Everything Is Going Wrong At The Same Time For Controversial Virtual Currency Bitcoin

Bitcoin is the virtual, anonymous currency that has everyone buzzing. 

Unfortunately, that interest is stretching the limits of the system, it seems. A major bitcoin was hacked, and with that the value of the currency plummetted. (More at DailyTech)

For the uninitiated, Bitcoin is an open source digital currency hosted on a peer-to-peer network, which makes it hard to trace, and hard to tamper with, because the growth of the money supply is dictated by an algorithm instead of a central bank (or, worse, a physical commodity).

But like any currency, Bitcoin is only worth anything if everyone agrees it’s worth something. Now people are learning that if you lose your computer you lose your bitcoin, and that servers can get hacked. That makes people sell bitcoin and buy dollars. Which makes the value of bitcoin plummet.

Over the longer term, it’s questionable whether bitcoin can last without a- a government enforcing and guaranteeing its use, and b- active management of the money supply.  

bitcoin mtgox transactionsTransactions on the hacked Bitcoin server Mt. Gox

Photo: DailyTech

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