With half a billion worth Bitcoins being vanished into thin air from popular virtual currency exchange Mt. Gox, has the dark age of cryptocurrencies arrives? ForexMinute’s Finance writer and founder Jonathan Millet finds out in this insightful article.
ForexMinute.com – There have been a widespread fear among investors who had earlier invested in Bitcoins. Reason: the world’s once-largest Bitcoin exchange losing half-a-billion dollar worth Bitcoins to a bug. The event has forcefully pushed Mt. Gox to a state of “rout”.
Nobody have a clue about what went wrong at Mt. Gox, Was it the system’s weakness or an ostensible dishonesty? The irony although is not centered on Bitcoins being unsafe, but it is the next generation of these digital currencies – Litecoin, Peercoin, Dogecoin, and others – that functions on the trust and faith of users, and now are being forcefully put inside the similar domain of “unreliableness”.
The Technicality of a Digital Coin
To better understand what exactly is happening, we must first delve into the bottom of cryptography – a mathematical coding system made of digits and letters. This data encryption is aimed at securing electronic transactions, including of purchase and sale, trading, and various other methods. Cryptocurrencies have a private key to complete these transactions. What we can guess here is that hackers had prior information of undoing the “possibly” circulated codes, which made them eventually slip into the system.
However, as being widely marketed, the major flaw was is the Mt. Gox’s system. It has been reported that the system was heavily compromised to allow a breach that could claim reimbursements of payments. And it is generally the case with currencies on digital portfolio, be it even a credit card. Virtual portfolios are prone to hacking more than paper ones, which is quite ironic for a digital currency. The only solution by which you can save your cryptocurrencies from being hacked is by storing them in a computer that is not connected to internet. Impossible right?
Whilst, a new technological entity known as cold storage has been introduced by many cryptocurrency exchanges. This storage keeps your coin in “offline” wallets, making it less vulnerable to hacking attempts. While this trick is equally applicable on all kind of digital currencies, Bitcoin miners and users might need them the more.
Although, as we said these cryptocurrencies are zoetic only when people are putting their faith in them. See Bitcoin for instance, even after being continually subjected to financial turmoil, be it its ban in several countries or the Mt. Gox shutdown, the currency is still trading around $566 at several other exchanges.
But how long can a faith survive? Its cryptocurrencies not Jesus! The chances of their extinction is inevitable, especially when hackers are turning smarter in cracking their The-Da-Vinci-Like-Codes.
This might be one of the best options for currencies like Bitcoins and Litecoins if they don’t want to see the extinction anytime soon. Under a fellowship with the existing financial regulations, their users can have the minimal risks of losing their hard-earned money. While US Senator Joe Manchin has asked for an outright ban of these currencies to the Federal Reserve’s new president Janet Yellen, Canada is looking for taxing them rather.
The quest here should be to save people’s investments in the wake of potential threats Bitcoins, Litecoins and many other virtual currencies face today. We don’t need to see another Mt. Gox going to pits, taking investor’s cash conjointly.
To contact the writer of the article: Jonathan Millet at firstname.lastname@example.org