Stellar (XLM)’s Jed McCaleb Shares His View on Early Mt. Gox Exchange Challenges with Moving Fiat
Back in 2014, Mt. Gox was deemed the biggest cryptocurrency exchange worldwide with a little shy of 80% of all bitcoin transactions taking place in the exchange. Unfortunately, a massive hack resulting in the loss of some 750,000 BTC – belonging to both the firm and investors – forced the exchange to go bankrupt.
At the time of the hack, it was considered massive, as the total amount lost came out to about 460M Euros or USD$3B. Based on the claims made, Mt. Gox is still trying to recover funds belonging to investors!
Mt. Gox was originally co-founded by Jed McCaleb, who is now famously known for playing a significant role in the project, Stellar. At some point in time, the exchange was passed down to Mark Karpeles, and as per McCaleb himself, the decision to do so was mainly because of the “amount of effort that you need to put into security,” something he did not want to do.
In an interview with What Bitcoin Did, McCaleb shared his point of view on cryptocurrency exchanges of the past, its similarities with that of the present and Mt. Gox (https://www.whatbitcoindid.com/podcast/jed-mccaleb-on-the-creation-of-mt-gox).
According to McCaleb, a possible challenge that led to Mt. Gox’s doom is as follows:
“Honestly, the main challenge with exchanges then and still today is getting fiat […] that is the roadblock for how successful you can be and how much money people can put through there.”
He added that it is not that enticing considering that you’d be dealing with,
“APIs of banks that are old and crappy, and like and you know or just like random integrations to different payment networks.”
When asked specifically in relation to Mt. Gox’s handling of fiat, McCaleb shared that, “PayPal, Liberty Reserve, and Big Wires,” were used. But the use of PayPal supposedly backfired on McCaleb because, at the time, exchanging virtual currencies were not allowed.