Bitcoin the Internet Currency Under Fire

Bitcoin The InternetMt. Gox, which was once commonly known to as the Internet’s premiere Bitcoin source, is now under fire. The company has recently been forced to suspend all transactions, and the once-largest exchange of Bitcoin digital currency is facing a growing number of increasingly angry customers.

Introduced on January 3 of 2009, Bitcoin has risen to become a widely popular form of decentralized digital currency. The open source software behind the payment system was created by Satoshi Nakamoto, and uses cryptography to manage the processes behind its generation and distribution. The currency is created through the process of mining, in which participants work to solve complex algebraic equations, or by verifying and record payments. Bitcoin can also be obtained by trading goods, services, and other forms of currency.

Due to the versatility of these exchanges, Bitcoin has been tied to multiple instances of illegal activity, which has placed the Internet currency under fire by many organizations. In 2013, when the Federal Bureau of Investigations shut down the online Black Market known as Silk Road, a total of 144,000 Bitcoins were seized, being valued at $28.5 million at the time. Outside of the United States, countries like China are far less lax on the system. The sovereign state has forbidden the exchange of Bitcoin for local currency, and warnings from the European Banking Authority advise against the use of Bitcoins due to their lack of consumer protection, and the inability for reimbursement in the event of theft.

Magic The Gathering Online eXchange, more commonly known as Mt. Gox, was founded in Kyoto, Japan back in 2009. The company was originally established as a trading card exchange, but as of 2010 it has been rebranded to service the growing market of Bitcoin users around the world. As of August 2013, Mt. Gox was responsible for handling 60 percent of all Bitcoin exchanges in the world, but along the way it has been involved in several trading incidents and a host of other issues.

The company has been forced to relinquish over $500 million of its financial assets over to U.S. regulators, which has resulted in delays spanning months for customers who hold American currency in the exchange. In addition to this, Mt. Gox reports that, due to a large amount of withdrawal request within the company’s servers, a technical glitch has arisen that has effectively prevented the exchange from completing customer transactions for the digital currency as well. The company reports that its team will provide updates as to the status of this matter on Monday, February 10, but this assurance has done little to quell the tide of angry customers who have been inconvenienced by this incident.

As a result of these technical issues, the value placed on bitcoins has dropped to below $690 per unit. This is a significant fluctuation compared to November, where the value was placed at over $1000, however, the units recovered to $730 a mere hour after the initial announcement was made by Mt. Gox. This volatility in the Bitcoin system, coupled with Russia placing it under fire by banning what they suspect to be a tool used to launder money, shows that the Internet currency still has a long way to go before reaching a secure place in the global economy.

By Darrell Purcell

Sources:
CNN
Wired
RT

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