Bitcoin’s Rise Constrained by Heists and Lost Fortunes
[Philip Lelyveld comment: Good grief! Something else William Edward Quigley and I agree on. Hell may be freezing over.]
The problem is caused by the design of the software that underpins Bitcoin. It uses cryptography to allow people to exchange funds securely without trusting each other or needing a third party to oversee the trade. But individual collections of bitcoins are secured using an alphanumeric private key that is impossible to recover or reset if lost or stolen, and is near impossible to memorize.
A private key resides in a simple text file called a wallet file and looks something like this: E9 87 3D 79 C6 D8 7D C0 FB 6A 57 78 63 33 89 F4 45 32 13 30 3D A6 1F 20 BD 67 FC 23 3A A3 32 62. If someone else learns that key or copies your wallet file, he or she can spend your bitcoins; if you lose your key or wallet file, Bitcoin’s cryptographic design makes it impossible to regain access to your bitcoins.
“The hackers figured this out really quickly. I think this is a really bad thing for the bitcoin ecosystem,” said venture capitalist William Quigley at the Future of Money conference in San Francisco on Monday. He believes that bitcoins can’t become more than a plaything for speculators unless tools and companies appear that make it easier to manage and safeguard a bitcoin wallet.
Kenna says the lack of tools to make securing and managing bitcoins easy is hindering the currency’s adoption for payments and other commerce, and that no clear solution seems to be on the horizon. Even so, he remains confident that the potential for making money by selling such services or software means they will soon appear. The total value of all the bitcoins in circulation stands today at more than $11 billion. “This is a tremendous business opportunity,” Kenna says.
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