The Great Crypto Stagecoach Robbery

[ed. See also: Mt. Gox Topples.]

Anyone holding Bitcoins—or pretty much any cryptocurrency, really—has taken a substantial hit in the last few months, with the exchange rate of dollars to Bitcoins dropping from a high of around $1200 last November to around $550 today. But it's possible that those whose Bitcoins were parked at the long-troubled Mt. Gox exchange have suffered a near-wipeout, or even a total one, in what may have been the catastrophic theft of some 744,000 Bitcoin from that exchange.

Mt. Gox was the first big Bitcoin exchange; as such it attracted the most attention, the most traffic, and the most trouble. It was hacked repeatedly because, at one time, it was simply where all the Bitcoins were. Most knowledgeable Bitcoin enthusiasts took off for more modern, more reliable exchanges long ago. (...)

Mt. Gox CEO Mark Karpeles, who is apparently holed up at home in Tokyo with his cat, has since verified in an IRC chat that the document is "more or less" legitimate, though it was not prepared internally by his embattled firm. He says that he is still trying to save the company: "'Giving up' is not part of how I usually do things."

You could look at the Mt. Gox disaster this way: imagine that ordinary consumer banks had only just been invented five years ago, and they'd since exploded in popularity. All of a sudden, Bank of America's internal systems are alleged to have been broken all along and every penny that was held there is gone. The money in all the other banks is okay, seemingly—but now, the whole banking system looks very rocky and untrustworthy. How to trust any bank, if one of the biggest lost everything?

That's basically what has happened to Bitcoin over the last few weeks, since it became clear that Mt. Gox was having trouble processing transactions last November. (...)

There has been a temptation to mock the libertarians who make up a lot of Bitcoin's most passionate following, and to blame the unregulated joys of the free market for Bitcoin's current problems. But just take a look at the stock market, the startup world, the bankruptcy courts, the markets for distressed debt, the art market, the real estate market, and any number of other markets (sure, basically all of them) where hopeful neophytes ripe for the plucking and clever participants eager to benefit from insider knowledge, plus quite a lot of plain cheats, are not hard to find. The most surprising thing about the Mt. Gox episode so far might be the resilience of Bitcoin prices, which might have been expected to take a much larger tumble in the face of the disaster.

by Maria Bustillos, The Awl |  Read more:

Image: uncredited