Mt.Gox founder arrested, Bitcoin's first season ends

Mark Karpeles, the former head of the bitcoin exchange Mt. Gox, caused many early bitcoin adopters to lose money. It is not clear how much bitcoin Karpeles has admitted to losing or possessing, but Japanese police said he lost about $387 million during the time Mt. Gox was in business.

While his mismanagement was certainly unforgivable — according to the Japan Times, Kapres apparently transferred millions of bitcoins to a live server to “test” some software — Mt. Gox symbolized the first era of bitcoin. It was a lawless, wild and often absurd era filled with strange people and even stranger behavior. I’m glad to see it go.

In New York Times reporter Nathaniel Popper's book "Digital Gold: Bitcoin and the Inside Story of How Jobless and Millionaires Make Money," you won't find anything resembling a traditional Silicon Valley success story. No garages, just chat rooms and forums, the only places that connected early tech leaders like Karpeles and his ilk with their internet social anxieties. In short, Bitcoin emerged from a branch of technological progress, and now it is merging into the mainstream thanks to what are seen as mainstream business interests.

This is a good thing.

A little over a year ago, I noted that Bitcoin had a big positioning problem. It was a geeky game, but it attracted regular investors because of its underlying value rather than its technology. Now that that has worked out — thanks in part to Karpres’s explosion of the internet’s worst exchange — blockchain technology has been embraced as a solution to a host of problems.

Ethereum uses blockchain technology to process code, and financial institutions want to use it to replace the ridiculous ACH and SWIFT systems. In theory, ordinary people can use it to evade political blockades. We will also see the first licensed exchange open on Wall Street. Bitcoin's second season is upon us, and it will become more interesting.

It is a tragedy that people lost a lot of Bitcoin on Mt. Gox. We may never know where those Bitcoins went, or whether Karpeles was a criminal genius or a fool. In any case, once regulators get a handle on blockchain technology, we can hope that Karpeles-style tragedies will not happen again in the financial world.

Millions of dollars of wealth can be easily lost through imperfect banking procedures, but when these incompetent bankers are connected to data blockchain technology, it becomes much more difficult to cause wealth loss. What makes Bitcoin interesting to privacy experts is the technology that Chase and Citibank need to track interbank fund transfers. Anonymity is the privilege of blockchain, not everyone has the right to have it. When the accounts are open, as bankers move their funds, more interesting things will be revealed to the world.

I'm much more optimistic about Bitcoin now. It's not a panacea or a replacement for fiat currency, it's used to make small donations to artists' work, or to exchange cash between family members. It can also be used to buy a couch, or a few ounces of jar. This is the direction to go, and I think Caprice's arrest confirms this idea - Bitcoin is important, and we can't let clowns and scammers ruin it.