36 bitcoin exchanges that are no longer with us

At the very least 36 bitcoin exchanges have already thrown in the towel and folded up shop. You may only be able to count the number of bitcoin exchanges that you've heard of on one hand, but the world is absolutely full of defunct bitcoin exchanges, and they’re apparently quite hard to keep profitable.

Does this mean that the industry is suffering, or that it’s getting hard to find a bitcoin exchange when you need one?

Not by a longshot! If anything, such a large number of exchanges going under means that the quality of exchange that you do use is much higher today than it would have been had these exchanges been profitable.

Marc Andresen, a prominent VC agreed in a tweet soon afterwards: “MtGox had to die for Bitcoin to thrive. Its former role from early Bitcoin days has been supplanted by better, stronger entities.”

Ask any free-market-loving libertarian about ‘market Darwinism’ and you’re likely to encounter a gleeful tale about capital moving from the hands of the incompetent into the hands of those who can create the better product. The theory goes that markets mature and get stronger through a process similar to natural selection, where bad or “unfit” services are bankrupted in one way or another, getting out of the way to make room for the good, or “fittest” services to thrive.

If these 36 exchanges are any indication, the theory is sound, and the bitcoin exchange industry is maturing quite rapidly.

In a global market where anyone, anywhere, can start up their own currency exchange, the market has been flooded with both good and bad service offerings. How many exchanges are there in total? Making a list of them is nearly impossible to do. Brave New Coin currently tracks over 111, while the official bitcoin wiki lists 162, although it’s somewhat out of date.

Not only are they hard to find for geographical and linguistic reasons, but the precise definition of an exchange is something few can agree on. A better way of estimating how well the bitcoin exchange market is doing is by looking at blockchain statistics for exchange trading traffic.

Exchage data

With Exchange trade volume doubling, or perhaps tripling over the last half year, it is clear that new exchanges are not just maintaining the status quo, but appear to be expanding bitcoin’s ability to grow.

For those who enjoy a stroll down memory lane, here’s a list of 36 now-defunct exchanges, and when we lost sight of each, with some historical notes where available.

Out of the 36 exchanges in this two were sold to larger companies, living on, if only in essence. Another two lost banking relationships, forcing closure in spite of any potential. 16 gave up the ghost due to financial difficulties, while 13 claim to have been hacked, four of those closures led to criminal convictions. In total, more than 950,000 bitcoins have been stolen from their rightful owners.

Soon after the MtGox fiasco came to a head, legendary venture capitalist Fred Wilson said, “We are witnessing the maturation of a sector and part of that will inevitably be failures, crashes, and other messes. Almost every technology that I’ve watched come into a mass adoption has gone through these sorts of growing pains.”

Apparently, it has been easy to go bankrupt, get hacked, give in to corruption, or otherwise fail to make a profitable business out of exchanging bitcoins for currency. While many of these failures have affected individuals, to varying extents, each one has added to the bitcoin ecosystem, and today's new exchanges are more secure and fortified than ever. No matter how secure these exchanges become, there is a simple lesson to be learnt.

- Andreas Antonopoulos, Author of Mastering Bitcoin

Venture Capitalist Marc Andreessen was no doubt speaking for the greater bitcoin community when he tweeted that “Every important new technology has birthing pains. PC did, Web did, Bitcoin does. Our enthusiasm and commitment unchanged.”