One of the biggest exchanges for so-called Bitcoins has declared bankruptcy in Tokyo. The result is not unlike what happens when a poker player loses a bet he can’t cover, or when a casino decides not to honor its gambling chips.
The Bitcoin business is largely a gamble. In fact, its most ardent supporters also tend to be active gamblers in online casinos, mostly illegal.
Bitcoin calls itself a payment system, but it’s actually a gambling system.
Bitcoins are supposed to be self-regulating, but they aren’t. They depend on digital exchanges to set their value, and according to one study quoted by the Associated Press, 45 percent of Bitcoin exchanges have failed and taken client Bitcoins down with them.
Which apparently is what happened at Mt. Gox, the Tokyo exchange that went belly up.
People who like Bitcoins say they aren’t dependent on any government for their valuation, that digital exchanges take care of the bookkeeping. In that respect they seem to be trying to be digital nations.
But the record of “digital nations” is worse than actual nations when it comes to maintaining stable currencies.
Debts at Mt. Gox totaled more than 6.5 billion yen ($65 million), surpassing its assets, according to Teikoku Databank, which monitors bankruptcies, says AP Just hours before the bankruptcy filing, Japanese Finance Minister Taro Aso had scoffed that a collapse was only inevitable.
“No one recognizes them as a real currency,” he told reporters. “I expected such a thing to collapse.” He was right.
The trade in Bitcoins had driven the digital currency as high as $510 to the Bitcoin, but now it probably is worth much less. In fact, 510 bitcoins may soon only fetch $1.
Bitcoins are traded mostly on line, although some actually exist as struck coins. However, what one could buy with those coins would be anybody’s guess. You probably couldn’t get a hamburger at McDonald’s with one.
Bitcoins are trying to be the digital equivalent of gold — a commodity that can be a medium of exchange, but also has value in itself.
So far, though, they have proven to be only fool’s gold.