Bitcoin Open transaction

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With the tremendous growth of the value of Bitcoins over the past several years, many have been creating cryptocurrency wallets, doing Bitcoins transactions, used Bitcoin exchanges, and started Bitcoin mining operations.

But while the Mt. Gox situation is enough for many to abandon Bitcoin altogether, it’s important to realize it’s too soon to assume that Mt. Gox failed to keep customer Bitcoins safe because of the Bitcoin system itself.

Of course, like any banking system, Bitcoin is not without flaws and requires vigilance from anyone dealing with currency and transactions. One of these supposed faults is the transaction malleability feature, which is confusing for many people, and could be potentially misleading as to the true problems at Mt. Gox.

Many, including Mt. Gox, have cited transaction malleability, a core feature of Bitcoin, as one of the main reasons for its problems. And while this can lead to transaction mistakes that send Bitcoins to criminals, it looks like transaction malleability isn’t at the root of Mt. Gox’s problems because it’s unlikely that it could be exploited at such a large volume.

Transaction malleability basically allows small changes to take place in legitimate transactions without invalidating them and without having to access private keys. In Bitcoin, this means users can change the unsigned transaction ID accompanying each transaction – during a very short window and under limited conditions – but in a way that can add confusion.

In an interview with CNN Money, Bitcoin Open Source Project core developer Jeff Garzik said transactions can be mutated for valid reasons but they can also introduce some ambiguity that can be exploited. A legitimate mutation would be, for instance, a crowdfunding application where multiple users collaborate on a transaction, requiring multiple transaction IDs.

Less legitimate mutations could be ones where the recipient changes the transaction IDs, so that it looks like the money didn’t transfer. Then, the sender or recipient can complain to the exchange that they never received the currency and convince them to send it again.