It's been a tough time for bitcoin recently with mixed news topped off by MtGox announcing that bitcoin has a bug that has led them to discontinue bitcoin withdrawals. This bug apparently led to users being able to withdraw their bitcoin more than once and has apparently been exploited to steal all the bitcoins from Silk Road 2 (whether this actually happened or whether it is a convenient excuse for someone operating an illegal exchange to run off with a few million dollars in bitcoins is unclear).
Initial reports made this sound like someone may have found a way to double spend bitcoin which would be a very serious bug and a significant test of bitcoin's resilience. On closer inspection though it appears to be years old and something that MtGox should have been patched long ago.
Initial reports made this sound like someone may have found a way to double spend bitcoin which would be a very serious bug and a significant test of bitcoin's resilience. On closer inspection though it appears to be years old and something that MtGox should have been patched long ago.
The MtGox Death Knell
Bitcoin prices fell after the announcement and other exchanges have disabled bitcoin withdrawals to rectify the issue. Since then they have recovered somewhat with Bitstamp currently at $684 (after having restarted withdrawals) and Btc-e at $645 (not having restarted withdrawals yet).
The price on MtGox on the other hand has been in free fall and has currently bounced to $450 having hit a low of $300. Time will tell whether this is the bottom for MtGox or whether we will see it fall further but at the moment since there is no way to get any money out of MtGox either in fiat or bitcoin it is debatable what this price really represents.
This differential between Btc-e and MtGox could be due to Btc-e still allowing fiat withdrawals (MtGox suspended these some time ago) or it could be reflective of damage MtGox has done to their own reputation as a result of their own irresponsibility in spreading news about an aged bug which they should have countered for some time ago as a major new bitcoin problem.
The price on MtGox on the other hand has been in free fall and has currently bounced to $450 having hit a low of $300. Time will tell whether this is the bottom for MtGox or whether we will see it fall further but at the moment since there is no way to get any money out of MtGox either in fiat or bitcoin it is debatable what this price really represents.
This differential between Btc-e and MtGox could be due to Btc-e still allowing fiat withdrawals (MtGox suspended these some time ago) or it could be reflective of damage MtGox has done to their own reputation as a result of their own irresponsibility in spreading news about an aged bug which they should have countered for some time ago as a major new bitcoin problem.
What If?
Generally though this recent episode which many longer term bitcoin users will be hardened to raises another question. What if this had been a serious and new security issue?
Almost all of the alt-coins available at present are based on the bitcoin code and change only the hashing algorithm. A failure in SHA-256 would affect some other alt-coins but not all. Litecoin for example replaces SHA-256 with Scrypt. However since SHA-256 has been around for years in the wider crypto community and has been thoroughly reviewed, used and tested its probably the least likely candidate for a security hole.
More likely would be some issue in the protocol or other (relatively new to the world) bitcoin-specific code. In this case all the other alt-coins based on bitcoin suffer the same issue and therefore potentially the same fate.
In the longer term a proponent of bitcoin might expect the issue to be fixed, damage to be repealed (where possible) and for the price to recover but the damage in some cases could be hard to mitigate and might carry forward in the longer term and allow any similarly widely used heterogeneous cryptocurrencies to get ahead take the lead.
Almost all of the alt-coins available at present are based on the bitcoin code and change only the hashing algorithm. A failure in SHA-256 would affect some other alt-coins but not all. Litecoin for example replaces SHA-256 with Scrypt. However since SHA-256 has been around for years in the wider crypto community and has been thoroughly reviewed, used and tested its probably the least likely candidate for a security hole.
More likely would be some issue in the protocol or other (relatively new to the world) bitcoin-specific code. In this case all the other alt-coins based on bitcoin suffer the same issue and therefore potentially the same fate.
In the longer term a proponent of bitcoin might expect the issue to be fixed, damage to be repealed (where possible) and for the price to recover but the damage in some cases could be hard to mitigate and might carry forward in the longer term and allow any similarly widely used heterogeneous cryptocurrencies to get ahead take the lead.
NXT
Cryptocurrencies in general are in their infancy at the moment with bitcoin and its derivatives pretty much making up the entire picture however a new recently launched cryptocurrency - NXT - has an entirely new codebase.
With its new codebase it also comes with some interesting improvements that could make it the first real potential contender for bitcoin. The most compelling of these is also an improvement that it is impossible for bitcoin to add - a 100% proof of stake model which keeps the blockchain secure without any mining and 'transparent transactions' which may allow it to achieve VISA-like (or higher) transactions-per-second rates. A more in depth rundown is available here.
NXT has been criticised for being '100% premined' with the coins being allocated initially and then distributed via IPO and sale on available exchanges however it seems that the founders and NXT community have tried to make it clear that distribution is essential for it to gain traction and credibility (and therefore value) and distribution may now be better than bitcoin.
NXT is still relatively new but it has been on the up recently, possibly related to the recent bitcoin-negative news. Its market cap stands at $60m right now which is below a number of other alt-coins like Litecoin, Peercoin and Dogecoin but as a bitcoin-heterogeneous cryptocurrency with some tangible improvements it seems feasible it could take a place near the top at some point.
At the very least it could make a good option to bet on the success of cryptocurrencies in general but hedge against any major issues coming up with the bitcoin codebase.
NXT has recently been added to BTER and seems likely propagate to other exchanges in the future.
With its new codebase it also comes with some interesting improvements that could make it the first real potential contender for bitcoin. The most compelling of these is also an improvement that it is impossible for bitcoin to add - a 100% proof of stake model which keeps the blockchain secure without any mining and 'transparent transactions' which may allow it to achieve VISA-like (or higher) transactions-per-second rates. A more in depth rundown is available here.
NXT has been criticised for being '100% premined' with the coins being allocated initially and then distributed via IPO and sale on available exchanges however it seems that the founders and NXT community have tried to make it clear that distribution is essential for it to gain traction and credibility (and therefore value) and distribution may now be better than bitcoin.
NXT is still relatively new but it has been on the up recently, possibly related to the recent bitcoin-negative news. Its market cap stands at $60m right now which is below a number of other alt-coins like Litecoin, Peercoin and Dogecoin but as a bitcoin-heterogeneous cryptocurrency with some tangible improvements it seems feasible it could take a place near the top at some point.
At the very least it could make a good option to bet on the success of cryptocurrencies in general but hedge against any major issues coming up with the bitcoin codebase.
NXT has recently been added to BTER and seems likely propagate to other exchanges in the future.
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