Bitcoin has seen some interesting twists and turns of late, some almost worthy of a spy novel. On February 10 Mt. Gox, the world’s largest Bitcoin exchange, suspended trading, citing a possible hacking incident. Later we would learn that in the weeks leading up to its collapse, Mt. Gox was experiencing as many as 150,000 DDoS (denial of service) attacks per second. These were followed closely by hacking of the notorious Silk Road 2 illegal marketplace on February 14 and the collapse of Mt. Gox competitor Flexcoin shortly thereafter.

1. Technology
74 | GlobeAsia April 2014
B
itcoin has seen some interesting twists and
turns of late, some almost worthy of a spy
novel. On February 10 Mt. Gox, the world’s
largest Bitcoin exchange, suspended trading,
citing a possible hacking incident. Later we would
learn that in the weeks leading up to its collapse,
Mt. Gox was experiencing as many as 150,000
DDoS (denial of service) attacks per second. These
were followed closely by hacking of the notorious
Silk Road 2 illegal marketplace on February 14
and the collapse of Mt. Gox competitor Flexcoin
shortly thereafter.
While not quite the St. Valentine’s Day
massacre, the Silk Road 2 hack resulted in a loss
of over $2.4 million while Flexcoin, too, reported
a loss of over half a million dollars, which it
attributed to hacker activity. Another victim of
the hacking epidemic, Slovenia’s Bitstamp, was
also forced to temporarily halt trading after a
DDoS attack on its servers.
The fallout from these disasters unfortunately
did not limit itself to the virtual world, as
evidenced by the untimely death of Singapore-
based Bitcoin exchange First Meta’s chief
executive officer Autumn Radtke. A victim of
what’s beginning to look like the Bitcoin curse,
Radtke was found dead on February 26 in an
apparent suicide. Radke had shared a news story
on depression among entrepreneurs via a social
media site shortly before her death.
If Bitcoin enthusiasts were hoping for a quiet
and uneventful March, fate did not oblige. By
The Bitcoin curse:
Can the crypto currency weather the storm?
IllustrationNelarealino

2. April 2014 GlobeAsia | 75
far the strangest week yet in the saga
of Bitcoin began with the release of
Newsweek’s print issue relaunch on
March 7. The article centered around
the supposed unmasking of the
mysterious Satoshi Nakamoto.
The name Satoshi Nakamoto was
the (presumed) pseudonym used by
the creator of Bitcoin who had gone
to great lengths to keep his identity
secret, and had not been heard from
in a long while. Newsweek claims to
have discovered that the true identity
of Satoshi Nakamoto is none other
than 64-year-old bespectacled Dorian
Nakamoto.
Nakamoto has since vigorously
denied having any connection with
Bitcoin and other news organizations,
too, have expressed heavy skepticism
toward Newsweek’s reporting. Indeed,
an expert hired by Forbes magazine
is convinced that Nakamoto is not the
same Satoshi Nakamoto presumably
connected with Bitcoin. Newsweek,
for its part, has not only stood by its
story, but deepened the mystery by
indicating it has secret evidence – that
it will not reveal – which definitively
convinced it of Nakamoto’s identity.
Interestingly, Nakamoto has
previously worked on classified projects
for the United States government and
there are huge swathes of his life that
are largely unaccounted for. Nakamoto
also seems to be an otherwise good
candidate, given his engineering and
mathematics background. In an even
weirder (according to Nakamoto)
coincidence, he was also once known as
Satoshi Nakamoto, but westernized his
name in a bid, he says, to simplify it.
As the story played out over the
next few hours and days, it took on a
bizarre life of its own complete with
a car chase through downtown Los
Angeles, as reporters jostled to get a
word in with the presumed, elusive
creator of Bitcoin.
If things were not strange enough,
on exactly the same day the Newsweek
While Bitcoin reached a high of
approximately $1,000 recently, the
Mt Gox fiasco caused it to drop to
about $500. Bitcoin now trades in the
neighborhood of $750. While this is
certainly more volatile than we would
like to see, it is a good deal less volatile
than it could have been, given that this
is such a new concept.
Among the torrent of news relating
to Bitcoin this month, reports say that
a group of individuals has proposed
a service they call Goxcoin. As the
mutant cousin of Bitcoin, Goxcoin
would allow individuals who lost
money in Mt. Gox to sell their right
to the recovery of said monies in
exchange for immediate liquidity at a
heavily discounted rate. The existence
of Goxcoin (even as a theory, if not yet
in practice) speaks volumes about how
confident these individuals are that
the stolen Bitcoin will eventually be
recovered.
Fortunately for those who have
lost Bitcoins in the whole Mt. Gox
fiasco, a volunteer army continues
to crowdsource their search efforts.
This sort of altruism is built into the
concept of Bitcoin itself, since because
of its revolutionary structure, every
Bitcoiner has an interest in locating
the stolen coins. Because an increased
supply could impact the value of their
own holdings, there are quite a few
armchair detectives hot on the case.
A good thing in the long run?
Recently Benjamin Lawsky,
superintendent of New York’s
Department of Financial Services, told
Reuters that the collapse of Mt. Gox
article went to print, there appears
to have been a historic transaction
involving 180,000 Bitcoins, worth an
estimated $115 million. Nobody has
yet been able to ascertain the source
or destination of those funds but
many theories revolve around the
mysterious Satoshi Nakamoto and his
rumored stash of over $400 million in
Bitcoin.
The drama didn’t end there.
Just when everybody thought they
had heard the last of Mt. Gox and
its founder Mark Karpeles, the saga
again took a turn for the absurd. Soon
after Mt. Gox filed for bankruptcy
protection, a group of hackers released
a collection of documents purportedly
from Karpeles’s hard drive that they
say indicates Karpeles may have
spirited away the money himself!
While it is too soon to definitively
prove just who could have made off
with millions in Bitcoins, an ad-hoc
group of cyber sleuths is hot on the
trail. Experts say that by examining
the Bitcoin Chain, the public registry
of all Bitcoin transactions, it should be
possible to trace the stolen Bitcoins,
although this is a lengthy process.
What is really interesting,
however, is how resilient the
currency has proved. Bitcoin has
emerged largely unfazed by the entire
hullabaloo, all things considered.
Certainly the thieves who have been
stealing these massive troves of
Bitcoin were not afraid of the potential
reduction in value that a Bitcoin crash
triggered by their actions could bring.
Indeed the numbers appear to support
such a view.
Bitcoin is not the only girl at the dance, only the
prettiest. Crypto currencies are all the rage these days
and there are plenty of alternatives waiting in the
wings to take Bitcoin’s place.
April 2014 GlobeAsia | 75
Jason Fernandes
Tech commentator and the founder of SmartKlock.

3. Technology
76 | GlobeAsia April 2014
weed out the smaller players, there is clearly
a growing enthusiasm for these currencies.
While part of this is speculation, a great deal
of the interest comes from people who are
increasingly distrustful of financial institutions
and government regulation.
What next?
One can’t help but wonder if perhaps Dorian
Nakamoto’s choice for a new first name was not
influenced by the classic Oscar Wilde novel A
Picture of Dorian Gray. The tormented portrait
of Gray is a perfect metaphor for the original
Satoshi Nakamoto (whoever he is) and his Dr.
Frankenstein-like relationship with his creation.
The future of Bitcoin, of course, depends on
what’s next for the fledgling cyber currency. Will
it ever grow out of its fascination with its creator
and actually become a viable transactional
currency? Many (myself included) once believed
Bitcoin had the potential to change everything
but now that view appears to be faltering.
The good news is that Bitcoin is not
inherently insecure. While Bitcoin is distributed
and untraceable by design, that does not mean
Bitcoins are unsecurable or that Mt. Gox took
every available precaution but was simply
overrun by a fundamental flaw in Bitcoin.
Indeed, the transactions that are at the center
of the Mt. Gox collapse could have been easily
avoided or quickly discovered, had Mt. Gox used
industry-accepted accounting practices.
The fact is that there is a way to do this
legitimately and still profit because there is such
a huge opportunity for exchanges. Perhaps a
bigger player will see the value of Bitcoin and
jump in with a fully-secure system that insures all
deposits the way the Federal Deposit Insurance
Corporation (FDIC) does for banks. While nobody
wants increased regulation, some regulation
might be welcome and indeed necessary, if that’s
what it takes to keep the idea alive.
Peer-to-peer finance is the next area of
great innovation and Bitcoin is at the forefront
of this democratization of finance. One must
learn to expect a few ruffled feathers when a
fledgling currency like Bitcoin begins to play in
the big leagues, but once these early troubles are
overcome, the possibilities are too great to be
ignored.
could actually strengthen Bitcoin in the long run.
He described the collapse as a “shaking out” of
the market. I disagree with this characterization
because Mt. Gox was the world’s largest Bitcoin
trading exchange and “shaking out” usually
refers to the culling of the smaller players in the
market.
On the positive side, the collapse will
likely lead to increased safeguards and better
accounting practices across the industry. The
most controversial possibility is the ever-looming
specter of government regulation, something
Lawsky appears to favor. Part of Bitcoin’s whole
appeal is its Wild West-style fierce independence.
Most Bitcoiners would likely look at any
regulation warily and with great suspicion,
prodding it only from time to time with a long
stick to ensure that it was truly not a threat.
I’d be a fool to say that Bitcoin will survive in
its current form for much longer. Just a few short
months ago in these very pages I heralded Bitcoin
as the future of money. Today the future seems
uncertain. India has strongly cautioned Bitcoin
users and both Japan and the United Kingdom
have flirted with regulating it, only to shy away at
the last moment.
Bitcoin is not the only girl at the dance
though, only the prettiest. Crypto currencies are
all the rage these days and there are plenty of
alternatives waiting in the wings to take its place.
Ripple, Litecoin and Dogecoin are all growing
quite fast and while market forces will eventually
Many (myself included) once believed Bitcoin
had the potential to change everything but now
that view appears to be faltering.