Bitcoin Boomtown: Digital Currency Tops $400, Mining Rigs Sell for $3M

Bitcoin Boomtown: Digital Currency Tops $400, Mining Rigs Sell for $3M

Updated by Endah

Bitcoin Boomtown: Digital Currency Tops $400, Mining Rigs Sell for $3M

Photo: David Ryder/WIRED
Alix Resources Corp. is a Canadian mining company that invests in gold mines in Arizona and tungsten mines in British Columbia. But in early 2014, it will kick off a new venture: It’s launching a bitcoin trading exchange.
“We are a mining exploration company so, yes, this is a bit different,” Alix Resources CEO Michael England told the Vancouver Sun on Wednesday. “There’s a lot of expectations that bitcoins are going higher, so why not start accumulating?”
England did not return messages from WIRED seeking comment, but it’s safe to say that he’s a symbol of yet another bitcoin boom. The value of the world’s most popular digital currency is up about 3,000 percent from its January trading values — it crossed over $400 yesterday — and everyone from gamblers to entrepreneurs want to know how they can cash in.
Several companies now offer mining services in the cloud, and many others are selling specialized bitcoin mining rigs, hardware that generates bitcoins by helping to drive the distributed software system that oversees the digital currency. One company, KnCMiner, says it took in $3 million in mining rig orders in just four days last week. The week before that, three young entrepreneurs in Vancouver fired up an ATM that trades cash for bitcoins and vice versa. They say they did $100,000 in exchanges on their first day.
It’s the kind of gold rush speculation that counld inspire a penny stock mining company like Alix Resources to start its own exchange. But it’s also an area that poses serious risks for investors.
Last month, an Australian startup called inputs.io was hacked and more than $1 million in customer bitcoins stolen. The company’s teenaged founder says that customers aren’t going to get all their money back. He doesn’t have enough to cover the losses. And last week, a Hong Kong exchange called GBL reportedly vanished, taking with it millions of dollars belonging to 1,000 investors.
Over the past year, regulators have begun to explore the digital currency. On Monday, the Senate Committee on Homeland Security and Governmental Affairs will hold hearings on bitcoin, and these will likely focus on the Silk Road, a online drug market that used bitcoin before it was shut down by the feds.
What’s more, as was revealed today in a letter shared with WIRED, the New York State Department of Financial Services will soon hold its own public hearings to examine how bitcoin and other digital currencies should be regulated. The department declined a request for comment, but for Jean-Jacques “J” Cabou, a partner with the international law firm Perkins Coie who closely follows the evolution of bitcoin, this is another step in the right direction.
“I think that the time and effort expended by the NYDFS to understand the virtual currency industry is commendable,” he says. “It certainly seems that the DFS is interested in making a decision about virtual currencies that is tailored to this emerging industry, rather than simply trying to squeeze the industry into a preexisting set of regulations designed for something else.”
Additional reporting by Cade Metz



Comments