- Published: Friday, 21 February 2014 09:50
- Written by Editor
One fact that the Mt. Gox Debacle proves once again that history always repeats itself but the lessons are rarely learned.
While Mt. Gox is proving to be a nightmare for many, with the potential loss of millions in Bitcoin and fiat currencies, nothing is really lost if the hard lessons are learned. The future of Bitcoin is assured, it is here to stay, and will not be replaced with any other crypto-currency. There will be many valuable opportunities in the months and years ahead for those wise enough to learn.
Situations similar to Mt. Gox are a recurring theme throughout history especially since the earliest days of the Internet. When something new and exciting comes along with the potential to make fortunes or promises to improve lifestyle, health or something else of perceived benefit, a sort of madness seems to take hold where people throw their usual caution to the wind, jump on board and follow the crowd wherever it goes, regardless of the consequences, each assuming the next knows what they are doing and must be right - an extremely naive and flawed assumption.
We saw this with "Internet Marketing" for example where countless thousands of people became obsessed with the thought of getting extremely wealthy overnight working just two hours per day from the home computer. This totally erroneous idea was - and still is - fuelled by very heavy pressure but slick marketing by people selling "how to get rich quick" ebooks and so on, without ever having actually achieved it for themselves. So people spend thousands or even tens of thousands on this material, get completely confused and give up the dream which turned out to b pure fantasy.
Bitcoin is broadly driven by two main dynamics - technical people and enthusiasts with boundless enthusiasm for Bitcoin, its future, and how it could change the world, and speculators all fired up by the prospect of making huge profits, enough to retire, on the steely increasing Bitcoin exchange rate.
For many, Mt. Gox became the exchange of choice, it was the only choice in the beginning, and the only focus became buying and selling Bitcoin without paying any attention whatsoever to the company and people that operated it, or of its origins, motivation and business plan.
So better late than never, let us address this now that lessons may be learned.
Mt. Gox started life as a very basic site that hardly even got off the ground, for enthusiasts of the fantasy card game "Magic the Gathering". "Mt. Gox" is an acronym for "Magic The Gathering Online EXchange"
The website always seemed to be in "beta" as we can see here from how the Mt. Gox website looked in 2007 It is only fitting that this was a fantasy service - it remained that way from that point onwards.
In 2009, Mt. Gox, owned by Jed McCAleb, suddenly morphed from a fantasy card exchange site to a Bitcoin exchange site - very obviously a case of opportunism as Bitcoin emerged while the card game site was less than successful. This should be a big red flag to begin with. Here is a "Bitcoin Exchange" that was not founded by someone dedicated to the emergent Bitcoin and its future, or with the benefit of a business plan or presumably investment capital, but as an obvious case of - "well, the fantasy card business is not doing so well, lets have a go at this Bitcoin thing" - the very worst basis to start any business.
Mt. Gox seemed to do well in its early days, when volumes were much lower, and in 2011 McCaleb sold Mt. Gox to the now infamous, and absent Mark Karpeles who, like McCaleb was a hacker who probably knew little or nothing about Bitcoin of running a serious business. It seems reasonable to assume that Karpeles did not acquire Mt. Gox due to a belief in Bitcoin, but rather to make a quick buck from the Bitcoin phenomena. From that point onwards Mt. Gox never ran exactly smoothly, with ongoing issues with withdrawal limits and delays, which were never resolved, security breaches and regulatory and other issues leading to fines and losses including $5 million seized by the Feds from a bank account.
These and many other ongoing issues should all have been huge warning signs that Mt. Gox was an accident waiting to happen, but still people were so obsessed with Bitcoin, all these warning signs were ignored as well as the difficulties withdrawing funds as if it really did not matter. The rest is now history in a saga that is by no means over except perhaps for those still hoping to retrieve Bitcoin or cash.
So what lessons are to be learned? Well as the saying goes - Caveat Emptor. It is for everyone to know the nature of the goods they are purchasing and who it is being purchased from.
No one who took an objective look at the origins and history of My. Gox as well as business performance or lack of same, would go anywhere near Mt. Gox, even if they were the only game in town. Unfortunately due diligence gave way to other human weaknesses as well as hope that nothing could ever go wrong. Hope, as it turns out, is not enough. If however the lessons are learned, it may for some just have been worth it.
Vote In The Poll