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Is Bitcoin Doomed?
Ian Eck | Photo: Courtesy Flickr | February 25, 2014
We look at three sides of the coin.
As you may have heard, Mt. Gox has gone the way of Mt. Vesuvius. After hackers exploited a major flaw in the code of the exchange, the company was forced to put a halt on all withdrawals. On Monday, the site went blank: the CEO resigned, they deleted their tweet history, and they're not picking up their phones. This is the digital equivalent of a bank slamming down the shutters and refusing to let people get their money. In this case, approximately 750,000 bitcoins ($367 million) are now unreachable, perhaps permanently.
Does this mean the end is near for digital currency? Or is this merely the handiwork of one exchange's wild incompetence? Should we abandon ship on this techno-libertarian experiment, or, with bitcoin prices at their lowest since November 2013, is now the perfect time to buy? Lets sort through the options.
The "GTFO you idiots, I told you so" mindset: All currency is a form of shared delusion. And let's face it: cryptocurrency is too abstract and too convoluted to capture the delusional trust of the general public. Sure, national currencies at their core remain mere pieces of paper, but those pieces of paper are backed by governments, tax systems, full-fledged armies. Meanwhile, we don't even know who created bitcoin, and everyone who backs it seems to be some sort of ne'er-do-well: hackers, drug dealers, money-launderers? No thanks. I'll keep my measly paper.
The "Pragmatic Believer" mindset: It's no surprise Mt. Gox went under. There were signs of incompetence from the beginning. Bitcoin is not at fault. We do not need regulation. There are no security issues if you're smart. Of course when you're trying to build a new financial order, the road will be bumpy. We all knew this going in, but the long-term benefits outweigh the short-term sacrifices. Keep your bitcoins safe. Don't use sketchy exchanges. And keep spending bitcoin to spread its value. Like a business, if you keep the core community of bitcoin strong, the growth will come.
The "I'm drowning in the Kool-Aid" mindset: Warren Buffet once said that we must "attempt to be fearful when others are greedy and to be greedy only when others are fearful." Well, Mt. Gox has fallen, and a lot of people are scared shitless. Now is the time to be greedy. We have shed the Gox-fat and are ready to move forward. In fact, a new exchange is being built in New York that intends to draw in the world's biggest financial players. It's being put together by startup-savvy SecondMarket, and early word claims that a number of big-time banks and financial companies are already in talks with the new exchange. In other words, bitcoin is about to go mainstream. Trust me. Buy now.