- Published: Monday, 10 February 2014 09:18
- Written by Editor
The Mt. Gox Bitcoin Exchange is in serious trouble. After seemingly months of issue which has seen tight restrictions on withdrawals and pricing irregularities compared to other exchanges, Mt. Gox has frozen all withdrawals of Bitcoin and cash until further notice.
The question is now, can Mt. Gox weather the storm, sort out its issues and bounce back, and if so, just how much has customer confidence in Mt. Gox and other exchanges been damaged?
In reality, it is very difficult to see how Mt. Gox, despite its history, popularity and standing can survive this latest debacle.
Most people using Mt. Gox and indeed other Bitcoin Exchanges are using Bitcoin for speculation, as opposed to the purchase of goods and services, and will therefore be expecting to withdraw cash or Bitcoin whenever required. With so many people having their funds frozen indefinitely on one of the largest and most popular Bitcoin Exchanges there will be considerable implications for the liquidity of Bitcoin trading, which could result in more volatility.
With regards to the bigger picture, there will be serious short term ramifications for Bitcoin speculator and user confidence, nor knowing whether funds and/or Bitcoin going to Mt. Gox and other exchanges will be available or even safe. This is especially true as more and more Bitcoin Exchanges come under regulatory scrutiny by governments seeking to protect their own fiat currencies from the threat of a de-centralised monetary system that is out of their own control and the control of the banking system who will pressure governments accordingly.
So what went wrong and what does this mean for the future of Bitcoin Exchanges?
Well it is clear that the Bitcoin Exchanges themselves became what Bitcoin is not - a central point of failure - a decentralised monetary system relying on a central point of failure - the Bitcoin Exchange.
So what then is the solution?
Clearly the solution is peer to peer exchange with people trading currencies and Bitcoin with each other, as for example the Local Bitcoins site. If Bitcoin is to survive it must maintain absolute decentralisation at every part of the system, otherwise, as we see with Mt. Gox, there will always be a central point of failure.
The end-game is a world where Bitcoin is the de-facto global monetary system, by the people for the people, where people are paid in Bitcoin, save in Bitcoin and spend in Bitcoin, within a totally decentralised, distributed peer to peer system, from Bitcoin, to people to merchant.
As recently noted in another article, Bitcoin Exchanges have no future as they get regulated to oblivion by governments who will apply rules, regulations and controls that make the whole benefit of Bitcoin as a decentralised monetary system completely void, with strict controls and no privacy or anonymity, which is a fundamental human right.
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