Monday, April 8, 2013, Bitcoin's Greatest Foe

Original known as "Magic The Gathering Online eXchange", has become a huge annoyance to bitcoin enthusiasts.

Because it was the first exchange to gain major acceptance, mtgox has become the de facto standard for bitcoin value in USD.  While the exchange fee of 0.6% seems generously low, with the volume of transactions going through it every day the website is making a small fortune.

The problem is not the fee, but rather what is being done with that money.  For all the money that is taking in, the service is failing to scale adequately.  At times, once or twice a week on average, crippling lag infects the trading engine.  We are talking hundreds of seconds of lag, sometimes five or more minutes of delay.  This invariably causes a panic among traders, and bitcoin value briefly crashes.  When the lag clears up, value eventually returns to it's previously level, but this is not a consolation for those who sold low during the slowdown.

In addition to the database engine lag, there is currently a line of over 15,000 users waiting for account verification, with estimates of a week or more for a new user to get verified.  Without verification you can't withdraw or deposit cash.  This is exasperated by the fact that bitcoin value is rising so fast.  For example, you attempt to verify your account when you have $5000 ready to buy 25 bitcoin for $200 each. When your account is finally verified a week later, you find that you can only purchase 15 bitcoin because value increased to $330.  You  lost out on 10 bitcoin due to mtgox's incompetence.

What is the solution?  A better exchange.  Or better yet, multiple better exchanges.  Competition is good.  Mtgox being the default go-to for bitcoin exchange and valuation is unhealthy and bad for the bitcoin community.

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