Noah J Nelson on Tuesday, Feb. 25th
How do you lose an entire mountain full of money? That’s what the bitcoin community is asking itself this morning as the largest exchange of the crypto currency–the Tokyo based Mt. Gox–has gone offline, and possibly out of business.
Reuters has some of the grimmer details:
A document circulating on the Internet purporting to be a crisis plan for Mt. Gox, said more than 744,000 bitcoins were “missing due to malleability-related theft”, and noted Mt. Gox had $174 million in liabilities against $32.75 million in assets. It was not possible to verify the document or the exchange’s financial situation.
If accurate, that would mean approximately 6 percent of the 12.4 million bitcoins minted would be considered missing.
Peer-to-peer technologies are really good at disrupting, or at least threatening, entrenched power structures. The Arab Spring, Ukraine and Venezuela are all evidence of this. What they are not so good at is providing a stable and secure enough foundation to run vital infrastructure like currencies.Not yet at least.
It isn’t even necessarily the technologies themselves that are the fail point. It’s people. A peer-to-peer exchange only works fairly when all the participants are committed to that principle. If there’s one thing we can count on out of people it is that some will seek their own advantage at the health of a system, even if it bring the whole system crashing down around them. It just might not be possible to write code that can adapt to this facet of human nature.
The bitcoin saga is playing this out in real time. The value of the currency fell as much as 23% (according to Forbes) but has since recovered much of the lost value as trader’s enthusiasm holds.