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wtorek, 22 kwietnia 2014

At Mt. Gox bitcoin hub, 'geek' CEO sought both control and escape


Mark Karpeles, chief executive of Mt. Gox, attends a news conference at the Tokyo District Court in Tokyo February 28, 2014. REUTERS/Yuya Shino/Files

In June 2011, when customers of now-bankrupt bitcoin exchange Mt. Gox agitated for proof that the Tokyo-based firm was still solvent after a hacking attack, CEO Mark Karpeles turned to the comedy science fiction novel "The Hitchhikers Guide to the Galaxy".
During an online chat, Karpeles moved the equivalent of $170 million in bitcoin at today’s market rates - the virtual equivalent of a bank manager flashing a wad of cash in a wallet to establish credit. The gesture - with a sly wink to the "geek" culture Karpeles believed he shared with many of his 50,000 customers at the time, including an interest in coding, Japanese manga comics and science fiction - succeeded.
By moving 424,242 bitcoins, Karpeles, then 26, evoked the random number, 42, described as the "meaning of life" in Douglas Adams' sci-fi novel. "Don't come after me claiming we have no coins," Karpeles said, according to a transcript of that online discussion. "42 is the answer."
As the price of bitcoin soared from a few dollars to above $1,000, Mt. Gox grew to become the world's largest exchange for the digital currency, handling flows worth $3 billion in 2013, by the company's own reckoning.
But even as Mt. Gox boomed, French-born Karpeles seemed both keen to maintain total control of key operations and indifferent to commercial success, according to former staff and associates who spoke to Reuters, but asked not to be named because of ongoing investigations into the exchange's collapse.
Creditors who want to know how Mt. Gox at one point lost some $500 million worth of bitcoin and another $27 million in cash from its bank accounts, are seeking answers from Karpeles, who has spent recent days huddled in meetings with lawyers in Tokyo. [ID:nL1N0LX12S]
Mt. Gox and its lawyers declined repeated requests for comment for this article.
Lawyers for Karpeles told a U.S. judge last week that he was "not willing" to travel to the United States - as ordered by the judge to answer questions in a bankruptcy court - until his attorneys can "get up to speed" on a new subpoena from the U.S. Treasury Department. [ID:nL3N0N70BW] Karpeles doesn't want to go to the U.S. as he fears he could be arrested by authorities there, a person familiar with his thinking said.
"Regardless of whether it was a massive fraud or whether he was just grossly negligent, at the end of the day he's at fault," said Steven Woodrow, a lawyer representing a U.S. class action against Karpeles brought by Mt. Gox creditors.
Mt. Gox's bid to resuscitate its business was dismissed by a Tokyo court on Wednesday, and the court-appointed administrator said that meant the firm was likely to be liquidated. He added that Karpeles was likely to be investigated for liability in the exchange's collapse. [ID:nL3N0N82HQ]
THE MAGICAL TUX
In its bankruptcy filing, Mt. Gox said 750,000 customer bitcoins and another 100,000 belonging to the exchange were stolen due to a software security flaw. Karpeles has told others he has been hurt by accusations he masterminded the theft, and wants to return the bitcoins and cash to some 127,000 creditors.
Karpeles, who has said he is reluctant to appear in public because of safety concerns, relieves stress by driving around Tokyo at night in a Honda Civic he bought as a company car at Mt. Gox, people close to him said. He lives alone with his cat, Tibane, whose exploits he used to chronicle on now-deleted Flickr and YouTube accounts.
The cat's name, chosen by Karpeles' late grandmother, inspired the name of his first company, Tibanne, which he set up in October 2009 in Japan. His employer at the time, software platform distributor Nexway, had transferred him to the country earlier that year.
Born in Chenove, in the Burgundy region of France, Karpeles wrote his first computer program aged 10. He wrote on his blog that he "never really felt at home in France," and has not been back since moving to Japan five years ago.
Shy and fearful of confrontation, the self-proclaimed "geek" felt comfortable in Japan, where he could also indulge his love of manga, video games and cosplay - a combination of "costume" and "play", where people dress as characters from Japanese anime, graphic manga novels and video games. Karpeles found solace in online communities, where he was known as "The Magical Tux", a reference to the penguin mascot of open-source operating system Linux.
His escapism into virtual worlds was accompanied by what some former associates describe as a lack of interest in how running afoul of law and regulation could threaten his business and reputation.
According to blog posts Karpeles wrote in 2006, he was arrested twice in France before he was 21 for computer fraud-related charges. One resulted in a 3-month suspended sentence. French authorities in Tokyo said they had seen confirmation of one prior conviction, but did not have details.
In Japan, Karpeles was sued by a customer in 2012 who claimed he had paid 15,000 euros ($20,700) for a website to be developed that was never built. Tokyo District Court ruled last May that Karpeles had to return the money.
The U.S. Department of Homeland Security seized $5.5 million in Mt. Gox bank accounts in 2013, saying the exchange had been late to register as a money transmitter.
"A NICE EXPERIMENT"
Karpeles became interested in bitcoin when a customer of his web-hosting services wanted to pay in the digital currency. Unlike other early fans of bitcoin, Karpeles had no particular interest in the libertarian philosophy that drove many bitcoin adopters. Instead, he told Reuters in a 2013 interview, he was interested in the technology as a "nice experiment".
He met the founder of Mt. Gox, U.S. entrepreneur Jed McCaleb, on IRC, an online chat platform. McCaleb, nervous about regulatory scrutiny on bitcoin, wanted rid of the exchange and sold it to Karpeles in March 2011 for no upfront fee, people with knowledge of the deal said. Karpeles told others he had later paid McCaleb a small fee, calling it "a very good deal". McCaleb could not be reached for comment.
Mt. Gox's user base mushroomed from 3,000 to 50,000 within three months as bitcoin gained traction. Unable to keep up with customer support queries, Karpeles hired his first five employees in June of that year, shortly after the company said in public announcements that it believed one or more hackers broke into the exchange's database and drove the price of bitcoin down to zero.
Dazed by that security breach, a former employer said, Karpeles retreated to build a more secure trading platform but left the exchange offline, with thousands of emails from bewildered users unanswered until a group of bitcoin enthusiasts volunteered to come in to help. One was Roger Ver, who says he was stunned when Karpeles proposed they resume work on Monday rather than work through the weekend to solve the crisis.
"He wasn't ever focused on Mt. Gox like he should have been," said Ver.
As the exchange's business grew, Karpeles hired more staff to work in programming, customer support and user verification, eventually taking space in a central Tokyo office with 30 employees, with another dozen contractors overseas.
ROBOTS, EXERCISE BALLS
Karpeles wanted to be liked, three former employees say. He bought lunch for the entire staff and spent thousands of dollars on gadgets and equipment to make the office more "fun" - exercise balls for chairs, beer steins and robots. Late last year, in the middle of increasingly strained times for Mt. Gox, he spent an afternoon putting up a hammock in the recreation room.
But staff found it galling that the boss was buying these goodies even while he refused to give pay raises. They also became frustrated as they waited for Karpeles to authorise decisions or make progress on simple tasks. Developers, stuck without direct access to the Mt. Gox source code, resorted to playing video games, people inside the company at the time say.
Employees were also concerned that Karpeles' tight grip on all company affairs was causing a bottleneck: he was the only person who could access the exchange's bank accounts and bitcoin holdings and resolve requests by traders to cash out.
Former employees say they asked Karpeles to share the passwords to Mt. Gox's bitcoin wallets in case he became incapacitated or unable to access the data. He refused, leaving him as the only person able to piece together the passwords, written on paper stored at his home, the office, and an undisclosed location.
Karpeles' secrecy extended to the company accounts, which he refused to show to prospective investors who came to the company with proposals, according to former employees. Mandalah, a Tokyo consultancy that worked for Mt. Gox, was also frustrated by Karpeles' lack of interest in outreach and business growth, according to people with knowledge of the matter. Mandalah declined to comment.
As other competing exchanges developed more sophisticated trading systems, Karpeles diverted his attention from the exchange to buy an unrelated software company called Shade 3D and began to work on launching a 'Bitcoin Cafe' – which would accept the digital currency as payment - on the ground floor of the office, according to records and former staff.
Karpeles was planning to serve quiche and apple pies he'd made himself in the cafe, which would also showcase a point-of-sales system he had spent hours tinkering with, a former employee said. The cafe never opened.
($1 = 103.7200 Japanese Yen)

($1 = 0.7238 Euros)

Digging for answers: The “strong smell” of fraud from one Bitcoin miner maker



For many crypto-minded libertarians, Bitcoin is the future of money. But that dream hasn't been helped much by the numerous high-profile legal cases involving the currency in recent years:The Bitcoin Savings and Trust hedge fund collapsed; uncertainty fueled the implosion of Mt. Gox, the currency's largest exchange; and the high-profile Silk Road takedown is a treacherous story combining Bitcoin, drugs, and alleged murders.
For now, though, one company sits above all others when it comes to cultivating a new level of direct customer mistrust in the Bitcoin community: Butterfly Labs.
For the past year, the Kansas-based Bitcoin miner maker has been embroiled in numerous accusations of fraud. Customer orders, totaling millions of dollars, were significantly delayed or never fulfilled. Through it all, the company insisted that mere manufacturing delays were to blame. However, suspicion never died down. In fact, it's getting worse after it came to light that Butterfly Labs' largest shareholder—a man who is a company co-founder, current "Innovation Officer," and member of the board of directors—pled guilty in 2010 to one count of mail fraud (PDF) for his involvement in an international, multi-million dollar lottery scam.
Now, the company's critics have fresh ammunition because of this same executive. A federal judge in Kansas has ruled that the man in question, Sonny Vleisides, violated the terms of his probation in the lottery scam case. As a result, Vleisides’ probation—previously slated to end in September 2013—will now continue for another two years. This ruling is Butterfly Labs' least concern. In light of new details from the recently published transcript of that January 2014 probation hearing, the legitimacy of the Butterfly Labs operation could soon be decided once and for all.

“I’m on a good track now”

According to the United States Postal Inspection Service, victims collectively lost more than $25 million during the lottery scam Vleisides participated in. The government accused his father, James Ray Houston (who has since passed away in prison), of being the mastermind behind the entire scheme. As the USPIS wrote in January 2011:
According to the indictment, the victims were purchasing “positions” in tickets for lotteries that would be grouped together or “pooled” to buy larger blocks of tickets, thereby increasing their chances of winning. Funds received from victims were not used to purchase tickets, but to pay “winnings” to other victims, to fund the scheme, and to benefit the defendants. Victims were sent checks falsely represented as lottery “winnings;" however, the amount of the alleged “winnings” was far less than the amount the victim had sent in.
Vleisides and three others were also implicated in the scam, and he took a plea deal. In a post on Bitcoin Forum in September 2012, Vleisides described the experience this way:
After two and a half years preparing, we neared trial. The prosecutor calls for a meeting and offers me a deal. I can go home if I accept a single count of mail fraud and skip the trial. They would drop 23 charges and leave me with a simple postal violation (lesser count of mail fraud). I thought about it and it didn't take long for me to agree to get the shackles off. I signed and went home to my mother's house in Kansas City. I sat there looking at the wall for a long time. I didn't feel like leaving the house much. It was difficult to get over the emotional loss. My life was ruined. Mom got me an account on match.com and encouraged me to date. I met a wonderful girl and we had a little boy. We named him Indy. My life continued and I started to look for a new project to begin again. A fresh start. I'm on a good track now, trying to put the past behind me.
When Vleisides moved to Missouri, his case was transferred to that federal district for judicial supervision of his probation, which included this “special condition”:
The defendant shall not engage, as whole or partial owner, employee or otherwise, in any business involving loan programs, gambling or gaming activities, telemarketing activities, investment programs, or any other business involving the solicitation of funds or cold-calls to customers without the express approval of the Probation Officer prior to engagement in such employment. Further, the defendant shall provide the Probation Officer with access to any and all business records, client lists, and other records pertaining to the operation of any business owned, in whole or in part, by the defendant, as directed by the Probation Officer.
Vleisides recovered from his mental slump and soon helped start Butterfly Labs. According to a 2012 court document, Vleisides’ lawyers say that BFL “began on napkins, scraps of paper, and spare parts on his kitchen table," adding that "the hours that Mr. Vleisides has put in to develop the product have been long and arduous. There have been times when he arrived before the sun came up and left after it went down." While Vleisides was "remorseful about what has occurred," he was looking toward a better future, they added. "The justice system could not ask for more from a person that has been punished."

Revenue and a growing rap sheet

But on September 3, 2013, Vleisides’ probation officer, Courtney Pierce, filed a violation report with the Missouri federal judge handling his case (just over two months after Ars published our first articles about Butterfly Labs and its mining machines). In her memo to the judge, Pierce wrote that Vleisides was now an employee of and the dominant shareholder in BFL, a company which "advertises all of its technology for purchase through pre-order... Vleisides did not seek the express approval of the probation officer prior to engaging in a business that involves the solicitation of funds through pre-orders."
She continued:
The Probation Office has been notified by the US Postal Inspection Service that hundreds of complaints have been filed against BFL from individuals who have placed pre-orders for hardware from BFL.
The seriousness of Vleisides' instant offense [the lottery scam], coupled with his current involvement in a somewhat similar business enterprise are cause for concern.
Before Vleisides' violation, BFL was already facing accusations of fraud and mismanagement. In December 2013, a German-Polish man who lives in China filed a lawsuit over a $62,000 order that was never fulfilled; he accused BFL of breach of contract, fraud, and negligent representation. And Butterfly Labs lost a civil case by default in Kansas’ Johnson County Court in late November 2013. The plaintiff, a Californian named William Lolli, won a judgment of more than $13,000 but told Ars that he has not yet collected the award.
The company's troubles may only worsen from here. A new lawsuit filed in early April 2014 (read the21-page complaint) accuses BFL of engaging in “deceptive and unconscionable business practices.” The suit, which seeks class-action status, was filed earlier this month in Kansas. It accuses BFL of collecting payment for “non-existent Bitcoin mining equipment, failing to ship Bitcoin mining equipment orders for which consumers have pre-paid, misrepresenting the date such equipment is to ship to customers, and profiting from Bitcoin mining for Defendant’s own benefit using customers’ equipment without permission or authorization from customers.”
BFL, its corporate attorney, Vleisides, and Vleisides' criminal attorney all failed to respond to Ars’ repeated requests for comment. But it's clear that despite all the legal wrangling, the company is doing well. According to testimony from BFL’s de facto chief financial officer, the company expected to earn $25-$30 million in revenue in 2013.

The Bitcoin "Crisis" Explained and 5 Reasons It Can't Be Killed

Near the end of last year, Bitcoin was being gobbled up at an unbelievable $1100 per coin. With a cursory glance, at today's price ($500), you'd think that the Coca-Cola of cryptos is careening toward disaster. In order to understand why that's not the case, you might need a quick recap on how we got to this juncture.
For Bitcoin, early 2014 was a PR nightmare. The crypto was constantly being linked to drugs and money laundering, most infamously in the case of The Silk Road. But, the most damning sequence of events was due to a known security vulnerability and good-old-fashioned ineptness.
Enter Hurricane Gox.
By February, major (but known to be sketchy) Bitcoin exchange Mt. Gox had been having problems for quite awhile. Because of that aforementioned security issue, Mt. Gox halted some of their user's ability to withdraw Bitcoin while they fixed the hiccup. Other more legit companies came forward to show that this wasn't a problem with Bitcoin at large, but with the implementation method of certain exchanges. Unfortunately, Mt.Gox still wasn't able to get their act together. They went into full damage control mode, preventing their users from making withdrawals altogether. That's when people really started freaking out. A shit-storm of downright apocalyptic press ensued, contributing to a big dip in the price of Bitcoin.
2014-04-19-Mt.GoxBitcoinExchange.png
In light of this Mt. Gox debacle, other big players in the Bitcoin community banded together to say enough is enough. This cryotocurrency coterie further demonized Mt. Gox, strongly implying they could no longer be trusted. Meanwhile, reports were circulating that over $400 million worth of Bitcoin had been "stolen" from Mt. Goxcustomers due to exploitation of the very same bug they'd been battling. By the end of February, Gox went dark completely, along with all that missing Bitcoin.
As if that weren't enough to shake people's confidence, in late March, the government of China slapped some really restrictive rules on banks with regard to Bitcoin, essentially putting it in a legal gray area. Some are also reacting negatively to theIRS's recent ruling on Bitcoin.
Now, while all of these phenomena are certainly not good news, they are not issues that have to do with Bitcoin in and of itself. They are simply cases of external forces grappling with an unprecedented new technology.
So, now that we've trudged through the (highly-simplified) negative muck and mire of the last few months, let's take a look at the 5 reasons Bitcoin is not only here for the long haul, but may seriously impact the world in a litany of positive ways.
5.The Spread
2014-04-19-bitcoinacceptedhere.jpg
For cryptos to really wield a lot of power, they need to be easy to use. That means merchants must accept it on a wider scale -- and that they are. There are thousandsof local restaurants, bars and businesses primed to take your sweet coin. On the web, significant players like SquareStripeOverstock, and Tiger Direct are a few of the latest to pick it up. No, it's not at Target or Amazon yet, but if it ever is expect another bump in interest, price and media hype.
It's also worth mentioning that services like Bitcoin ATMs, sites like Gyft and Cheap Air are bringing Bitcoin's learning curve down to earth, allowing people to spend their coin more directly and conveniently.
4.The Progeny
2014-04-19-altcoins.png
Whenever a successful, novel piece of technology hits, pretenders are inevitable. Because of Bitcoin's coding is available to the public, there's been a rabbit-like reproduction rate of cryptocurrencies. Literally hundreds of Bitcoin spinoffs, or "forks" have sprouted up and dozens of them are quite successful, with market caps well into the millions of dollars. Some even argue that certain more nimble cryptos like Litecoin, Feathercoin, or (my favorite) Dogecoin, actually improve upon what Bitcoin started. Perhaps down the line, Bitcoin will take a backseat to another crypto. But as of now, it's not even close in terms of value, infrastructure or user-friendliness.
3.The Philosophy
2014-04-19-bitcoinphilosophy.jpg
"Price is the least interesting thing about Bitcoin... At first, almost everyone who got involved did so for philosophical reasons. We saw Bitcoin as a great idea, as a way to separate money from the state." -- Roger Ver, The New York Times. One of the most attractive things about Bitcoin is the philosophy behind it. It's designed to be completely decentralized, anonymous, egalitarian, and free from external or internal manipulation. It's neither liberal nor conservative. There's no Federal Reserve sending down mandates from on high. It is, 100 percent, a digital manifestation of the consensus of its users.
There's also been a lot of talk lately regarding potentially huge implications for the developing world. According to the World Bank, migrant workers are paying $14 billion a year in remittance fees. That's money that isn't going to their families. Imagine what a profound impact that cash would have for struggling, or downright poor families. On the other hand, the fee for transferring Bitcoin is minuscule, so nearly all of that lost money would be going directly into the pockets of families, not banks. On top of the remittance issue, there are dozens of weak currencies around the world, yet struggling populations have no choice but to use them. Bitcoin offers an easily obtainable, far more valuable alternative that wasn't available just a couple of years ago.
2.The numbers
Let's start with the cryptography and coding. Don't worry, I'm not going to get technical on you. But, consider this -- of the hundreds of cryptocurriences out there, basically all of them use Bitcoin's backbone. Because the king of cryptos is open-source, everyone has worked together to create something highly-functional and thus far, unhackable. As Bitcoin continues to mature, so do the exchanges and wallets, making them safer. As we've seen from the Mt. Gox snafu, companies that aren't backed by a strong team of properly qualified people simply cease to exist, leaving the strong to take the reigns.
Every day, people are sinking insane amounts of money into Bitcoin and we're not just talking about investing and trading. (Speaking of which, there's been over $6.5 billion worth issued.) Bitcoin miners are pushing raw computing power to an unheard of level. We're talking eight times more than the world's top 500 supercomputers combined. This has created an arms race of processing prowess that has spawned a whole industry of mining gear. As a result, crazy computing power is shrinking into smaller spaces. Who knows what implications this may end up having for other industries.
1.The Community
Ultimately, the power of Bitcoin is, and always will be, in the hands of the people that use it. This community is more than just a bunch of nerds (I say that with love) getting together on message boards clickity-clacking away at their ergonomic keyboards. Thousands of people in over 60 countries are gathering in meat space to learn, discuss and philosophize about Bitcoin. While attendees definitely run the gamut in terms demographics, experience and degree of technical knowledge, many are deeply involved in shaping how the technology will be used and experienced going forward. Because of this passionate, highly engaged grassroots community, literallyhundreds of startups with an average value of nearly $4 million have cropped up in just a couple of years.
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Given the fact that this technology and its implementation is still so young, we don't know what these companies, coders, meet-up groups, miners and just flat-out curious people will eventually accomplish. But, when you diminish or scoff at Bitcoin at this point, you're essentially deriding hundreds of thousands of tech-savvy, hungry, young people -- not a great group to bet against.
Despite all the misinformation, resistance and doomsday prognostication along the way, Bitcoin has and will continue to defiantly weather the storm. Though speculation and hyperbole will surely continue as the price inevitably waxes and wanes, the technology, infrastructure and tenacious group of humans pushing this thing forward aren't simply going to stop.

niedziela, 20 kwietnia 2014

Japanese Importer Raimu Orders Japan’s First Bitcoin ATM


Japan's First Bitcoin ATM

Japan’s first bitcoin ATM has been ordered by import company Raimu, and is expected to be installed in Suzuka City. Suzuka city is home to the nation’s popular Grand Prix circuit.

Japan’s First Bitcoin ATM

The bitcoin ATM is a Robocoin model purchased from the US, and arrived at Raimu’s warehouse this past Thursday. Information on the Raimu individual who bought the machine was not shared.
The import company has announced plans to unveil the unit in Suzuka, whose population exceeds 200,000 citizens.
CEO of Raimu, Motonori Kan, says with the popular demand of bitcoin ATMs around the world, his company is looking to buy two more units. The 49-year-old Kan says:
“It’s going to be an educational process. People know about Robocoin and it has the highest security features, and features required by governments around the world regarding money-laundering restrictions.”
The investment in Japan’s first bitcoin ATM happens to be Raimu’s first bitcoin-related venture. Before adding bitcoin to its business operations, the import company worked with a variety of goods, such as PC peripherals, camping gear and dog treats.
The new machine will allow Japanese residents to buy and sell bitcoins. All transactions will be denominated in yen, and offer users paper receipts.
As for Kan’s outlook on the digital currency, he realizes that bitcoin’s reputation has been tarnished. Incidents such as Mt. Gox and Silk Road have deluded many from becoming involved with it. However, Kan remains optimistic that if the bitcoin ATM makes it way to Tokyo, it could very well surpass $1 million in bitcoin purchases. He adds:
“As a trading company, we are also always searching interesting items to import to Japan.” Kan added that it would allow him “to be a part of one of the biggest inventions in history.”

World’s First Bitcoin ATM

The first ever bitcoin ATM came to pass in Vancouver, Canada. The Robocoin ATM was installed in Waves Coffee Shop, and began the bitcoin ATM race. Since then, many manufacturers have been spitting out bitcoin ATMs around the world.
Countries from the UK, Switzerland, China, Singapore, the US, New Zealand and several more have had the distinction to test out bitcoin ATMs locally. This proves that these machines are here to stay.
With the addition of Japan’s first bitcoin ATM, a new country will get to experienced the awesome technology and benefits of digital currencies.

sobota, 19 kwietnia 2014

American Investment Banker James Rickards Takes on Bitcoin


James Rickards

James Rickards, an American economist, lawyer and investment banker posted an opinionated article on Bitcoin detailing what he feels about the digital currency. He first explains what exactly Bitcoin is. He writes that the digital currency isn’t backed by anything just as how the dollar, which he feels is also digital, isn’t backed by anything. He explains,
The overwhelming majority of dollar transactions, from credit cards to the government bond market are digital. Dollars emerge from and vanish into thin air — just like bitcoins.”
James Rickards continues on to write that the Federal Reserve print out dollars from computers. The difference with Bitcoin is that even though it too uses computer technology, it isn’t controlled by a government or central bank. Rickards explains that this isn’t strange because in 1999, Milton Friedman said that the internet would be of the major things that could reduce governments’ role.
“The one thing that’s missing, but will soon be developed, is a reliable e-cash, a method whereby … you can transfer funds from A to B without A knowing B.”
This in essence is Bitcoin, according to James Rickards.

Failures in Bitcoin Mirror Failures in Dollars: James Rickards

Rickards continues his article by mentioning that the people who doubt Bitcoin quickly point to Mt.Gox’s failure for evidence that Bitcoin will soon fade out. However, they forget to mention that brokers who are regulated and do business with dollars “fail all the time.” Rickards mentions the Lehman Brothers company demise did not end the dollar. Likewise, fallen Bitcoin exchange Mt.Gox does not mean failure for Bitcoin. The other things skeptics point out is that Bitcoin is mostly used for criminal activity. However, those people fail to realize that dollars are also used for illegal activity.
James Rickards writes,
“But dollars have been used for crime from Al Capone to Bernie Madoff. Again, the critics are confusing the currency with the uses to which it is put.”
Rickards continues by writing that if Bitcoin is so similar to the dollar then will Bitcoin rival it in value? This will not be the case since the IRS is taxing Bitcoin. Rickards explains,
“This is unlikely because the dollar has set a trap for bitcoin in the form of taxes. If you acquire a bitcoin for $100 and use it later to purchase $200 of goods, the IRS says you have a $100 gain on the sale of bitcoin that must be reported on your tax return.”
The other thing Rickards notes is that you can’t even pay taxes with Bitcoin since the dollar “has a monopoly as legal tender for the payment of U.S. taxes.” This means that the only reason why dollars are valued is because they are used to pay taxes, otherwise it’s jail time, according to Rickards.

Bitcoin Volatility Solution

James Rickards writes that Bitcoin has been very volatile as its price has gone from a dollar to over a thousand dollars. The dollar does increase and decrease depending on other currencies like the euros, but only by fraction of pennies.
Rikcards offers a solution to the Bitcoin volatility problem, he writes,
“One solution to the bitcoin volatility problem is to link bitcoin to gold at a fixed rate. This would require consensus in the bitcoin community and a sponsor willing to make a market in physical gold at the agreed value in bitcoin.”
Rickards explains that if Bitcoin is backed by gold it might even be able to challenge the dollar especially if it was supported by Russia and China. Concluding his article, Rickards writes that Bitcoin is not only a currency: it is,
“also an open-source technology that can facilitate cheap, secure, distributed processing for all kinds of property transfers including stocks, bonds and land titles.”
James Rickards mentions that even if Bitcoin the currency fades out, the technology behind the virtual currency may survive. He writes that the future of Bitcoin is its position of being a tech platform for cheap transactions rather than being a currency. Rickards finishes his article by writing that Bitcoin as a currency is “an interesting, if risky, experiment. Just don’t try paying your taxes with it.”