TOKYO, Feb. 10 (UPI) -- Bitcoin prices plunged after news that a bug in the software allowed for fraud, causing Japan-based bitcoin exchange Mt. Gox to suspend transfers to external bitcoin addresses.
The digital currency is known for wild fluctuations and dropped to $680 last Friday, having traded around the $850 mark for the week. After a Mt. Gox announcement on Monday the price dropped further to around $538 but has since made a small recovery and is hovering around the $640 mark.
Mt. Gox has suspended bitcoin transactions from wallets it holds to external bitcoin addresses, but continues to allow conversions of bitcoins to conventional currencies and bitcoin transfers to other Mt. Gox addresses.
“A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur,” Mt. Gox said in a statement.
The glitch allowed a third party entity to alter the hash code associated with the new bitcoin transaction, thereby duplicating the transaction, only one of which can be validated by the exchange. An attacker could ensure that the duplicate transaction is validated, rejecting the original one.
“This means that an individual could request bitcoins from an exchange or wallet service, alter the resulting transaction’s hash before inclusion in the blockchain, then contact the issuing service while claiming the transaction did not proceed,” the exchange warned.
Mt. Gox said that the problem wasn't limited to the exchange and affected all transactions where a bitcoin was sent to a third party.
Mt. Gox, the third-biggest bitcoin exchange, has seen its popularity as a seller and buyer of bitcoins drop, with the emergence of competitors like BTC China, Bitstamp and BTC-e. The company has seen other issues with its services after experiencing high-profile DDoS (distributed denial-of-service attacks) hacking attacks, which slowed down user experience.