Bitcoin Suffers Another Setback

Illustration for article titled Bitcoin Suffers Another Setback

Thanks to the exit of e-wallet service Paxum, and a $100,000 fraud incident, trading has been suspended at TradeHill, a Bitcoin exchange site that mostly played second-fiddle to the more prominent Mt. Gox.

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In a blog post, the Chile-based company outlines their reasons for halting trading and returning funds to customers, basically saying that in addition to the other factors, regulation has made the price of transaction licensing too costly. As for the fraud:

Everyone at TradeHill has also been working without pay for several months after one of our payment processors removed over $100,000 dollars from our account without notice. We decided to cover this loss for now instead of passing it on to our customers and are taking legal action against the processor.

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Bitcoin, of course, was being championed around the internet last year as the future of currency; one that wasn't tied to any nation, or government, or corporation, or physical object. After trading at a price over 30 USD, security issues began to pop up, highlighted by the hacking of Mt. Gox, which led the site to freeze all trading and roll back the timeline of events. The price of Bitcoin eventual fell to a much lower price, which severely stifled the amusing little experiement.

TradeHill says it's not completely down for the count, and promise to relaunch with Bitcoin.com, but forgive me if I remain a bit skeptical of that ever happening. [TradeHill via BetaBeat via The Verge]

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DISCUSSION

MrFluffyThing
MrFluffyThing

At the time that Bitcoin started getting hot in the news between late 2010 and early 2011, I had decided to try mining. One of my systems sat at full tilt for what seemed like 2 days to produce a single bitcoin. This bitcoin was worth, at the time, around $16. I sat on it for a while and didn't think anything of it until I saw that bitcoins were valued at $30. I signed up for an Mt. Gox account that day and traded it for roughly $31.

I wasn't able to get any money of out this because I had to sign up for some ridiculous paypal knockoff that wouldn't let me get cash out or really use it anywhere online. A week later, Mt. Gox got hacked and my transfer was recalled, but my Bitcoin disappeared forever. Because I signed up for a Mt. Gox account at a point in time AFTER where the servers had rolled back to, both my account and my bitcoin had disappeared, and my bitcoin never got returned to my wallet. I was already weary about this digital currency, but the lack of centralization (which is supposed to be the redeeming part of this type of currency) had screwed me out of $30 worth of electricity (Yes, my bill was about $35 higher that month).

Now I'd like for all of you to imagine something for a minute: If I had PAID hard earned USD to purchase bitcoins, and something as dumb as this would have happened to me, where would my money have gone? Who would I had even contacted at Mt. Gox to fix this issue? Unless there's a government regulation or a centralized organization managing all transactions, it's a little difficult to trust.