Mike Cote's Business Editor's Notebook: Bitcoin, the honey badger of currency
AT A POSTAL store a few weeks back, I met a young guy who was standing in line in front of me. The back of his orange hoodie said "Bitcoin: the honey badger of currency."
While Bitcoin may still make you scratch your head, chances are you've heard about the honey badger, thanks to a narrator named Randall's goofy parody on YouTube, which has generated nearly 66 million views since it was posted in 2011.
It's just a couple of years younger than Bitcoin, the virtual currency that was created in 2009, so you could say Bitcoin and the honey badger have grown up and gone viral together. Thanks to Randall, we know the honey badger can survive a cobra's venomous bite and resume its carnivorous activities after a little nap. The honey badger don't give a hoot.
Will the same be true for Bitcoin?
On Friday, Mt. Gox, once the world's largest Bitcoin exchange, filed for bankruptcy in Japan, saying 850,000 Bitcoins belonging to customers and the company were missing, Bloomberg News reported. Mt. Gox, which reportedly has been plagued by cyber attacks, internal battles and clashes with regulators, suspects the Bitcoins were stolen and is considering filing a criminal complaint.
As Randall would say, that's nasty.
About $300 million worth of invisible money disappeared. Advocates of Bitcoin - which has gained a lot of traction among Free Staters in New Hampshire because the currency can be moved around without and does not reflect the overall Bitcoin ecosystem.
"Mt. Gox is the only exchange that wasn't backed by venture funds or institutional investors," Micky Malka, the founder of Palo Alto, Calif.-based Ribbit Capital and a Bitcoin investor, told Bloomberg.
If you're not among the folks who have used Bitcoins to buy a sandwich, pay an attorney or shop for something online from overstock.com, here's a brief explanation of what they are, courtesy of a Q&A compiled by Reuters.
"The virtual currency relies on a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every Bitcoin transaction that is made."
No central authority oversees the supply of Bitcoins, which like the honey badger's loose skin, allows it to move about freely. That made Bitcoin popular with drug dealers and other crooks who did business in the Silk Road online black market.
Like other currencies, the value of Bitcoins depends on people's confidence in them.
And why wouldn't anyone have a lot of confidence in a computer-generated currency that has fluctuated in value from $30 a year ago to $1,100 in December? That Bitcoin is just crazy.
About now, the people's confidence in Bitcoin is probably equal to their confidence in Target.
While we can expect digital currencies to become more commonplace, we've learned no financial payment system is safe from the ingenuity of a hacker - the honey badger of criminals.
Once the hoopla of Mt. Gox subsides, Bitcoin use likely will gradually pick up steam as sure as Target customers will continue using their Target credit and debit cards.
Last week, I was among the millions of Target debit card holders who received a form letter from Scott Kennedy, the president of Target, thanking me "for being a REDcard holder and valued Target guest" and apologizing for the holiday shopping season data breach that put its customers' financial data at risk to cyber-thieves.
Kennedy said Target is accelerating its plans to introduce chip technology to its credit and debit cards by early 2015, six months ahead of schedule - and years behind Europe, where such encryption technology is standard.
No word on when Target will be ready to accept Bitcoins as payment, but Bitcoin don't care. Bitcoin just goes where it wants.
Mike Cote is business editor at the Union Leader. Contact him at 668-4321, ext. 324 or firstname.lastname@example.org.