Bitcoin on the Hot Seat

Tokyo-based Mt. Gox, once one of the largest exchanges of the bitcoin cybercurrency, stopped operating Tuesday amid rumors that millions may have been stolen from the firm and rising concerns about the long-term prospects for the unregulated digital currency.

Other bitcoin exchanges quickly moved to distance themselves from Mt. Gox and assert that they were still open for business. The value of the currency itself dropped sharply to just over $500 by mid-afternoon. It hit an all-time high of $1,100 in November.

As Paul Ford notes in his story (“Marginally Useful”) on the currency for the March/April issue of the magazine, bitcoin’s underlying technology may be what has true long-term value, potentially outlasting its role as a currency.

“While it may be wishful thinking to imagine Bitcoin as a true currency, it’s a highly functional and effective technology. Bitcoin’s “block chain protocol” is built atop well-understood, established cryptographic standards and allows perfect certainty about which transactions occurred when,” Ford writes. “Free and open implementations of software, as we learned from the immense success of the open World Wide Web and Linux, trump everything else.”

Tom Simonite, our senior editor of IT, has been covering Bitcoin and its volatile history for quite some time. Among the highlights are his February 10 examination of the technical infrastructure weaknesses responsible for the currency’s slump in value, the remarkable security issues dogging the market, and its links to illicit online markets.