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Flexcoin Follows Mt. Gox Into the Bitcoin Graveyard

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March 06, 2014

Flexcoin Follows Mt. Gox Into the Bitcoin Graveyard

By Steve Anderson
Contributing TMCnet Writer

It's an old aphorism that any new technology is going to have a certain boom-and-bust cycle, as a huge array of new firms enters the market and many of same are shown the metaphorical door as flaws emerge in the business model. Bitcoin is no different, and after the fall of Mt. Gox only days ago, another such collapse has emerged as Flexcoin has stepped forward to shutter its operation.

What drove Flexcoin down, meanwhile, was much the same point as Mt. Gox: flaws in the software code. But in this case, the flaws were more pronounced than the word commonly implies, allowing hackers to make off with a load of Bitcoins valued at 440,000 euros (about $609,000 U.S.). The fatal flaw that hackers used to gain access to that kind of Bitcoin was involved in conducting transfers between users—one of the biggest advantages of Bitcoin—a flaw that hackers used to great effect by flooding the system with requests for transfers.

Indeed, Flexcoin had fended off such attacks before—thousands, based on reports from Flexcoin—but this particular attack was just too much for the company to stand, and Flexcoin, according to a statement, had neither “the resources, assets (n)or otherwise to come back from this loss.” That led to Flexcoin's immediate shutdown.

However, this loss will be somewhat easier for account holders to bear. Not only is Flexcoin working with law enforcement to track down the culprit, but those whose Bitcoins were held in offline computers will get said Bitcoins returned, as it was impossible for those Bitcoins to be stolen.

The recent rise in Bitcoin, both in terms of price and perceived value as both an alternative currency and as an investment vehicle, is prompting governments to more closely examine Bitcoin. Indeed, Japan is set to roll out a set of rules this week specifically regarding Bitcoin, and how it falls under laws that are currently in place. Reports indicate that Japan is set to regard Bitcoin the same way it regards gold: as a commodity as opposed to a currency, meaning banks couldn't handle it as part of main business. The possibility of taxing Bitcoin transactions remains, but is difficult due to the anonymity of Bitcoin, and the issue of how to protect consumers involved in Bitcoin transactions remains a likewise thorny issue. Overstock's recent $1 million in sales with Bitcoin, though, suggest that it's an issue that will need some kind of address as the currency itself simply won't go away.

Bitcoin in general could be described as a thorny issue. Indeed, the protection of consumers is important, and there are sure to be some issues getting started as is the case with most every new technology that comes long. Governments are likely interested in getting a slice of the tax revenue as well, a development that can never be underestimated, and are likely concerned about the growth of a currency that's not tied to any one nation in particular and thus more inherently difficult for any one nation to control.

There is certainly no shortage of issues to consider when it comes to Bitcoin, and keeping a handle on these issues will likely lead to success in the long term for the currency and for those willing to consider said issues. Only time will tell just how the whole thing is handled, however, and the end result may prove to be something that no one expects.

Edited by Cassandra Tucker

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