bitcoins being stolen from the two exchange sites.

Other exchanges have already designed ways to stop this from happening, and while both Mt. Gox and Bitstamp have plans in mind to stop this bug from being exploited, they are forced to halt withdrawals until the issue is fixed.

This issue has caused Bitcoin to fall down to $620, only half of what it was less than a year from now. The price of Bitcoin is expected to rise when the blockchain exploit is fixed within coming weeks.

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