MtGox filed for bankruptcy protection on February 28, 2014, after losing control of almost 6% of all Bitcoin in existence at the time. You should be worried and excited at the same time.
Bitcoin is inherently a fixed supply currency. If a coin is lost, it cannot be reprinted ever. It is not mathematically possible so it’s not just a matter of attitude either. When you give someone a coin to hold for you and they lose that coin, there is no way to recover it. It is lost forever and you can jump up and down from anger as much as you want.
In essence, unless you can make 2+2 equal something else than 4 in traditional math, it won’t matter.
So, the loss of those coins, if they are indeed actually lost, is quite a blow to MtGox users. Even if you go to court and get a ruling saying you should get your money back, the money, for all intents and purposes, do not exist anymore. It would be like getting a ruling saying that you are entitled to be part of a historical event that happened centuries ago; it’s just not possible to enforce the judgment.
That’s the “why you should worry” part of this.
There’s good news, though, especially if you have followed the advice from virtually everyone who know how to tie their own shoelaces, and have kept coins in different accounts.
Imagine this: Tomorrow, the US government (or your local government) announces that 6% of the entire money supply is gone, and it’s not coming back. The money printer burned down, taking the only templates with them, and for some odd reason, it’s not possible to create a new template. You may think that this is a disaster, but it can be quite the opposite.
You see, the economy isn’t measured in number of coins, dollars, euros, or whatever. The economy is still exactly the same. You still buy the exact same amount of food, gas, electricity, and midget porn.
The means that, because there are fewer dollars in circulation, each dollar is worth more than it was prior to the accident. 6% more, actually. That means prices measured in US dollars will drop, so the money you have will last longer.
In a perfectly balanced world, where everyone kept an equal amount of money in MtGox, cold wallets, hot wallets, and other storage services, the loss of one of these services will not in any way affect the purchasing power of each individual. You can wipe out MtGox and it won’t mean a thing to Bitcoin, in the grand scheme of things.
To understand how this works, again imagine that every dollar in the world, except one, was gone in some freak accident. Suddenly, that dollar now represented the entire US economy, so it would be worth the entire supply of food, gas, electricity that the US consumes. And midget porn. A cent would suddenly be worth 1% of the entire US economy.
Similar to Bitcoin, of course, that won’t matter for those who lost all their money and it will make whoever holds that remaining dollar very rich. For those who did not lose anything on MtGox, their remaining coins are worth more. If you held a perfect balance across all your accounts, it won’t matter much.
So, it’s not all bad news, unless, you know, you just lost your entire life savings in which case… Well, you should have listened to the hundreds and thousands of community people that warned you against keeping all your eggs in one basket.
And you’ve learned.
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