Imagine the bustle of the crowds as traders hustle all around, jostling shoulders and elbows to get noticed by the man with the clipboard, waving their slips as they yell in the din. It’s not the 1940s on Wall Street anymore and now most of this is done by computers and often by people sitting in their living rooms staring at charts and tickers. Bitcoin too has a market—well an ecology of markets, although a significant portion still rests split between the coffers of Mt.Gox and TradeHill—and it behaves a lot like a foreign exchange market, trading bitcoins for USD or Euros or what-have-you.

To take a bite out of this paradigm, Bitcoinica steps in. As a Bitcoin brokerage service, Bitcoinica takes an interesting tack as to not trade bitcoins with users at any point. Instead, they take USD and then use that to assess a certain number of bitcoins to a user who can then trade them in the exchange. They can withdraw USD at the current market price for their bitcoins or a customer can receive bitcoins via Mt.Gox. At no point does Bitcoinica trade bitcoins directly to or from users; but the brokerage does use Mt.Gox to stabilize their accounts so that they have a tradable volume.

As a part of the Bitcoin ecology, Bitcoinica is extremely new and has little reputation—it emerged onto the scene only a few days ago onSeptember 8, 2011. However, users seem to be taking to it extremely well. The corporation that owns the brokerage, xWaylab Inc., incorporated in November of 2010 and the software product has been developed by a single 17-year-old programmer known as Zhoutong on the Bitcointalk.org forums. He lives inSingaporeand claims he is not the only shareholder in the corporation.

Billowing up into the cloud

In his initial post on BitcoinTalk, Zhoutong mentioned that Bitcoinica runs on Heroku, a Platform-as-a-Service provider. Heroku is a cloud-based service for Ruby-on-Rails that has been expanding a great deal since last year being acquired by Salesforce.com. The servers that Bitcoinica runs Heroku on exist in the Amazon Web Services datacenter cloud and that provides a great deal of expected uptime and reliability. Both Heroku and AWS are well-known and extremely powerful cloud-based technologies that have done well proving themselves to be enterprise-level muscle.

However, we’ve seen these sorts of developments go sour when programming wasn’t up to par as when I reported about Bitomat losing their wallet.dat in a virtual machine accident that took over 17,000 bitcoins with it. Bitcoinica doesn’t operate a bitcoin wallet, so the project cannot have a lot of coins vanish from the market.

The current web security makes use of a Go Daddy 256-bit encryption certificate forTLS, but Zhoutong has claimed he is working on getting a SSL Certificate with Extended Validation, which will increase connection security to a corporate level and require Zhoutong and his corporation to submit to strict identity verification. Truthfully, gaining this will add a lot of confidence that they are who they say they are.

Security is a very big deal in the Bitcoin ecology lately. Especially noting how BitcoinTalk.org was recently hit with a Bill Cosby prankster-hacker who could have stolen the login credentials for all the users, Mt.Gox barely recovered from a hack that nearly destroyed them but spurred them to think more about their overall security, and the hack that hit MyBitcoin.com did destroy them.

If Zhoutong’s Bitcoinica project achieves the popularity he is looking for, he has a long road of careful security considerations ahead of him—and perhaps an insurance policy as well. Once again, not running a Bitcoin wallet.dat will make the site less lucrative to attack; but once in control of user accounts a hacker could still wire money out of them.

So far, the website and product appear to be going strong. The web lists stats every 15 minutes and as the writing of this article it has exceeded 6,800 BTC traded among 2156 orders placed.