Bitcoin is two things at once: A) an interesting experiment that will largely drive the future of digital grey-market currencies and B) a fad among that guy from your high school who never grew out of his Ayn Rand phase. To this guy, Bitcoin was the future! Bitcoin was going to free us from the tyranny of having to pay for government services! Bitcoin would show we didn’t need all those pesky “currency protections” and “financial market regulations!”
Guess what! Now he’s screwed!
Mt.Gox, which you might remember got in hot water with the US government for not filling out a form properly, is currently completely closed for business. If you had Bitcoins with them, you can’t get at them. There’s a lot of discussion about why, precisely, Mt. Gox is offline, but the rumor, according to Valleywag, is essentially that a company that used to exist to trade collectible cards for a game is, shockingly, not that good at protecting people’s money:
According to a leaked document, purportedly from Mt.Gox itself, the exchange has lost 744,408 BTC (around $350 million) in theft and fraud that was never reported, and has nowhere near enough real money to satisfy all its existing customers who want to pull their virtual money out. In short: Mt.Gox users are f***ed, and Mark Karpele, the exchange’s CEO, is gone without owing anything to anyone.
This is unconfirmed, we should note, but essentially what Gox is trying to do, in shutting down their site, is prevent a bank run. You remember bank runs, right? From high school? When a poorly regulated financial system allowed banks to crash, costing everybody who didn’t get their money out in time a fortune? Those? Oh, and did we happen to mention that the government of Japan, where Bitcoin is based, refuses to help anybody sucked into this because they basically think Bitcoin is Monopoly money?
The best case scenario here is that Mt. Gox comes back online and gives back all the Bitcoins it’s stored, which it can technically do because they’re just basically lines of code, not minted gold coins. The worst case scenario is $350 million has vanished completely, untraceably, and everybody who held those coins can basically just impotently rage on Reddit.
This was nothing more than a matter of time: Bitcoin is absurdly volatile and Bitcoin bank robbery happens on a near daily basis. And we do feel bad for those who lost real money to this fad. But when the next digital currency comes along, this should be something all involved keep in mind.
I want more like this!
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