Mt. Gox

Bitcoins?

Bitcoin raised its ugly head in an email conversation this week, and I put in my two cents:

I don't trust Bitcoin. It doesn't make much sense. You can make bitcoins by running a computer program to generate them. It takes a long time, ties up your computer, burns electricity, but all you get out of it is some number. I mean it's not good for anything except showing people that you have money and power to burn.

As I understand money, it's main purpose was to enable the government to levy taxes and then use the proceeds to buy weapons and pay soldiers. Originally it had inherent value because it was made of metal.

You can see that I'm not a fan of Bitcoin. Then California Bob mentions the Mt. Gox disaster. At first I thought it was a misspelling of Mr. Gox, but no, Mt. Gox is correct. Wikipedia's intro sums it up nicely:

Mt. Gox was a Bitcoin exchange based in Tokyo, Japan. It was launched in July 2010, and by 2013 was handling 70% of all Bitcoin transactions.^[1] In February 2014, the Mt. Gox company suspended trading, closed its website and exchange service, and filed for a form of bankruptcy protection from creditors called minji saisei, or civil rehabilitation, to allow courts to seek a buyer.^[2][3] In April 2014, the company began liquidation proceedings.^[4] It announced that around 850,000 bitcoins belonging to customers and the company were missing and likely stolen, an amount valued at more than $450 million at the time.^[5][6] Although 200,000 bitcoins have since been "found", the reason(s) for the disappearance—theft, fraud, mismanagement, or a combination of these—are unclear as of March 2014.^[7] There has been some speculation of hackers being responsible for the missing Bitcoins, but no case has been proven.^{[citation needed]}

I can see that we could use a better form of money. Gold backed money is nice and solid, but it ties up huge quantities of gold, one of the more useful metals. Then again, gold is relatively scarce, and keeping vast amounts of it locked up doesn't prevent it from being used, you just need to make sure you are making good use of it. Most all electronic devices use a tiny amount of gold for electrical contacts and bonding wires on integrated circuits, but the amount is miniscule. I suspect there isn't a tenth of a gram in an entire desktop computer these days, which only amounts to $2 worth.
    And then there is gold jewelry. I suspect more gold is lost from everyday wear of gold than the entire electronics industry uses in a year. No one notices because the loss is so miniscule, but there are so many people wearing it that the loss must add up to something.
    Fiat money (which is what most everyone uses these days) depends on good management by the government. Foolish governments try to print more to pay their bills, but they don't fool anyone, at least not for long. Witness Zimbabwe, which recently was unable to print any more money because they could not afford to buy any more paper or ink. How low can you go?
    The USA and Argentina are both running inflationary schemes. Argentina's may be a little worse (read steeper rate of devaluation), but we are both suffering from it. Why, I remember when I was a boy gasoline was 25 cents a gallon. Now it's over $4. Dang nab politicians. Never mind that it took 40 years to get there.