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Hackers blamed for Bitcoin plunge

Jason Murphy (via AFR) | April 12, 2013
Bitcoin, a digital currency, fell from a peak of over $US265 to under $US105, in what some say was an attack by hackers looking to manipulate the currency.

On Wednesday night, one global currency lost more than half its value.

Bitcoin, a digital currency, fell from a peak of over $US265 to under $US105, in what some say was an attack by hackers looking to manipulate the currency.

It recovered to $US180 by Thursday afternoon. Confidence in the safety of the fledgling unit had been shaken, but some Australian businesses still accept bitcoin in exchange for their products.

It only has value if people agree it does, said CommSec chief economist Craig James. "In many respects bitcoins have much in common with gold," he said in a recent note to clients.

A bitcoin valued at $US180 would have seemed extremely high not long ago; on January 1, 2013, it was just $US13.

 

SUPPLY WILL CEASE IN 2140

Bitcoin has been in existence since 2009. The currency has no central bank and supply is limited to a maximum of 21 million units, of which 11 million exist now. The remainder will be made available gradually until 2140, when supply will cease.

Bitcoins can be held in online accounts and traded through online exchanges or smartphone apps into and out of a range of currencies. The bitcoins are encrypted so they can not be duplicated

Cameron Garnham got into bitcoins early. "I'm a geek and a programmer," he said. When he first obtained bitcoins they were worth under US10¢, then he watched them rise. The 25-year old only retained some but he is now designing software called Open Transactions that will further facilitate digital currencies.

He puts the recent volatility down to hackers attacking bitcoin exchanges, but believes it will not be an ongoing risk. "It is only a matter of market depth. If people get used to the fact that 200,000 coins get sold in one day, the market will adjust to that."

 

REGULATION OF VIRTUAL CURRENCIES

The United States has moved to regulate virtual currencies, which improved perceptions of bitcoin's legitimacy. But the Australian Securities and Investments Commission on Thursday did not respond to requests about its approach to the currency.

Bitcoins are now being used by some businesses for transactions.

South Australian jewellery store Merrin & Gussy recently started accepting bitcoin. IT manager Patrick Galbraith said the system protects the store against credit card fraud and was easy to use. "You don't have to worry about credit card processing fees. The internet needs something like bitcoin."

The owner of honestbeef.com sells meat for bitcoins. About 5 per cent of customers pay in the digital currency, said owner David Moloney, who was trained as a computer programmer.

"People say look there's no central protection. I say, it does not want protection - it's the free market in the rawest form."

 

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