TOKYO (AP) — The Mt. Gox bitcoin exchange in Tokyo filed for bankruptcy protection Friday and its chief executive said 850,000 bitcoins, worth several hundred million dollars, are unaccounted for.
Bitcoins, you say?
If you’re like most people, you’ve probably heard the word “bitcoin” and have a vague sense that it is some kind of virtual or digital currency. But really, what the heck is it?
To me, the most fascinating thing about bitcoin is this: Talk to your friends and financial advisers about it, read a few scholarly articles on the topic, listen to some business journalists on TV — and I guarantee you will still not know what bitcoin is.
Here’s how Reuters describes it: “A form of electronic money independent of traditional banking, bitcoins started circulating in 2009 and have become the most prominent of several fledgling digital currencies. … The virtual currency relies on a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every bitcoin transaction that is made.”
OK, swell. That explains everything.
Let’s try again.
Some say bitcoin is a revolutionary new form of nationless, paperless currency that could reshape the way the world defines money.
Others say it is a mysterious virtual currency wrapped in a riddle wrapped inside a powerfully encrypted enigma.
Still others insist it is an elaborate practical joke begun in 2009 by American actor George Clooney to get revenge on Matt Damon for putting itching powder in his trousers on the set of “Oceans 15.”
Noted bitcoin insiders say this week’s crash of the most prominent bitcoin exchange, Tokyo-based Mt. Gox, only confirms that it is not too late to lose your actual and/or virtual shirt.
According to CNN, you can use them to buy Internet services, manicures or pizza. Though not explicitly stated, this implies you could also use them to buy, say, car insurance, tattoo removal or Chinese food (though not in China, where their use is punishable by up to 14 years in a roadside culvert).
The price per bitcoin either skyrocketed to an all-time high of $900 in November then plummeted to $400, or it surged to $1,100 in February then vanished in a puff of smoke, leaving behind shattered fortunes and the scent of charred motherboards.
According to Bitcoinexchangerate.org, one bitcoin currently clocks in at $572.98.
Yes, and I would only charge you a modest commission in my lucrative new career as a bitcoin day trader.
Otherwise, they can be obtained by “mining” for bitcoins.
For this you will need specialized mega-computers roughly the size of your house, or you can lease computing power on someone else’s freakishly advanced artificial brain.
You might perform millions of complex calculations every 17.2 seconds trying to solve inscrutable algorithms in your quest for those sweet bitcoins.
I swear I’m not making this up.
To recap, you’re probably not going to find a bitcoin behind the cushions of your couch. Nobody’s going to accidentally give you one when you buy something for 99 cents and hand the person a dollar. If you are a child and you lose a tooth, the Tooth Fairy will not be bringing you a bitcoin.
However, some critics suggest the Tooth Fairy very well may be involved in the bitcoin scheme — along with the Easter Bunny, a shadowy consortium of leprechauns and maybe even Santa.
Bitcoin was reportedly created in 2009 by an unknown person or persons (or possibly a consortium of humans, chimpanzees and dolphins) using the alias Satoshi Nakamoto, which is said to be Japanese for “Donald Trump.”
Its nature is said to be so mysterious that no one person truly knows what bitcoin is — legend has it that seven people each know one-seventh of the secret and they live on seven different continents.
My search for a deeper understanding of bitcoin led me to the ancient Chinese philosophy of Taoism. To paraphrase Lao-Tzu: “The bitcoin that can be explained is not the eternal bitcoin.”
Australian economist John Quiggin has called them “the most demonstrably valueless financial asset ever created.” Speculated he: “Bitcoins will attain their true value of zero sooner or later, but it is impossible to say when.”
Still befuddled? Me too.
Perhaps this little math problem will help make things clearer.
Johnny has two bitcoins. If each bitcoin was allegedly worth, say, $1,000, how much money would Johnny have?
If you answered “zero,” congratulations! You are at low risk of losing everything in the coming bitcoin apocalypse. However, if you answered “elevendy billion,” best of luck.
So has the bitcoin bubble burst? Or will it birth a boom of bitcoin billionaires?
Get all the answers in my new book “How to Avoid Getting Bit by the Bitcoin Bug” (Amazon, 1 bitcoin).
— John Breneman