Today, Mt. Gox, reportedly the largest and best trusted of the Bitcoin exchanges, vanished entirely. They didn’t just halt trading, they took everything offline and the name on the url seems to have been sold.
And over 340 million has gone missing along the way. Needless to say, the price of Bitcoin has tumbled (don’t expect that to last, however) and a lot of people seem to be rethinking their decision to jump on the Bitcoin Bandwagon.
The problem, however, isn’t with Bitcoin itself. The virtual currency is itself sound, still (as far as I know) un-hackable and non-counterfeit-able. The problem is with the exchanges and the techniques used to store, trade and sell Bitcoin. Much of it is probably due to the speed with which Bitcoin has gone viral. You’re seeing it mentioned in TV shows (even ones targeted at older ladies with cats, like Castle) on the news, the cat is out of the bag and what previously was a niche trading market is now going the way that baseball cards, comic books and that creepy old vase you found in great-auntie Aida’s attic. It’s gone insane. Millions of dollars are being shoveled into Bitcoin exchanges and (for better or worse) the common-man investors are entering the market, bringing with them a limited understanding of how Bitcoin works. The exchanges that might have been able to slowly upgrade themselves and their security to accommodate a slow, reasonable adoption of Bitcoin as a currency, are now beset from both sides, from buyers clamoring to sign up and from malicious opportunists looking to exploit the flaws in the system.
This type of aggressive exploitation is not unique to Bitcoin either. A quick stroll through the history of currency and exchanges in general will reveal that we are just seeing updated versions of the kinds of scams and hacks that have plagued every new transnational method. These kinds of problems have been solved before, and when the Bitcoin exchanges solve their generations issues, then the currency will be ready for global adoption.