The Bitcoin bug threatening the web’s favourite cryptocurrency

Top Bitcoin exchange MtGox has released an update on the issue that saw Bitcoin prices crash last week.

MtGox have discovered a critical flaw with Bitcoin, that every exchange is now having to deal with. That fault threatens the functioning of the digital currency.

The problem is known as “transaction malleability”.

Here’s their non-technical explanation:

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. Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent.

Bitcoin’s core development team and MtGox are working with each other to deal with the fault.

The technical difficulties have hit Bitcoin prices in two ways, as fears over the technical fault and the removal of MtGox have weighed on prices.

The so-called “MtGox premium” has been removed (Bitcoin prices have almost always more expensive on the MtGox exchange), removing an arbitrage opportunity for traders.

MtGox say that the issue must be put in perspective, and that “it’s important to remember that Bitcoin is a very new technology and still very much in its early stages.”

Update: Bitcoin tumbles over 20pc on MtGox update