What is Bitcoin and is it Now in Trouble?
What is Bitcoin?
Bitcoin is one of the most popular types of virtual cryptocurrencies – an internet based online currency that works independently from traditional banking. It started back in 2009 by a pseudonymous developer called Satoshi Nakamoto and has gone on to become one of the most prominent digital currencies in the world.
Instead of being controlled by any one authority or banking group, the entire system is maintained by an online community. Using Bitcoin to pay for things over the internet means that no cash handling fees or credit cards are involved, making users less susceptible to fraud and problems.
Bitcoin is reliant on a network of computers that works out very complex mathematical problems in order to verify and record details of every single transaction made using the currency – its value entires completely on how much confidence the community has in it.
How Can You Use Bitcoin?
It has been suggested that one day Bitcoin will become the most commonly used form of currency for online shopping, but for now, online retailers such as Overstock.com accept the currency as payment, as do a few offline stores.
Unfortunately, due to its volatility, adoption of the currency has not become particularly widespread and the majority of retailers do not accept it. The value of Bitcoin can spike and drop rapidly as more people become aware of it and then just as quickly become wary of it.
Another problem, is due to the anonymous nature of Bitcoin transactions, the currency has also been used for some shady activities and was famously the currency used on Silk Road, a site that sold everything from weapons to drugs.
What’s Happened Now?
Things have taken a turn for the worse for Bitcoin, as the Tokyo based exchange Mt Gox has gone offline!! The website has been attacked and a whopping 745,000 Bitcoin (around £225 million) has been lost. A couple of weeks ago trading was suspended due to “unusual activity” and all withdrawals were frozen. There hasn’t been much of an explanation but it does seem to have been in trouble for a little while now.
Thousands of people had large amounts of Bitcoin saved on Mt Gox’s exchange system and all of them will now have lost out. This leaves a lot of unhappy people in the community that once championed the virtual currency.
What is the Future for Bitcoin?
There are other exchanges, but existing Bitcoin critics feel that if Mt Gox has suffered this attack then the others could just as easily, proving that the virtual currency is no where near stable enough to be used across multiple retailers as it could really cause a commerce crash and end in tears.
It is still early days though for the digital currency and this could just prove to be some unfortunate teething problems – it does have potential to really change the way we pay for our goods. There is still a very dedicated community of Bitcoin advocates who will continue to promote Bitcoin and praise its features, but one more trip up and this could really be the end for it.