Stacy Summary: Recording stuff at the moment so no time at moment to digest; but, in the meantime, your thoughts.

• MtGox statement

Bitcoin transactions are subject to a design issue that has been largely ignored, while known to at least a part of the Bitcoin core developers and mentioned on the BitcoinTalk forums. This defect, known as “transaction malleability” makes it possible for a third party to alter the hash of any freshly issued transaction without invalidating the signature, hence resulting in a similar transaction under a different hash. Of course only one of the two transactions can be validated. However, if the party who altered the transaction is fast enough, for example with a direct connection to different mining pools, or has even a small amount of mining power, it can easily cause the transaction hash alteration to be committed to the blockchain.

Mt. Gox Blames Bitcoin – Core Developer Greg Maxwell Responds

So in other words, Gox should be able to account for this known problem by modifying their internal systems?

Yes, internal only changes should account for it. The only remaining issue for Mt. Gox’s application would be some tech support problems, where if a user’s transaction is mutated by a malicious party the txid ["transaction ID"] Mt. Gox told them to expect wouldn’t be the one that ultimately showed up in the blockchain.

It seems the market is reacting very negatively to the news. What advice would you give to the average Bitcoiner regarding this situation?

The challenge for me in offering something here is that this isn’t news to me – for years – and it’s never been a particularly large concern. This wouldn’t make the top ten list of dangers in the Bitcoin technology.

Back in April, we warned about MtGox:

Another core developer has this to say:

The #bitcoin protocol and network are just fine today. Let's not over-react about a technical issue in one custom implementation.

— Jeff Garzik (@jgarzik) February 10, 2014