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Bitcoin

Bitcoin, released to the world in 2009 by a person or people called Satoshi Nakamoto, is not backed by a central bank or a government and is seen as an alternative payment system. In February 2013, Bitcoin went into the mainstream as a monetary crisis threatened to bankrupt Cyprus, seen as a safer bet. Early adopters of Bitcoin have been richly rewarded as the price has soared – in one case, a young Norwegian bought a house from an $850,000 windfall on a US$22 investment.

NewsWorld
FINANCE

Customers turn to paper to secure their bitcoin funds

PUBLISHED : Friday, 28 February, 2014, 11:21pm
UPDATED : Saturday, 01 March, 2014, 4:20am

Don't bet on bitcoin exchanges to keep your money safe, investors and fans of the troubled digital currency say.

Following Japanese company Mt Gox filing for bankruptcy, users are turning to traditional pieces of paper to keep their expensive digital currency secure.

The high-profile Tokyo exchange lost bitcoins worth millions of dollars when it fell victim to cybercriminals. The digital heist has triggered an investigation in Japan, and has left fans of the online currency scrambling to keep their holdings safe.

Touted by advocates as a new, digital type of money that could one day replace real-world cash, bitcoins can also be stored like traditional currencies, locked up in a safe, or hidden in a shoe box - known as "cold storage".

Watch: Bitcoin users to gather in Tokyo amid MtGox woes

Every virtual wallet holding bitcoins has a unique, private number. Recording that number on a piece of paper or a thumb drive, for instance, keeps a wallet's contents out of reach of anyone online, criminal or not.

Enthusiasts of the nascent digital currency who witnessed the grand opening of Hong Kong's first bitcoin retail store by Asia Nexgen (ANX) say they will not now bank on the company to look after its coins.

"It does shatter my confidence a little bit in the exchanges, it makes me more aware these exchanges are not very stable," consultant Leo Weese, 26, said. But Weese still made a HK$1,000 purchase of bitcoins yesterday to store on a piece of paper.

"Some of the exchanges are more trustworthy than others but best practice says [not to store coins on there]," said bitcoin entrepreneur Jake Smith, who compared the Mt Gox collapse to a bank going bust. Smith, who spent HK$2,000 buying up the virtual currency at the retail store, said he would keep his coins in "cold storage".

Sang Yen-huang, who was also at the grand opening, said it was "too risky" to store bitcoin any other way other than on paper.

Lo Ken-bon, the chief executive of ANX, explained that if customers digitally collect bitcoins - instead of leaving them in the hands of the company - the liability, if there is a hacking attack, lies with the customer not the exchange.

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