Video: NTDTV/Reuters
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Chart of Bitcoin prices via Bitstamp
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In the early days of Mt. Gox—when the entire market cap of Bitcoin was roughly zero—passwords were displayed in a web address (Photo: screencapture via Reddit / Imgur.com)
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Bitcoin exchanges, from "Beware the Middleman: Empirical Analysis of Bitcoin-Exchange Risk," by Tyler Moore and Nicolas Christin.
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A protestor confronts Mt. Gox CEO Mark Karpeles (Photo: screencapture of video by Jon Southurst)
The only way to keep it going is to have faith in bitcoin and trust in the institutions that keep it working. That faith and trust won't be about math, not just. That would be foolish: imagine a pilot flying only by his or her instruments without looking out the window at what's ahead—or a spy agency letting its technological capabilities exceed what's lawful. If Bitcoin is to remain true to its anti-establishment, decentralized premise, that faith and trust won't involve the Federal Government either. Bitcoin may be a great currency for donations and tips, but there won't be any bailouts.Instead, Bitcoin will continue to rely on a mix of some of the most sophisticated cryptography—in order to keep it functioning—as well as on a very human faith in the possibilities that the cryptogrphy allows, from decentralized banking to more efficient ways to pay, tip and donate money.That faith is being tested hard now. The value of a Bitcoin is less than half its peak last year and still in much flux; an untold number of Bitcoin users may have lost their cash for good or simply can't access their funds; and the entire system of Bitcoin may be compromised. But hope springs eternal in Bitcoinland. Based on that alleged internal document (which no one has been able to verify) and an internet domain registration, even Mt. Gox appears to intend to rise again as "Gox," with a new CEO and new software.There are some hopeful theories about Mt. Gox's demise. Could it's sudden closure conceal a larger, unknown plan to buy and reform the company and make it solvent again? Could China, where 30,000 Bitcoins have changed hands since Tuesday, quadruple the normal trading volume, boost the economy again? In a note on Tuesday, Bitinstant CEO Charlie Shrem, who stepped down from the Bitcoin Foundation last month amidst money laundering charges, said that he had spoken at length to Mark Karpeles "and the team" over the weekend, and "I see good news on the horizon for people who have funds stuck in MtGox (I also have funds in MtGox stuck)."No matter what, as in politics and as in games (Bitcoin relates to both), all the hope about the future of this alternative currency also comes with an unknown risk. That was the lesson that the libertarian Bitcoin evangelist Erik Vorhees urged in a note on Reddit on Tuesday night:… the lesson is not that we ought to seek out "regulation" to save us from the evils and incompetence of man. For the regulators are men too, and wield the very same evil and incompetence, only enshrined in an authority from which it can wreck amplified and far more insidious destruction. Let us not retreat from our rising platform only to cower back underneath the deranged machinations of Leviathan. The proper lesson, if I may suggest, is this: We are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world. This is the harsh truth. We are building the channels, the bridges, and the towers of tomorrow's finance, and we put ourselves at risk in doing so.Bitcoin's dream of digital cash—Tyler Winklevoss calls it "cash with wings"—may seem rooted in the Valley's technoutopia, but maybe it's as old as money and art: the belief that technology can make the world better, and that certain objects—wampum, Magic cards, Facebook stock, cryptocurrency, whatever—are worth having because they'll be valuable tomorrow and the next day and hopefully the next, until you decide to use them. And somewhere along the way, Bitcoiners might find themselves in an interesting conundrum, putting trust in a kind of middleman, while repeating one of the movement's old tenets: never put blind faith in your financial institutions.The story of Mt. Gox's demise sounded familiar enough: a financial institution deeming itself too big to fail and strategizing a bailout, not just for itself but for the good of the whole economy.