Bitcoin takes a beating..

Bitcoin had a serious case of the Mondays yesterday as the EFF dropped the currency for donations, and MtGox, a major international exchange, managed to spill over $5 million worth of BTC in a public ‘free for all’ moment. One lucky fellow snatched up over $5 million worth of BTC with a mere $2,613 by wisely setting an unlimited buy order at $0.0101 (everyone else was bidding $0.01).

The EFFs move wasn’t so bad when you pick it apart. Accepting any donation might seem harmless, but if the charity needs to convert that donation to a currency then it becomes an issue. The EFF cannot responsibly spend BTC, or exchange it, without exposing themselves to legal entanglement in doing so. Until the currency is ‘trouble free’ the best option for a huge non-profit is to avoid that donation.

In a post from Cindy Cohn on the EFF blog the issue is broken down three ways:
EFF Logo

  • Lack of understanding with regard to legality of BTC
  • Misleading donors with regard to value and use of donations
  • Giving a false endorsement of Bitcoin technology

Going forward the EFFs plan is to simply dump the donated BTC into the public faucet where they will be given away in small chunks to fresh Bitcoin users (or existing users who have never drank from the faucet). Don’t hurt yourself rushing on over for your handout, the current give-aways are only around 55 cents US when there’s more than 50 BTC in the faucet.

Speaking of give-aways, the $5 million I mentioned at the start of the article is apparently pending the decision of the folks running the exchange. The story is the very essence of TL;DR, so let me try to put it into point form:
BTC Value

  • MtGox setup a BTC exchange in Japan
  • MtGox’s auditors were hacked and an encrypted file was stolen
  • Alerts went out to change passwords and secure accounts
  • At some point on the 19th an MtGox user put a gigantic sell order up
  • As the sell was taking place Kevin Day took note, offering $0.0101 per BTC
  • By the end of the trading Kevin had purchased ~260k BTC for $2,613
  • Kevin took out 643.27BTC (~$8,000 US) and placed it into a personal wallet
  • MtGox claims that the day of trading broke exchange rules and must be reversed
  • Initially MtGox was considering a review by the FBI but at the moment it seems they are focused on a roll-back
  • MtGox has not mentioned an ability to reverse coins that left the exchange which creates a large problem

At this point the MtGox sites are having a hard time staying up and as of 11:40AM GMT they are struggling to allow users access to ‘reclaim’ accounts. I gave up on the site personally and have just been looking in Google’s cached results (a great solution for overloaded websites any time something like this happens).

There is also mention of the exchange going back on-line when the accounts are sorted out, and the claim that once the site is back on-line, trades 218869~222470 will be reverted and the exchange price will be going back to ~$17.50/BTC. Given everything that has happened this seems really optimistic to me.

Can’t wait to see what happens tomorrow.

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