Posts Tagged ‘Mt. Gox’

An existentialist problem for virtual Bitcoins

February 26, 2014

“Virtual” has no connotations of having any virtues. As long as things “virtual” remain in the abstract world they work.

Virtual books can be read. Virtual commerce is fine for recording transactions. But virtual foods are indigestible and unsatisfying. A virtual house doesn’t keep out the rain. And virtual currencies are useless if they cannot be translated into the real world.

I am not convinced that virtual currency offers me anything more than I get with electronic transactions with real money. At least the real currency has a value which is somewhat connected to things happening on the ground (even if speculation does occur). The Bitcoin however has an exchange value solely dependent upon somebody’s imagination.

(Reuters)Mt. Gox, once the world’s biggest bitcoin exchange, abruptly stopped trading on Tuesday and its chief executive said the business was at “a turning point,” sparking concerns about the future of the unregulated virtual currency. ……. The website of Mt. Gox suddenly went dark on Tuesday with no explanation, and the company’s Tokyo office was empty – the only activity was outside, where a handful of protesters said they had lost money investing in the virtual currency. …

…. Investors deposit their bitcoins in digital wallets at specific exchanges, so the Mt. Gox shutdown is similar to a bank closing its doors – people cannot retrieve their funds.

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. ……. The digital currency has caught the eye of regulators concerned with consumer protections and bitcoin’s use in money laundering. ….

…… Mt. Gox halted withdrawals earlier this month after it said it detected “unusual activity on its bitcoin wallets and performed investigations during the past weeks.” The move pushed bitcoin prices down to their lowest level in nearly two months.

Even with the halt on February 7, Mt. Gox still handled more transactions than any other in the past month. Over the last 30 days, Mt. Gox has handled more than one million bitcoin transactions denominated in dollars, or about 34 percent of activity, according to Bitcoincharts, which provides data and charts for the bitcoin network.

Critics of the exchange, from rivals to burned investors, said the digital marketplace operator had long been lax over its security. Investors in bitcoin, who have endured a volatile ride in the value of the unregulated cyber-tender, said they still had faith in the currency despite the problems at Mt. Gox.

“Mt. Gox is one of several exchanges, and their exit, while unfortunate, opens a door of opportunity,” The Bitcoin Foundation, the digital currency’s trade group, said in a statement. “This incident demonstrates the need for responsible individuals and members of the bitcoin community to lead in providing reliable services.” …….

Bitcoin value Feb 2014

Bitcoin value Feb 2014

The exchange rate applying is entirely speculative and – it seems to me – purely a result of manipulation. It is not anchored to anything real  – but why would it be?

After all it is only virtual.

Advertisements

%d bloggers like this: