MtGox will support wire transfers again soon

Bitcoin exchange MtGox wants to make transferring Bitcoins to other addresses possible again soon. Due to a bug in MtGox’s implementation of the Bitcoin protocol, transfers of Bitcoins were temporarily not possible, causing the price on MtGox to go into a free fall.

Making Bitcoin payments on MtGox to other Bitcoin addresses has been banned since February 7, but that should change soon, according to a statement from MtGox. In the beginning, there will be a limited number of transfers per day to avoid problems. Before allowing transfers again, MtGox re-indexes the entire Bitcoin blockchain: all Bitcoin transactions ever executed.

The bug that MtGox suffered from is in its implementation of the Bitcoin protocol. Transaction malleability allows a third party to modify the hash of a new transaction without invalidating the signature. If the abuser is quick, his version of the two transactions can be validated. For providers of wallets and exchanges, it will appear that the transaction has not been made, because it does not appear with the original hash in the blockchain. Users can take advantage of spoofing the transaction IDs with rogue transactions. Nevertheless, a denial of service is the biggest risk of the problem in MtGox’s implementation of the protocol.