Bitcoin Soap Opera’s Wild Week

By Bill McGuire

Mar 7, 2014 2:14pm
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Bitcoin trader Kolin Burges, right, of London and Aaron (an American who gave only his first name) hold protest signs as they conduct a sit-in in front of the office tower housing Mt. Gox in Tokyo, Feb. 25, 2014.  (AP Photo)

It’s been quite a week for Bitcoin, the digital pseudo-currency that’s created $7.5 billion worth of value out of some computer code and the beliefs of a lot of hopeful folks.

The week began with news that Tokyo-based Mt. Gox, one of the major Bitcoin exchanges, had filed for bankruptcy after hackers over a period of months stole every last coin they had, valued at over $425 million. Investigations by U.S. and Japanese officials ensued and the first lawsuits have been filed.

Then Autumn Radtke, the American CEO of another smaller Bitcoin exchange was found dead near her home in Singapore. A police spokesman told the Associated Press on Thursday that initial investigations indicated there was no suspicion of “foul play” in her death, which was classified as “unnatural.” That can mean it was an accident, misadventure or suicide, police said. Her company, First Meta, is said to be still operating.

Then on Thursday the website Newsweek published a 4,500-word story supposedly unmasking the mysterious founder of Bitcoin. It’s an adventurous account, tracking down a 64-year-old man named Dorian Prentice and inviting him to lunch.

But Dorian Prentice, a.k.a. Satoshi Nakamoto, later told the AP he is not the creator of Bitcoin, that he did not write the computer code underpinnings of Bitcoin and in fact had never heard of Bitcoin until a few weeks ago when he was contacted by a Newsweek reporter.

“I got nothing to do with it,” he said.

Newsweek is standing by its story.

Bitcoin is still trading merrily along, to as low as $130 in November to peak near $1,200 in December. Today it traded at just over $600, according to this exchange.

What makes a Bitcoin worth that much, or worth anything for that matter? That’s hard to say. The inventors of the so-called currency — whomever they may be — deemed that only 21 million can be “mined.” This is done by setting computers to solve ever more complex mathematical algorithms. There’s 12 million Bitcoins out there now.

What makes Bitcoins worth anything at all is simply the willingness of people to buy and sell them in the belief that they have value.

Is there a sucker born every day, or are Bitcoin backers geniuses who have found a frictionless way to make payments across borders with no paper involved, simply long strings of computer code? Stay tuned.

 

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