Friday, February 28, 2014

Bitcoin MtGox FAQ: One is sorely needed

With the mainstream media getting it wrong, and financial sites like +CNNMoney outright lying about what's going on, I thought it might be good to tell it like it is. This will be in standard FAQ format. 

Bitcoin is dying right?

No. In fact it's shooting up in value as we speak. When I started typing this it was at 556 dollars a piece. Now it's at (let me check) 561. 

But but but, the guy on TV said it's dying. He said MtGox is dying and it's killing bitcoin?

That's because the guy on TV is either an ignorant dick, or they are in the back pocket of "big money" or both. MtGox was one exchange out of very very many. Assuming its death would "kill bitcoin" would be like assuming a bank up the street closing would kill the US dollar. 

What happened with MtGox?

Simply put, very poor security practices. Bitcoin has a procedure for verifying transactions. Better exchanges (not MtGox) verify all transactions. MtGox did not. This allowed people to fabricate fake transactions and steal them. It would be like if you went to the lobby of an apartment complex and lied to a pizza guy standing there and said it was for you. MtGox wasn't asking you for your name or what you ordered. They were just handing the pizza over. It would be like somebody stealing your checkbook and writing bad checks at your bank, and your bank not verifying their identity. 

What is the real fallout from MtGox going bankrupt?

The price dipped. Smart people (strong hands) bought like crazy when it dipped. Dumb people (weak hands) sold their coins in a selling frenzy. The folks with strong hands took the bitcoins from the people with weak hands and have now doubled their money. The price keeps climbing now that Gox is gone, and there's literally nothing to stop it from rising back up to 1000 USD a bitcoin. Even better, because of how dramatically and overtly the mainstream media outright lied about what this meant for Bitcoin, people will be convinced it's invincible now. All the media coverage has made it look like Bitcoin survived the worst attack possible. 

But what if it happens again?

People with strong hands will make a whole lot more money. 

What can kill Bitcoin?

A miracle. I mean, it would be like trying to kill porn. It would be easier to kill porn. That's why the pissed off bankers and the folks that missed out haven't killed it. They can't. It's here and nothing can stop it now. But even better, even if it WAS possible to kill it, there are hundreds of other crypto currencies waiting to replace it. That's why nobody is even trying to kill it anymore. 

Can you still make money on Bitcoin?

Yes, but it's harder and different to do now. Bitcoin has increasing "difficulty" to mine it. What current miners do (me included) is mine the alternatives to Bitcoin, then trade them for it. You make a lot more than you would make if you tried to mine Bitcoin directly.

What is "mining" Bitcoin anyway?

Bitcoin doesn't have a printing press like dollars or euros. It has to be "found" before it can be put into circulation. Mining hardware does complex calculations to come up with possible mathematical solutions to the Bitcoin algorithm. If you figure one out and you do it first? You get the coins. Each "block" of bitcoins found is currently 25 coins. Do that math. Mining or "minting" Bitcoins can be insanely profitable. 

And that's pretty much the whole story. MtGox is guilty of sucking, and now they are gone. Bitcoin isn't dying because it can't be killed. Too many people want it to succeed. Hundreds of times the number of people it needs to succeed. That's reality.