Tuesday, February 25, 2014

A Quick Cryptocurrency Update


Well, Mt. Gox appears to be gone. And of course the usual suspects are out in force,  screaming that Bitcoin is a scam and quacking about "the need for regulation" of cryptocurrencies.

Two initial thoughts on that last part:

  • Cryptocurrencies as such -- at least of the Bitcoin variety -- can't be government-regulated, because there's no central authority involved which can be seized, sued or arrested. Specific entities using Bitcoin might be regulatable ... if they decide to allow themselves to be regulated.
  • Mt. Gox in particular is an existence proof that attempts to regulate aren't going to be helpful. Mt. Gox was one of the first, if not the first, to "voluntarily" start requiring government-issued IDs for cash withdrawals and so forth, in an attempt to ingratiate itself with the US and other governments.
So:

Q: Who lost Bitcoins and/or cash in the Mt. Gox shutdown?

A: Anyone who had an account balance there. For example, me -- I had a few thousandths of a Bitcoin in my account at the time things went south.

Q: Who had to lose Bitcoins and/or cash in the Mt. Gox shutdown?

A: Nobody. While it may be convenient to leave your Bitcoins in an online wallet hosted by an exchange (like Mt. Gox) or an online store (like Silk Road), you don't have to do that (and the history of cryptocurrencies so far says it's a bad idea). You can transfer them to an offline wallet in your possession -- on your hard drive, a USB drive, whatever -- any time you like.

Word to the wise: Don't keep substantial cryptocurrency balances online. Only keep the balances you are actually working with online. When you have a significant stack, or when you don't expect to be using the stuff any time soon, move it to an offline wallet. Then if the exchange falls down and goes boom, it doesn't do so while holding your money.

The old "donate Bitcoin" button here at KN@PPSTER was linked to my Mt. Gox account. That button is gone. I've created two new cryptocurrency "tip jar" buttons (top of the right sidebar, just like the old one) linked to an account at BTC-e.

Now you can tip me in Bitcoin or Litecoin, courtesy of coinwidget. And I hope you will, even if it's just a tiny amount, so that I can test those buttons :)

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