Cyber grief

!@%$##! Heartbleed bug! If -- somehow -- that term doesn't ring a bell, see "How to Protect Yourself From the Heartbleed Bug." Right now. Really, I'm not kidding. But do come back. 

(For a more technical look at the problem, see The Heartbleed Bug.)

Sigh ...

The Heartbleed-centric hit to productivity -- certainly to mine -- is staggering. On how many websites does each of us have an account that suddenly needs a new password? While you tally those up, don't forget every long dormant etail account in which you ever paid with a credit card, or with which you may have used a password you're still using elsewhere. Sigh.

It's the kind of thing that makes one wonder about using a virtual currency -- if the recent travails of bitcoin haven't already convinced you.

Unfamiliar with virtual currencies like bitcoin? Very briefly, a virtual currency is a digital asset class (a) created, maintained, exchanged, and stored by private parties outside the normal banking system (b) independent of government monetary authorities. 

A unit of virtual currency can be exchanged for conventional currency. Virtual currency can also be used directly (at only a few businesses, so far) to acquire goods and services. The most popular virtual currency is bitcoin, units of which are created by solving math problems. Virtual currencies exist only on computers, and so are subject to a variety of security risks -- as in, "Bitcoin and other cryptocurrencies compromised by Pony botnet."

Back to bitcoin ... how messed up is it these days? Herewith a few references, beginning with Mt. Gox, the onetime leading exchange for bitcoins.

"Mt. Gox files for liquidation as Japan rejects rehab plans." To grasp the scope of the problem, note that "... the Mt. Gox case is nothing if not unusual. For one thing, it may have had as many as 1 million customers before it went bust Feb. 28 with 850,000 bitcoin missing. It later said it had found about 200,000 bitcoins in an old-format online wallet."

Who created bitcoin? Supposedly someone named Satoshi Nakamoto -- only it's less than clear who that is, or if it's a nom de net. Last month one could read that "Bitcoin creator Satoshi Nakamoto reportedly found," in the form of one Dorian Prentice Satoshi Nakamoto. Only soon after, "Dorian Nakamoto's denial blows up Newsweek's bitcoin 'scoop'"

In the days of latent security holes like Heartbleed, it's nice to know the provenance of the software that underpins one's financial wellbeing. Even big banks have had their problems (reference, say, the 2008 financial mess), but a big bank or brokerage backstopped by the US Treasury does offer some comfort. That's one person's opinion, anyway ...

Did Mt. Gox lose or abscond with customers' bitcoins? Was Mt. Gox hacked? What does forensic hacking tell us? I can't say, but "Hackers claim bankrupt Mt. Gox still has customers' bitcoins."

Is Mt. Gox an isolated case? Perhaps not. See "Bitcoin exchange CEO Autumn Radtke found dead in Singapore." Radtke, whose death was attributed to "unnatural causes," headed the First Meta bitcoin exchange.

This is a currency?

Amid such turmoil, it's hardly surprising that bitcoin values (as denominated in conventional currency like, say, the USD) have gyrated wildly. But the market provides. See "Swap agreement aims to protect Bitcoin holders from the next crash." That protection, of course, is only as useful as the ability of Tera Group, the outfit selling the related financial derivative instrument, to make good on others' losses.

Suppose you own some bitcoins. You decide to use one. In the US, be prepared to discuss the matter with the IRS. See "Buying with bitcoin gets complicated under IRS ruling." Why? Because the IRS has decided -- not unreasonably, IMO -- that a bitcoin isn't a unit of real currency -- it's a noncash asset, and hence subject to reported gains and losses. That makes the notion of cashing in a bitcoin for your daily Starbucks fix somewhat less attractive, doesn't it?

Again, the market provides. See "Bitcoin is a Tax Nightmare, But LibraTax Has Got You Covered." Of course, LibraTax can't make sense of your bitcoin gains and losses without knowing about your transactions. If you are using bitcoin, isn't it for the (presumed) privacy? Hmm.

Of course expectations of privacy via bitcoin already took a hit, as reported when "FBI shuts down online drug market Silk Road," the latter a big bitcoin user.

Nor are US authorities alone in skepticism (or distrust) of virtual currencies. "Russian authorities say Bitcoin illegal." And "Bitcoin set for fresh Chinese regulatory attack." Also, "Europol Calls For Increased Powers For Police to Identify Bitcoin-Related Money Laundering." And "Bank of Japan Governor: Bitcoin is Too Unreliable to be a Currency."

I'm in the future-ism business, and I'm skeptical virtual currency is coming into the mainstream any time soon.