Bitcoin hack shakes public opinion

by | Mar 7, 2014 | Biz/Tech

Casey Taylor
Biz/Tech Reporter

Cryptocurrency holders are experiencing trust issues following the collapse of Mt. Gox and Flexcoin but people in the industry say bitcoin isn’t going anywhere.

As the world’s first decentralized currency, bitcoin allows people to make transactions anywhere in the world for little or no fees.

Recent events, however, have caused a stir in public perception.

Once one of the world’s biggest and most well-known bitcoin exchanges, Japan’s Mt. Gox suspended transactions on Feb. 25, after finding suspect activity in their databases.

Mt. Gox announced in a motion for civil rehabilitation posted to their website it had been drained of 850,000 BTC ($425-million, all dollar figures Canadian).

Within the week, Flexcoin, a small bitcoin bank based out of Edmonton, announced hackers had liquidated their hot wallet (connected to the servers).

They said nothing from cold storage was stolen as it was out of reach from an online attack.

Flexcoin closed its doors due to the loss, with 896 BTC ($448,000) stolen.

Anthony Di Iorio, founder of Bitcoin Decentral in Toronto and executive director of the Bitcoin Alliance of Canada said the fall of Mt. Gox and Flexcoin shouldn’t deter people from bitcoins themselves.

“Mt Gox. And Flexcoin were exchanges,” said Di Iorio. “Exchanges mean you have to let someone else hold your funds and with bitcoin you want to hold on to your funds just like any bank really, you want to be your own bank.”

“You shouldn’t be leaving large amounts of bitcoins in anyone else’s hands,” said Di Iorio.

“If they fail, it’s a private company that fails and you’re going to be out of luck.”

Di Iorio said simple ways exist for people to keep their bitcoin safe.

“There’s many different types of wallets out there, each with different levels of security,” he said. “I think that’s the safest way to do it.”

He said when a typical bank fails there’s insurance in place but those safeties don’t exist with bitcoin yet because it’s still too new.

Di Iorio said bitcoin should still be considered a good investment.

Peter Hanna, a Business Analyst at Microsoft Canada, said he originally only invested small in bitcoins but decided to jump in a little heavier after the crash.

“I originally bought in when it was around 200-ish (dollars), then again when Mt. Gox crashed the other day because I saw an opportunity,” said Hanna.

Hanna said he had originally cashed out when the value had been near peak and, like Di Iorio, still sees it as an investment that could play out well.

But some people still haven’t been convinced.

“I was never really confident in (bitcoins) to begin with,” said first-year Humber paramedic student Mark Godfrey. “I know some people who have them and use them to buy online but I don’t really see the point of them.”

Since Mt. Gox and Flexcoin collapsed, bitcoin value has risen from the $500 it sat at prior.


Hanna said he still has confidence in the market.

“I feel like I have a better understanding of (bitcoin) than penny stocks or whatever and I buy and sell them quite a bit,” he said. “So to me, it’s worth the risk.”

Di Iorio said he thinks more merchants are going to start accepting bitcoin and more people will adopt it because it doesn’t carry the fees that come with PayPal, banks, credit cards, or sending remittances back home via companies like Western Union.

“So I think cryptocurrencies, ones like bitcoin, are going to be the way financial transactions are done in the future,” he said.