200,000 missing Bitcoins found in wallet

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There's nothing like that feeling when you put on an old jacket or pair of trousers and find a few coins waiting for you in the pockets. Now a bankrupt Japanese firm has had its equivalent of the same thing - uncovering £70 million worth of Bitcoins lurking in an old digital wallet.

But what does this actually mean?

The find

The firm, MtGox, found 200,000 Bitcoins in a digital wallet it hadn't seen since 2011. The company was a Bitcoin exchange, which had gone bust in February after a hacker attack stole 750,000 customer Bitcoins (worth around £279 million) and 100,000 belonging to the company itself. This represented 7% of all Bitcoins in existence.

The experts have been hunting through what is left of the company in order to find assets, and discovered this haul. They had been left to languish in this wallet, because it was an old format and the company thought they had emptied it.

It has since moved the coins elsewhere, to protect them from any other potential hackers. They will form company assets, which will hopefully return some value to those who lost out in the hack after the bankruptcy procedure is over.

What does it mean?

Bitcoins are the first form of currency to be created through cryptography. Coins are generated by users figuring out a complex mathematical solution relating to the current number of coins in circulation. Whoever finds the answer wins a certain number of coins and then the calculations have to start again. The length of time it takes to do the calculation controls the number in circulation, and the total number is limited to 21 million - which gives them a scarcity value.

The coins are then traded for real money on an exchange, so people buy the coins to use in much the same way as any other online transition. To use the currency, you create a Bitcoin wallet on your computer or mobile and you get a unique code. Then you can pay anyone else with a wallet by sending your Bitcoins to their unique code.

The value of a Bitcoin depends on demand and supply. In April 2011 one Bitcoin was worth around $0.75. By August 2012 it was worth $10, and right now they are worth around $575. However, the exchange rate fluctuates wildly. Between April 2011 and June 2011 the price rose from $0.75 to $30, then by November it crashed to $2. This was just the first of several price rises and crashes - each subsequent one seeing more dramatic rises and falls, until the most recent move from $130 to $1,242 and then back to $455. Clearly it's not the most stable currency.

Hackers

The rapid gains and loses mean that for most people, even when they manage to get their hands on Bitcoins, ownership is a highly risky business. However, the risk is not confined to the fluctuating value of the coins.

The industry has been beset by hacking since the outset. The attack this year wasn't even the first time that MtGox had been the victim of hackers: it was one of the first to face losses after a hack in 2011.

There have now been more than ten hacks of major Bitcoin operators - and since MtGox closed its doors in February, hackers have also shut Flexcoin - a Bitcoin bank and Poloniex - a Bitcoin exchange. With no regulator overseeing the currency and no protection in the event of an attack, there has been no compensation for those who lost everything.

The latest find means that some victims of the MtGox attack will get some money back. However, it's highly unlikely that they will be the last to lose out.