Bitcoin trader Kolin Burges from London speaks to reporters as he protests Tokyo-based bitcoin changer Mt. Gox in front of the company's office in Tokyo on Feb. 26. Credit: Getty Images
The future of Mt. Gox, formerly the biggest bitcoin exchange, remains unclear Wednesday after the company's website abruptly vanished this week, leaving users of the cryptocurrency uncertain about their investments.
Some cryptocurrency enthusiasts claim the warning signs of Mt. Gox's fate were clear after a recent security flaw that prevented users from withdrawing their funds from the platform. The rumored loss of $350 million in bitcoins through Mt. Gox's downfall has raised questions about the largely unregulated industry and whether the incident is isolated to the company — or a reflection of the stability of cryptocurrency as a whole.
Jackson Palmer, creator of popular cryptocurrency Dogecoin, offered the following analysis to Metro on the market and how the mentality of users can define its future.
Mt. Gox's problems aren't actually about Bitcoin
"The Mt. Gox insolvency issue isn't necessarily a problem with Bitcoin as a protocol (although something called transaction malleability, which was recently patched, lent to it), but more an issue with the investment mentality that's built around the currency. The fact that bitcoin to U.S. dollar exchanges are so prevalent suggests that most people involved in bitcoin don't actually see it as a store of value, but more as a commodity or asset you hoard with the intention of one day 'cashing out.'
All these merchants who are 'accepting bitcoin' aren't really accepting it either — they're using services such as Coinbase to instantly convert back out to U.S. dollars. Reddit, Overstock and other companies accepting bitcoin aren't sitting on hundreds of bitcoins, so do they really believe in the future of the currency, or is it akin to just accepting a new form of fiat payment, like American Express?"
Cryptocurrencies should be treated as currencies, not stock
"Bitcoin started out as a decentralized protocol, with the aim of removing any centralized entity that could potentially influence the market. With most people seeing it as a 'get rich quick' scheme, however, the bulk of the network is placing its faith and trust in a centralized exchange or merchant service. People need to start treating Bitcoin (and all digital currencies) as just that — currencies, not something like gold or Nasdaq-traded stock that you buy and hope will one day make you rich.
Without this demand for Bitcoin to Fiat trading, the need for centralized exchanges and service begins to disappear, as everyone is transacting in bitcoin (including people like Reddit, who would believe that bitcoin is more worth than just its equivalent U.S. dollar amount)."
End goal should be stability, not value
"The community needs to stop being so fixated on 'the price of Bitcoin,' because the end goal should be to keep it stable. The viability of a currency shouldn't be pegged to how much profit you can make when you cash out to a fiat currency. Unfortunately, that's how a lot of people see it right now.
We have a saying in the Dogecoin community: 1 DOGE will always equal 1 DOGE. If a currency's users truly believe in that and build the trust of merchants in the currency as a legitimate store of value (independent of any other currency), only then do I think digital currency will succeed."