Three Silver Linings In Bitcoin" s Current Problems
This year has not begun well for bitcoin. Several events have created an expanding public perception that bitcoin is not ready for prime time. While the digital cryptocurrency might be down, it"s not out. Detractors, hold off upon popping the champagne corks just yet.
Problem started in late 2013 when regulators discontinued Silk Road, a site suspected of being the eBay of ban transactions, and found a massive cache of bitcoins. To worsen things, a Bitcoin Foundation member was detained early in 2014 on alleged money laundering charges. This further tightened the fear that bitcoin's pseudonymous nature makes it easy to fund ban activities and launder money.
Then this month, Mt. Gox, the world's biggest bitcoin trade, suspended every bitcoin withdrawals. Primarily blaming a bug in the bitcoin software, this was the most recent in a string of problems for the exchange including consumer complaints of slow withdrawal requests, the united states government seizing $5 million of Mt. Gox funds over alleged noncompliance of money laundering laws and a $75 million charge from a ex business partner.
Not unexpectedly, MasterCard's CEO crowed of late. He was probably relieved that a potential low cost challenger to the credit card duopoly is dying of self-inflicted lesions and confident that they can go on raking fees of three to four percent on all transactions.
But to pay attention on these problems ignores three silver linings.
First, bitcoin's public register together with its pseudonymous nature helps regulators and law enforcement catches the bad men doing bad things. Cash has no such register and ban transactions are normally completely anonymous. Further, regulators and law enforcement seem to have adequate basic tools in their current regulatory arsenal to do their jobs. Fresh regulations and laws may ultimately be needed, but what is on the books seems to be working to grab some infractions.
Second, the technical crisis that caused Mt. Gox to suspend bitcoin withdrawals was due to Mt. Gox, not bitcoin. As early on a 2011, bitcoin developers warned that firms might be defenseless to attack if they did not customize its software properly to account for bitcoin's code written for transaction verification. Successful attacks thwarted some transactions from confirming. Mt. Gox chose the cheap and easy course and paid the price. The virtual currency development team is working with the exchanges to develop a fix.
Third, despite of whether Mt. Gox lives on, there are other exchanges that will happen. It rose to the top since it was successfully the only place to go. But due to competition, consumers have been migrating to other exchanges that have better consumer service, more resources as well as improved technology. The distinct pro is that that bitcoin's open-source technology arena offers are that its success is not dependent on any one firm.
Is this the starting of the end of bitcoin? I am not curtained, but I would not gamble on it. I am even more confident that this is not the end of digital currency but instead just the starting.
Problem started in late 2013 when regulators discontinued Silk Road, a site suspected of being the eBay of ban transactions, and found a massive cache of bitcoins. To worsen things, a Bitcoin Foundation member was detained early in 2014 on alleged money laundering charges. This further tightened the fear that bitcoin's pseudonymous nature makes it easy to fund ban activities and launder money.
Then this month, Mt. Gox, the world's biggest bitcoin trade, suspended every bitcoin withdrawals. Primarily blaming a bug in the bitcoin software, this was the most recent in a string of problems for the exchange including consumer complaints of slow withdrawal requests, the united states government seizing $5 million of Mt. Gox funds over alleged noncompliance of money laundering laws and a $75 million charge from a ex business partner.
Not unexpectedly, MasterCard's CEO crowed of late. He was probably relieved that a potential low cost challenger to the credit card duopoly is dying of self-inflicted lesions and confident that they can go on raking fees of three to four percent on all transactions.
But to pay attention on these problems ignores three silver linings.
First, bitcoin's public register together with its pseudonymous nature helps regulators and law enforcement catches the bad men doing bad things. Cash has no such register and ban transactions are normally completely anonymous. Further, regulators and law enforcement seem to have adequate basic tools in their current regulatory arsenal to do their jobs. Fresh regulations and laws may ultimately be needed, but what is on the books seems to be working to grab some infractions.
Second, the technical crisis that caused Mt. Gox to suspend bitcoin withdrawals was due to Mt. Gox, not bitcoin. As early on a 2011, bitcoin developers warned that firms might be defenseless to attack if they did not customize its software properly to account for bitcoin's code written for transaction verification. Successful attacks thwarted some transactions from confirming. Mt. Gox chose the cheap and easy course and paid the price. The virtual currency development team is working with the exchanges to develop a fix.
Third, despite of whether Mt. Gox lives on, there are other exchanges that will happen. It rose to the top since it was successfully the only place to go. But due to competition, consumers have been migrating to other exchanges that have better consumer service, more resources as well as improved technology. The distinct pro is that that bitcoin's open-source technology arena offers are that its success is not dependent on any one firm.
Is this the starting of the end of bitcoin? I am not curtained, but I would not gamble on it. I am even more confident that this is not the end of digital currency but instead just the starting.