Developers fix Bitcoin software to prevent the next Mt. Gox

The developers who contribute to Bitcoin’s open source software are doing everything in their power to prevent another Mt. Gox fiasco.

Mt. Gox, formerly one of the largest Bitcoin exchanges, suffered a cataclysmic implosion when it announced it had lost more than $400 million in Bitcoin. The latest version (0.9.0) of the “Bitcoin Core” infrastructure software contains five changes intended to prevent transaction malleability attacks, which is the official explanation offered by Mt. Gox for the missing Bitcoins, according to Ars Technica.

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Malformed transactions appear similar to legitimate, previously processed transactions, fooling the Bitcoin software. Those illegitimate records didn’t sync with the Bitcoin blockchain, leaving a disparity between the actual location of the funds and the exchange’s records.

But now, thanks to tightened transaction rules, those “mutated transactions” can’t be relayed or mined. The new version also includes functions that report conflicting wallet transactions and instances of double-spending.

Wednesday’s release note stated:

“If you are running an older version, shut it down. Wait until it has completely shut down (which might take a few minutes for older versions), uninstall all earlier versions of Bitcoin, then run the installer (on Windows) or just copy over /Applications/Bitcoin-Qt (on Mac) or bitcoind/bitcoin-qt (on Linux). If you are upgrading from version 0.7.2 or earlier, the first time you run 0.9.0 your blockchain files will be re-indexed, which will take anywhere from 30 minutes to several hours, depending on the speed of your machine. On Windows, do not forget to uninstall all earlier versions of the Bitcoin client first, especially if you are switching to the 64-bit version.”

In a strange twist, Mt. Gox this morning announced that it has found an old wallet full of 200,000 Bitcoins, worth roughly $116 million.