The former head of bitcoin exchange Mt.Gox, Mark Karpeles, screwed a lot of early adopters. It is unclear at this point how much Karpeles allegedly lost or took, but the Japanese police are claiming he lost about $387 million while Mt.Gox was in business.
While his inept management was inexcusable – according to Japan Times Karpeles apparently added millions in bitcoin to a live server in order to “test” some software – Mt.Gox was emblematic of the first age of bitcoin. It was a lawless, wild and often ridiculous age full of odd characters and even odder behavior and I’m glad it’s gone.
In Nate Popper’s Digital Gold you won’t find anything like the traditional Silicon Valley success story. There are no garages — only IRC rooms and forums — and the only thing linking the early tech pioneers and folks like Karpeles and his ilk was server social anxiety. In short, the rise of bitcoin happened in a side branch of technological change and, thanks to what can be seen as mainstream business interest, it’s now rolling into the mainstream.
And that’s pretty good.
A little over a year ago I noted that bitcoin had a big image problem. It was a nerd’s game that had been invaded by investors because of implied value and not because of the tech. Now that things have settled down – thanks, in part, to Karpeles torpedoing one of the worst exchanges on the Internet – the blockchain is seen as an answer to multiple problems.
Ethereum is using it to process code while financial organizations are about to fork it in order to replace the ridiculous ACH and SWIFT systems. Average people are using it, in theory, to escape political horror shows and we are about to see the first licensed exchange open on Wall Street. The Second Age of Bitcoin is upon us, and it’s going to get a lot more interesting.
It is truly tragic that so many lost so much bitcoin at Mt.Gox. We will probably never know where those bitcoin went and whether or not Karpeles is a criminal mastermind or a fool. However, once the regulators get a hold of the blockchain, we can expect no more Karepelization in the financial world.
While it is currently trivial to destroy millions of dollars of wealth through inept banking, it is far harder to destroy that wealth when inept bankers are coupled to the blockchain. The things that made bitcoin interesting to privacy experts are the same things that will hold Chase and Citibank accountable when money moves between accounts. Anonymity is a privilege on the blockchain, not a right, and when the ledgers are open, far more interesting things will come to light as the bankers move their money.
I’m more optimistic these days in regard to bitcoin. While it is neither a silver bullet or a fiat currency replacement, it is a way to micro-pay artists for their work as much as it’s a way to send money between unbanked families. It’s a way to buy a couch as much as it’s a way to buy a few ounces of pot. It’s a way forward and I think the Karpeles arrest attests to the vision that bitcoin is important and we can’t let clowns and charlatans ruin it.