In case you haven’t heard, this last week has been a very busy and very eventful week for bitcoin. For some reason a regulation-free market just isn’t working out. Here’s what’s happened.
- Dwolla started spitting out money like a broken ATM. Dwolla, one of the largest USD -> Bitcoin payment processors used by Mt. Gox and Tradehill, had done chargebacks on behalf of their users against the markets. This was not supposed to be possible as bitcoin transactions cannot be reversed and therefore the users got the bitcoins AND the cash. Tradehill states they lost about 37k, but Mt. Gox denies any chargebacks, which is highly unlikely considering they are 10x bigger than tradehill. If Mt. Gox did suffer chargebacks, then would be around $1mil in the hole, making them insolvent at this point.
- MyBitcoin, the largest online “bank” for bitcoins, simply vanished from the net. They have been around for quite a while but have always seemed a little shady. Like, having a private whois on the domain and using parts of their website through the Tor network. Despite all this, a very large amount of people had their wallets in MyBitcoins, including Bruce Wagner, the owner of OnlyOneTV, producer of “The Bitcoin Show” and hosting the Bitcoin Conference who personally lost 25k bitcoins ($250k USD). Ironically, the 3 restaurants accepting bitcoins as payments also stored their wallets in MyBitcoin. The FBI was notified (lol), but the owner is believed to be living in Barbados currently but there’s no chance in hell anyone will or care to find him.
- Bitomat.pl, the largest Polish bitcoin exchange and 3rd largest exchange in existence, is run by an incompetent CIS major. He hosts the entire exchange on an Amazon EC2 server made for quick CPU calculation projects and decides against the $10/ for persistant storage. In the process of upgrading the RAM on the service, he apparently does not understand that it will restart the instance, wiping the storage portion clean and losing everyone’s wallets in an instance. Of course this exchange had no backups (which that $10/mo would have handled with multi-distributed backups). The exchange ended up losing over 17,000 BTC and is currently up for sale to pay back the people who lost their coins. As to who is going to pay $200,000 to buy an exchange with no customers, no traffic and no income is beyond me.
As a result, the price of bitcoins has tanked. BTC started around $12.50 on Tuesday and is currently under $8, with no sight of slowing down. I don’t think it’ll be a quick crash, but I think we’ll be looking at a long, drawn out slide to >$1 rates.
On the plus sides, there should be a glut of cheap video cards hitting eBay very soon.