Bitcoin "bank" going bankrupt
Hi Guys. Something really exciting happened with Bit Coins this week! Can we have someone explaining the whole concept of Bit Coins? What is it, how do we use them, why do we even have them?
A person answered:
besides being a digital currency and not being regulated by any government, it's also important to remember that there is a finite amount of bitcoins after which no more bitcoins should be released. Moreover, these bitcoins are "mined" which in very simple terms means solving very hard mathematical problems and gaining money for it (here you also have "mining pools" and other more complicated issues).
Also, if my memory doesn't fail me, the value of bitcoin is exclusively determined by 1) the amount of bitcoins, which will have a finite amount and 2) speculation. Lastly, (not really, because there are too many things to explain) is that because bitcoins are not regulated by any government or financial institution, one can easily transfer bitcoins from place to place, making it very easy for black market and other illegal transactions (constant argument against bitcoin); however, people in the other side argue that because of this freedom, more good than bad can be done, as for example charities or help people oppressed by any government... etc
and I imagine what you are taking about sir is MtGox (a bitcoin exchange company) declaring bankruptcy this week, supposedly loosing around 850,000 bitcoins which in this week's rate was something about $460millions... however, even though bitcoin rate has been known as a volatile one, since the start of the year and even after MtGox declaring bankruptcy, the price has remain pretty much the same (aroung $500)
Yes I was indeed referring to the Japanese exchange house that went bankrupt this week. This currency is risky because of the inability to measure who's doing what (the bitcoin is not backed by any government... not backed by anything at all actually) given the complete lack of oversight. There are also very high levels of speculations in this market, which could indeed lead to high levels of inflation and deflation of value.