Last week Digiconomist featured an article on cryptocurrency exchange mcxNOW, which had lost 350 million Dogecoin due to failing to update to Dogecoin 1.8. The exchange was still accepting invalid Dogecoins from version 1.7, and allowed these to be traded against valid Bitcoins, even though this version had already been replaced two months earlier. As a result, the exchange announced that it would be forced to reduce the balances on Dogecoin deposits to match the amount of valid coins on the platform. Initially this “haircut” was indicated to amount to 85 percent of Dogecoin balances.
Shortly after the article by Digiconomist was published, the exchange released a new statement in which it was indicated that 135 Bitcoins (about 190 million Dogecoins) had been retrieved. Instead of an 85 percent haircut, the richest Dogecoin wallets would see their balances reduced by “just” 30 percent.
The main person behind the DOGE 1.8 theft has returned 135BTC to rectify the damage done by him on the 1.8 Network. This roughly translates to ~190M DOGE that can be returned to users, lessening the haircut from around 85% to about 30% for a handful of the richest users. The haircut will not be applied to users that don’t have significant DOGE holdings here, to put the burden on the richest users instead.
It appears that only a single person had the ability to perform the required updates, and was not available to do so due to a long holiday, which is what caused the delay in updating to Dogecoin 1.8.
There is only 1 person with any access to the admin side of the site, this is about to change to prevent future problems.
Digiconomist was also informed that the exchange would undergo some changes and allow more persons to have access to the platform’s systems. So far so good, but in the official announcement it was subsequently revealed that the exchange would be shut down for several weeks, in order to implement required changes.
mcxNOW will be going into a maintenance period beginning November 15 2014 and lasting at least some weeks to address some issues concerning wallet use and the number of system administrators able to resolve problems. We will also take this time to perform some feature requests from users.
Deleting remaining wallets
Apart from being taken offline for a while, it was also announced that all wallets remaining on exchange would be deleted when the maintenance period starts on November 15, 2014. Effectively, anyone with any currency left on the platform will lose them once this date passes.
All wallets here will be removed to make way for a new wallet system meaning you will need to withdraw all your cryptocurrency holdings prior to this cutoff point. Any coins left in mcxNOW at the cutoff point will be destroyed.
What makes the announcement even more remarkable is that mcxNOW does not send email notifications. A valid email is not required to use the service to begin with.
We do not store any personal information about any users or even require a valid email address to use this service.
According to mcxNOW this is in the best interest of the users, to fully protect their privacy.
We feel that sending emails from mcxNOW to you will leave a financial paper trail which may be used against you in the future. By keeping all communications “on site” there is no off site privacy leakage, basically making mcxNOW the digital equivalent of a Swiss bank account.
It does mean that if these users do not check on the mcxNOW website within the next three weeks, then they will lose any of the funds they have deposited on the exchange.
Not the first time
It is not even the first time the exchange decides to shut itself down for maintenance. The same thing happened almost one year ago, when all users were requested to withdraw their funds before the 20th of December, 2013. The owner then stated that he could no longer manage all parts of the exchange by himself and that he could “barely sleep” and was ” getting health issues, etc.” as a result.
mcxNOW is a custom coded exchange built 100% by one man in C++ . This means if anything has to be modified then only one person can do it.
Unfortunately the growth has been too fast to match with the support requirement as only one person can currently do all support. This is a burden of 200 to 400 emails a day among many requests on IRC and through chat. This makes development of mcxNOW nearly impossible without neglecting valid user requests through support.
Despite promising to expand the support team after taking the exchange down for required maintenance, it apparently was not enough to consider expanding the development team as well.
It should be noted that coins not withdrawn in time were simply carried over to the new version of the platform, unlike the current situation in which remaining wallets will be deleted. The reason for this difference is not known. A question on how the destruction of wallets would be made verifiable went unanswered as well. In combination with the lack of user notifications and the short period to withdraw coins from the exchange, along with the fact that little is known about the identity of mcxNOW’s owner, it has certainly become a very questionable situation.
Whatever the case, users should withdraw their holdings from the exchange as soon as possible, and avoid returning unless mcxNOW makes some serious and verifiable changes to its governance.