Author: by Chloe Barrow
As Spear’s has previously discussed, cryptocurrencies like Bitcoin offer great rewards but also have great risks. Today we saw the risky side when one of the biggest Bitcoin Exchanges, MtGox, went offline after being hit by ‘technical difficulties’, which it then elucidated as being ‘unusual activity’.
Essentially it left customers unable to access their accounts for an indeterminate amount of time, which one imagines is somewhat vexing.
The Tokyo-based firm said it had found a loophole that thieves could use to fool the transaction process into sending double the correct number of Bitcoins, resulting in a $2.7 million theft from the Silk Road 2 website earlier this month.
While hopes have been high for the virtual currency, this recent issue suggests that the Bitcoin may not be stable, not least because this incident alone has resulted in a sharp decline in its value.
Some say the rise in value of Bitcoin has been purely speculative and as such is not sustainable in the future. Certainly its lack of financial regulation coupled with its anonymous nature leaves it vulnerable to fraud and theft, as this event proves.
However, for those that favour Bitcoin’s virtually anonymous financial transactions – and who are not users of the felled MtGox exchange – all may not be lost. There are six other major Bitcoin exchanges, all of which, unsurprisingly, declare this is an isolated incident very much limited to the MtGox Exchange. And supporters of the virtual currency continue to extol its potential.
Will Bitcoin be more akin to a WhatsApp wonder-product or a MiniDisc mega-flop?