As you may have heard, the world's biggest Bitcoin trader, Mt.Gox, went offline late Monday, leaving "investors who gambled on the digital currency" at risk of losing "millions of dollars." John Cassidy, of The New Yorker explains how it happened.
In case you are a bit confusedI know I amlets just go over that again. Bitcoin is based on cryptography. And yet, as far back as 2011, when it was largely the preserve of drug dealers and software geeks, some developers and entrepreneurs associated with it were already aware of a potentially serious vulnerability at the heart of the electronic-accounting system that constitutes its essence. But they didnt do anything about it, and some of them, including, todays events suggest, Karpeles and perhaps some of his colleagues at Mt. Gox, took steps that exacerbated the problem. Meanwhile, they promoted Bitcoin as a safe and secure medium of exchange that would eventually allow people all over the world to bypass the costly banking system.
Of course, that vision may yet come to pass. With venture capital pouring into the sector, and with even the likes of Ben Bernanke saying that virtual currencies could perform a useful economic function, Bitcoin still has plenty of boosters. Mt. Gox is one of several exchanges, and their exit, while unfortunate, opens a door of opportunity, the Bitcoin Foundation, which until a few days ago numbered Karpeles among its directors, said in a statement. This incident demonstrates the need for responsible individuals and members of the bitcoin community to lead in providing reliable services.
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