Since its inception on January 3rd, 2009, Bitcoin has promised (or threatened, depending on how you look at it) to change the way international finance and transactions are done. Bitcoin is a non-government regulated currency that generates a fixed and decreasing amount of new coins every ten minutes (until the supply eventually stops increasing).
The currency has been highly popular with several groups. Libertarians and others distrustful of “fiat” currencies love the fact that Bitcoin is not regulated by any government, and that transactions are more or less untraceable if you want them to be. While this has led to some illicit use (such as the online black market Silk Road), it appears that the majority of Bitcoin users are more interested in simply keeping their transactions private. “Bitcoin is a unique technology. Even if this specific currency fails, the technology will almost inevitably be used to create another more secure and more robust digital currency,” said technology expert Jason Hope. Indeed, the Bitcoin “block chain” technology has already been used to create dozens of competing digital currencies, though none have become as popular or a valuable as Bitcoin.
Technologists love Bitcoin as well, though not necessarily for the exact same reasons as libertarian groups. Technologists typically love digital solutions to everyday problems, and one could easily make the case that payment processing is far too inefficient in today’s world. Technologists like Bitcoin because it is highly efficient, with very low transactions costs, and (it was thought), impossible to crack or hack.
Unfortunately, bitcoin is doomed to fail , it appears as though Bitcoin is not as secure as once thought. Just a few weeks ago, it was announced that Mt. Gox, once one of the largest global Bitcoin exchanges, went bankrupt. While it is unclear whether the Japan-based company was guilty of fraud or simply the victim of a highly effective hacking attack, the bottom line is that over 750,000 Bitcoins, with an estimated value of $500 million USD, were lost instantaneously, never to be recovered.
This event sent shockwaves through the Bitcoin community, and the price of the ever-volatile digital currency dropped significantly before partially recovering in the following days. Bitcoin holders, Bitcoin miners, and the community at large began to wonder whether this meant the end for the burgeoning digital currency. There were even calls by some government officials in the United States and elsewhere calling for the ban of the “dangerous” digital currency.
While there is no question that the failure of Mt. Gox is significant and will permanently change the landscape of global digital currencies, it is unlikely to spell the end of digital currencies or even Bitcoin in particular. Despite the massive losses many in the Bitcoin community faced, they remain confident in the ability of the digital currency to serve as a safe and secure method of transaction in the years to come. However, it also appears far more likely now that government regulations will begin to creep in to the previously unregulated currency. However, the events at Mt. Gox will probably make government regulation far more welcome than it might have been just a few short months ago.
Bitcoin is doomed to fail
As it stands today, Bitcoin has all but recovered from the Mt. Gox fiasco. The market capitalization of the digital currency is now at about $8.3 billion, and the price of Bitcoins is solidly above $600, which is more or less where the digital currency stood before the collapse of Mt. Gox. Proponents of an “unregulated” currency have learned an important lesson about the risks of just such an unregulated market, and many big players in the Bitcoin community are already working openly with federal regulators to make Bitcoin a safer and secure digital currency option in the future. At the end of the day, Bitcoin is not destined to be a safe haven for drug dealers and other black market players who are looking to fly under the radar, but instead will likely serve as an efficient payment processing and wealth storage method for individuals looking for an alternative to traditional banking options. Bitcoin will also likely serve as a less expensive alternative to services like PayPal, thanks to its ability to cut out the middle man entirely.
Amy Taylor is a business and technology writer. Amy began her career as a small business owner in Phoenix, AZ. She enjoys writing about business technology trends. When she isn’t writing, she enjoys hiking with her Alaskan Malamute, Sam.
