What a week for bitcoins — ups, downs, and now the Winklevoss twins.
The digital currency has been on a roller-coaster ride recently, its prices fluctuating wildly amid other economic woes such as the Cyprus banking crisis. Tuesday, bitcoins’ value rose to $200 for the first time. Prices rose to as high as $260, then crashed to as low as $130 Wednesday. Mt. Gox, which claims to be the biggest and oldest bitcoin exchange, reportedly dealt with a DDOS (distributed denial of service) attack Thursday. Mt. Gox shows the value of a bitcoin at about $75 as of this post. (In February, as we wrote, the value was at $21.24.)
The controversial cash substitute many people might not ever have heard of is now getting plenty of attention, with the Winklevoss twins of Facebook infamy reportedly getting in on the action. Venture capitalists are paying attention. There are supposedly bitcoin millionaires, although they can’t spend their money everywhere because bitcoins aren’t yet widely accepted.
They’ve faded a bit from the spotlight, although they do pop up from time to time — what are the Winklevii up to now? Well, the brothers who sued over claims that Mark Zuckerberg stole their idea for Facebook — and won a cash settlement, plus shares in the Menlo Park company now worth a couple hundred million — say they have amassed $11 million worth in bitcoins. “We have elected to put our money and faith in a mathematical framework that is free of politics and human error,” Tyler Winklevoss told the New York Times.
Bitcoins, created in 2009 and commonly previously known as money for nerds, are not backed by any government treasury. What keeps them going is technology, the Internet. The coins are stored in electronic wallets whose owners’ identities are hard to determine. Libertarians, reportedly drawn by the fact that the coins aren’t connected to any state, are fans. But bitcoins — whose issues include lack of accountability, the aforementioned volatility and the occasional security breach — have many detractors and skeptics.
“People say it’s a Ponzi scheme, it’s a bubble,” Cameron Winklevoss told the NYT. “At some point that narrative will shift to ‘virtual currencies are here to stay.’ We’re in the early days.”
And that’s where VCs come in. This week, for example, OpenCoin announced its angel funding round, with investments from Andreessen Horowitz and Lightspeed Venture Partners, among others. OpenCoin is further developing Ripple, an open-source, global virtual currency platform. Some say Ripple’s system is more dependable and shows more promise than bitcoins. “I think it could genuinely become the first real way for anybody in the world to pay anybody else in the world, immediately and about as frictionlessly as possible,” Felix Salmon writes for Reuters.
Is this the virtual currency gold rush? Looks like there’s plenty of uncertainty in them there hills.
At least one pub in Germany accepts bitcoins. (Photo by Sean Gallup/Getty Images)
Levi Sumagaysay is editor of the combined SiliconBeat and Good Morning Silicon Valley. She also blogs and is the online producer for SiliconValley.com, the Mercury News tech website. Email: lsumagaysay (at) mercurynews (dot-com).