The Implosion of Mt. Gox: or, What Happens When You Centralize “Decentralized” Currency

(2 March 2014)

Mt. Gox, the world’s biggest Bitcoin exchange, just “Died and the Money Is Gone.”

Bitcoin enthusiasts, believe it or not, but this is what happens when you centralize your decentralized currency in one giant bank.

When the centralized bank falls, so does your decentralized currency.

Mt. Gox lost 850,000 Bitcoin in theft & fraud that was never reported. There goes 7% of the estimated global total of Bitcoins, estimated at over $470 million (much of which could very well be in the Bitcoin bankers’ pockets). This is the Almighty “Free” Market™ at its finest.

According to the Taipei Times, early last year, an estimated 70% of Bitcoin transactions went through Mt Gox. That’s how centralized the “decentralized currency” was.

Most Bitcoin enthusiasts only worry about state centralization; they fail to see that capitalism inherently tends toward centralization too. Banks would (and do) kill for control over much smaller than 70% of all global transactions.

This is what happens when you merely make a new currency instead of challenging the system itself.

The implosion of Mt. Gox and the transfer of MILLIONS of average people’s Bitcoins into a few technocratic pockets is just one example of what a right-“libertarian” society would really look like.