Bitcoin will survive despite MtGox debacle

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Bitcoin is here to stay, despite a little hiccup in Japan.

The digital currency, seen by its promoters as a super-efficient way to pay online, has suffered a setback with the Tokyo-based MtGox business, that once boasted it was the largest bitcoin exchange in the world, evaporating, at least for now. This would mean little if it could explain where bitcoins worth several million pounds held in its databanks have gone. The owners say they have yet to get an explanation.

There is a strong rumour, based on a supposedly leaked report from the exchange, that theft accounts for around 744,000 missing bitcoins, or 6% of the entire world stock. With a bitcoin valued at more than $500 before the story broke, the theft could leave users more than $370m out of pocket.

Such a huge loss would engulf most businesses in a welter of lawsuits. The digital currency was already battered by criticism pointing out its popularity with criminal gangs seeking to evade regulators or anti-fraud police. Critics also highlighted its lack of government support and the volatile price, which soared above $1,200 before Christmas before falling back below $420 on Tuesday.

Techies claim they are the equivalent of Klondyke miners with a pick and shovel chipping away at rocks dotted with ore. In a sense that is how they come by their booty, except that the chipping is done by an algorithm and the whole exercise performed on a PC, perhaps from the safety of their bedroom. In a masterstroke, the currency's creator set a limit on the amount that could be generated, making everyone think that its limited supply would mean the price can only go up.

That part of the plan at least seems to be unravelling. But even if the MtGox debacle hurts bitcoin beyond repair, it will be back in another guise – if only because digital currencies give clever people who lack the interpersonal skills to make it in business a chance to make a quick million bucks.

Until the skills and cunning of bitcoiners can be redirected into something more useful, they will keep at it.

Powered by Guardian.co.ukThis article was written by Phillip Inman, economics correspondent, for theguardian.com on Tuesday 25th February 2014 17.18 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

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