Bitcoin - I Hardly Knew Ya

I first heard of Bitcoin when the Free Software Foundation announced they would start accepting it for donations. Before long another story about Bitcoin appeared in my news feeds. Then another. And another. Then the new currency got a black eye, and finally, the Electronic Frontier Foundation stopped accepting donations of it. You know something is on very shaky ground when a non-profit will no longer accept donations of it.

Bitcoin began life just two short years ago as what some may characterize as an experiment in a new currency. It was to be one that wasn't tied to any country currency and demonstrated the characteristics of rising or decreasing in value somewhat like a stock on an exchange. Perhaps the best advantage of using Bitcoin currency was the ability to conduct purchases anonymously.

That latter point was driven home in an article on highlighting how many Bitcoin users were using their anonymous currency to purchase illegal drugs and other outlawed commodities such as incandescent light bulbs. That eye-opening article lead to an increase in the exchange rate of Bitcoin units, but also brought it to the attention to some of the same lawmakers that outlawed the incandescent light bulbs. With legitimate concerns such as illegal drug and prostitution activity, these senators and key justice department figures are seeking to shut down the Silk Road, the anonymous site used to sell and purchase illegal goods, and investigate how to castrate Bitcoin. Bitcoin is used for numerous legal tranactions as well, much like Bittorrent, such as donations to non-profits or paying for IT services. Some think of it as an investment. This chart shows the rise and fall of Bitcoin exchange rates coinciding with the story and subsequent hack and theft of Bitcoin user account data.

On June 19 hackers broke into and stole the database of accounts from Mt. Gox where most of the Bitcoin activity originated. When the news broke, many Bitcoin holders dumped their "coins" and combined with the flood of stolen coins sent the exchange rate back down to almost nothing. Mt. Gox immediately locked their system down. Rollbacks are being implemented, and accounts are being restored. Mark Karpeles, a Mt. Gox spokesman, posted that exchange rates should also be back to approximately $17.50 when everything is back to normal.

Not just because of the hack into Mt. Gox but for several reasons, the Electronic Frontier Foundation decided to no longer accept Bitcoin donations to help fund their civil liberties group. Among the other issues cited stem from legalities of using the currency and trying to convert Bitcoins into real cash. The EFF also did not want to be construed as endorsing Bitcoin or Mt. Gox.

As of this writing, the Free Software Foundation is still accepting Bitcoin donations. Nevertheless, the future of Bitcoin is very uncertain. Even if folks can figure out where they might use this obscure currency, can get over their fear of volatility, and discover how to purchase or earn some Bitcoinage; those in power will surely find a way to destroy anything they don't understand or can't control and tax.

Load Disqus comments