Mt. Gox is likely no more. The company has filed for bankruptcy protection after “losing” approximately 850,000 BitCoins at a current market value of $473,000,000 USD (Mt. Gox Files for Bankruptcy Protection – Wall Street Journal). With his headquarters in Tokyo, Mt. Gox owner Mark Karpelès offered a mild apology but chose not to slit his own belly as a native Japanese CEO might.
This story will makes news and headlines for the next week, naysayers will cluck their tongues and shake heads. There will be a host of news stories as to why the New Normal of digital payments is a bad idea. I offer that the focus should be on the goal and not the task.
When BitCoins emerged from the mysterious Satoshi Nakamoto (it’s unclear if this was a single person or group acting under this name) the goal was to create a borderless currency that disrupted current transaction models. BitCoins are exchanged in a peer-to-peer manner in a manner similar to “paper” hard currency. The rules for exchange were somewhat open thus creating an instant third party market for Apps, Exchanges (e.g., Mt. Gox, CoinX, BitcoinsChile.cl, rBitCo.in) and a host of speculative (it is a volatile currency/instrument) investments by high-profile names (e.g., Winkelvoss twins). All of this was intent and goal of the BitCoin creators.
Arguably two of the greatest inventions of the 20th century were globalization and management structures. BitCoin’s goal model epitomizes the desire to globalize transactions that reach many people evenly and with a low barrier to entry. A step along that way is to have some form of exchange where the transaction is moved from point-to-point with assurances. These assurances are more formally known as non-repudiation of a message or transaction. Non-repudiation is a big word for a big concept. It means that the payment is being guaranteed with a high degree of certainty of who sent it and that it wasn’t tampered with on its way to you. With this in place you know who sent you what before you receive it. New Normal exchanges such as Mt. Gox need to take lessons from the processes and methods used by legacy exchanges to safeguard transactions.
The individual tasks required create a robust and seamless transaction ecosystem will always have issues that need to be worked out, but they are not the end game. A noble end-game scenario is to provide a universal currency model that works, at scale, in every transaction scenario (P2P, B2C, G2C, B2B and more) just like cash. The best results to come out of Mt. Gox are the lessons learned.
The future of digital currency will take its best lesson from the Agile credo, “Fail Fast, Fail Early.”