Wednesday, February 26, 2014

What Is Bitcoin and Its Current Crisis?

The virtual currency’s once largest exchange, Mt. Gox, has abruptly shut down. A Bitcoin expert explains the potential impact.
What will become of Bitcoins?
Problems at the Tokyo-based Mt. Gox Bitcoin exchange, once the world’s largest, have come to a head, leaving the virtual currency and peer-to-peer payment system in a state of flux and threatening to undermine much of the acceptance Bitcoins have garnered over the past year or so. The Mt. Gox Web site has been shut down, and the organization’s Twitter feed has been cleared amid reports that the exchange was hacked, resulting in the theft of hundreds of thousands of Bitcoins.

Bitcoin value fluctuates, but currency conversion Web sites indicate that the more than 744,000 Bitcoins taken could be worth as much as $386 million as of Tuesday. Details are scarce, particularly with Mt. Gox having gone dark, but if that number is correct it means about 6 percent of the 12.4 million Bitcoins created since the currency’s inception in January 2009 have been taken out of circulation.

Mt. Gox’s fall has been messy, much to the chagrin of the rest of the Bitcoin community. The exchange claims that the cybertheft of Bitcoins from its computers has taken place over a period of years and is at least in part the result of a flaw in the Bitcoin software. Bitcoin developers dispute Mt. Gox’s claims that their software has inherent security flaws. Meanwhile, despite being a founding member of the Bitcoin Foundation that advocates the virtual currency, Mt. Gox on Sunday vacated its position on the board of directors. All of this has helped sink the value of Bitcoins on other exchanges.

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