Digital Gold - читать бесплатно онлайн полную версию книги автора Nathaniel Popper (ч. 3)

aisles,

grabbing as much food as

possible

before

the

hyperinflation

caused

the

goods to be repriced. A man

walked through the aisles all

day

doing

nothing

but

repricing the items on the

shelves to keep up with the

rapidly changing value of the

peso. When Wences and his

mother got to the register, he

and his sisters would run back

and grab more food if they

still had any money left.

Holding on to money was

equal to losing it.

These experiences gave

Wences insights into the

nature of money that most

people in the world learn only

from textbooks. In America,

the dollar seamlessly serves

the three functions of money:

providing

medium

exchange,

unit

for

measuring the cost of goods,

and an asset where value can

be stored. In Argentina, on

the other hand, while the peso

was used as a medium of

exchange—for

daily

purchases—no one used it as

a store of value. Keeping

savings in the peso was

equivalent to throwing away

money. So people exchanged

any pesos they wanted to save

for dollars, which kept their

value better than the peso.

Because the peso was so

volatile,

people

usually

remembered prices in dollars,

which

provided

reliable unit of measure over

time.

As Wences avidly pored

over all the available writing

about Bitcoin in the first

months after discovering it, it

seemed clear to him that for

people

places

Argentina,

Bitcoin

might

provide

much

efficient place to store money

than the dollar. In Argentina,

dollars had to be purchased

through

shady

money

changers, and were saved in

closets or under the mattress.

The promise of a virtual

currency that could be bought

and stored online, accessed

from anywhere, and secured

with a private key looked like

a significant improvement.

Wences

began

purchasing

growing

stockpile of Bitcoins from

Mt. Gox in early 2012 and

joined in the conversation on

the forums and chat channels.

When he wasn’t playing with

Bitcoin, he devoured several

books on the history of

money, most significantly

Debt: The First 5,000 Years, a cult favorite in the Occupy

Wall Street movement and in

certain transgressive corners

of Wall Street. The book, by

anthropologist

David

Graeber,

argued

that

historians and economists

have wrongly assumed that

money grew out of barter. In

fact, Graeber argued, and

Wences came to believe,

barter was never common and

money

was

actually

evolution of credit—a way of

tracking what people owed to

each other. People used to

just keep a mental tally of

what they owed each other,

but money provided a way to

expand the system more

broadly among people who

didn’t know each other.

As he read, Wences felt

that after twenty years of

working

financial

technology, he was finally

coming to understand money

for the first time. He saw that

Bitcoin’s lack of any apparent

intrinsic value didn’t matter

when looked at against the

history of money. The reason

gold itself had been used as

money was not that it was

valuable; it had become

valuable because it was used

as money. And it was used as

money because it did what all

good money did: it served as

a sort of physical ledger on

which society could keep

track of who was owed what.

Each

piece

gold

represented a slot on the

ledger of all outstanding gold,

which anyone could verify by

checking

the

mass

and

volume of the gold.

“We

don’t

use

gold

because it’s pretty—that was

a stupid assumption of mine

and many other people,”

Wences would tell anyone

who would listen during these

days when he was totally

immersed in the history. “No,

we use it in jewelry because

it’s very expensive. It’s not

expensive because we use it

in jewelry.”

“What is the value?” he

would ask. “It’s that it is the

ledger. You put the ledger on

your neck to show power and

wealth. It isn’t a ledger where

you have to trust a bank or

anyone else.”

Bitcoin, Wences came to

believe, was a purer version

of that sort of ledger—a

commonly verifiable place

where everyone could keep

track of who owned what.

Despite

his

fervor,

Wences initially had trouble

drumming up much interest

among his Silicon Valley

friends beyond a few fellow

South Americans, who had

grown up in places with

similarly

screwed-up

currencies. Mostly he just got

skeptical looks. For those

who had heard of it, the first

question was usually about

whether it was anything more

than a token for online drug

dealers. Some remembered

David Chaum’s DigiCash

back in the 1990s, but anyone

familiar with that experiment

knew that it had gone under.

The bigger question was why

something like this was

necessary in the first place.

Credit cards and $20 bills did

everything

that

most

Wences’s

friends

needed

when it came to spending

money. Why should they trust

a digital code that had

nothing backing it but the

computers of some libertarian

nerds?

After months of trying,

Wences

finally

made

breakthrough with one of his

best friends, and the one

whose opinion in this area

mattered

most:

David

Marcus, who had recently

become the president of

PayPal. Like Wences, Marcus

was a foreigner in the Valley.

He had grown up in France

and Switzerland, and had the

same

slender

stature,

unassuming presence, and

seemingly

effortless

sophistication as Wences. But

after spending a decade on

payment startups, Marcus

was used to hearing grand

claims about technologies

that would revolutionize the

way money moved around

the Internet. He also had

experienced the overbearing

regulatory scrutiny that falls

on any company that wants to

deal with money.

But in the fall of 2012

Marcus had a conversion

moment

when

the

Argentinian

government

ordered his company, PayPal,

to cut off direct payments

between Argentinians, a new

prong in the government’s

effort to slow the movement

of pesos into other currencies.

With Wences’s arguments

ringing in his head, Marcus

watched as the policy went

into effect and the price of

Bitcoin rose, suggesting to

Marcus

that

Argentinians

were seeking out Bitcoin as a

way around the government’s

restrictions. He quietly set up

an account with Mt. Gox and

began buying coins. In doing

so, Marcus became one of the

first

many

important

converts that Wences would

win to the Bitcoin cause.

WENCES RAN HIS digital-wallet

company with an old friend in

Argentina, Federico Murrone,

or Fede. Unlike Wences, who

had an aristocratic lineage,

Fede came from a working-

class family and looked like a

tough biker. The two had

connected as teenagers on

Wences’s

first

startup,

creating

Argentina’s

first

Internet provider, and they

had been close friends ever

since, with Fede providing

the programming smarts for

Wences’s ideas, always from

Argentina, where Fede stayed

to be close to his family.

Wences

traveled

Buenos Aires every few

months to check in with Fede

and his team of Argentinian

coders. Each time Wences

visited in 2012, the reminders

of what it was like to live in a

country with broken money

strengthened his belief in the

potential for Bitcoin.

Like other smart visitors

to the country, Wences went

to a black market money

changer whenever he needed

pesos to spend. Credit cards

and ATMs were available,

but they provided pesos at the

official government exchange

rate, which was about 35

percent lower than the rate

available on the street in

2012.

The

government

wanted to make changing

money

into

dollars

unattractive, with its official

exchange rate, because it was

afraid that its citizens would

sell off all their pesos for

dollars, driving the exchange

rate down even further and

devastating the economy. The

government

had

recently

started fining economists who

challenged

its

official

exchange rate. As 2012 went

on,

the

situation

grew

progressively worse, and this

what

had

led

the

government to crack down on

PayPal.

The inflation rate wasn’t

the only problem with the

local financial system. As in

many developing countries, it

was incredibly hard to open a

bank account and even harder

to get a credit card. Despite

having

grown

Argentina, Wences had never

had an Argentinian bank

account. People were left to

pay their bills in cash at the

drugstore, so they had to

carry around wads of 100-

peso bills. This too, seemed

like something that Bitcoin,

with its secure digital wallet,

could help address.

At the Lemon offices in

Buenos Aires, Wences and

Fede were supposed to be

working on their new startup,

but they would end up

spending hours playing with

Bitcoin and talking about

how they might harness its

potential. In late 2012 the two

men organized the first-ever

Bitcoin Meetup in Argentina

at a favorite whiskey bar. It

was sparsely attended, other

than by the friends that

Wences and Fede had already

sold on the technology. The

small

crowd

was

not

surprising given how hard it

was to get Bitcoins in

Argentina. It was incredibly

expensive and difficult to

transfer money from an

Argentinian bank to Mt. Gox

or another foreign Bitcoin

exchange.

And

Argentinian bank would work

with a domestic Bitcoin

company.

But there was a budding

conversation about Bitcoin on

Argentinian

website

dedicated to protecting online

freedom. When Wences was

in Argentina, he would offer

to sell some of his Bitcoins

after work at a bar near the

Lemon offices. Each time, a

different crew of people

would show up, but one older

gentleman kept coming back,

buying a little more each

time. He had a silent, sullen

countenance and didn’t seem

technologically sophisticated.

After the man made a

particularly large purchase

one day, Wences gently asked

him if he understood the risks

involved with Bitcoin.

“It seems to me like this

is a lot of money, and this is

very risky,” Wences told him

as politely as he could. “You

know you could lose it all?”

“How many times has

your family lost everything

keeping their money in the

peso?”

the

man

asked

Wences.

“Three,

maybe

four,

times,” Wences said.

“Yes. For me it’s been

more times than that,” the

man said.

The man admitted that he

had the option of putting his

money in dollars but that this

would require him to take a

distorted exchange rate and

then hide the bills in his

closet. And who knew when

the dollar might suffer the

same problems as the peso?

“There is no way you can

convince me to keep my

money in the peso,” he said.

BITCOIN HAD CAUGHT Wences

at a decisive moment in his

life—what

American

might call a midlife crisis. He

already had many successes

under his belt, as was evident

from his estate in the rolling

hills above Palo Alto, with

two homes, a swimming pool,

tennis courts, and views down

to the bay. In addition to the

tens of millions of dollars

Wences had earned from

selling past startups, he had

been surprised to discover

that he also had a knack for

picking winning investments

in his friends’ companies.

But he had recently been

hitting up against failure for

the first time. Lemon, his

current startup, had grown out

of the decline of his previous

startup, Bling Nation, and

many of Wences’s friends

wondered whether Lemon

was the result of the kind of

passion necessary to succeed

in Silicon Valley or was just

Wences’s attempt to prove

that the failure of Bling

Nation had been an anomaly.

There were already signs that

Lemon was not getting the

kind of pickup that Wences

had imagined. And, as with

all startups, it required more

time from its chief executive

than any one person had in a

day. This was Wences’s

twelfth startup, depending on

how you counted, and his

wife once again felt like a

single mother for their three

children. Wences and Belle

had

already

agreed

that

Lemon would be his last

startup.

These difficulties played

into larger insecurities that

Wences had managed to

sweep under the carpet until

now. For all the money his

past startups had made him,

none had quite achieved their

grand original goals. Back in

Argentina, he had hoped that

his first company, Patagon,

would provide a way to

extend financial services to

the hundreds of millions of

South Americans without a

basic bank. In the end,

though, he couldn’t get a

banking license, and the

online financial firm he

created was used mainly by

South

America’s

wealthy

elite.

For

Wences,

Bitcoin

seemed to address many of

the problems that he’d long

wanted to solve, providing a

financial account that could

be opened anywhere, by

anyone, without requiring

permission

from

any

authority. He also saw an

infant technology that he

believed he could help grow

to dimensions greater than

anything he had previously

achieved.

Wences’s wife, Belle, was

used to watching Wences

dive

headfirst

into

new

technological discoveries. His

easily incited passion and his

ability to convey it were part

of what made him such a

great startup salesman. He

could impart his excitement

with a rare skill. But usually

the initial ardor passed before

long. That was showing no

signs of happening with

Bitcoin. As 2012 went on,

Belle realized that this might

be different from his previous

endeavors.

Belle

herself

resented how much time

Bitcoin was taking out of

Wences’s

already

full

schedule. But even she was

becoming entranced by the

almost mythical nature of this

currency and its mysterious

founder. She soon started

swapping her own theories

with Wences on the identity

of Satoshi.

IN EARLY JANUARY, Wences

traveled with a group of some

of the West Coast’s most

wealthy and powerful men to

an isolated lodge in the

Canadian Rockies with its

own wine cellar, sauna, and

private staff. Their host was

Pete Briger, whom Wences

had met a few years earlier

through an organization for

young chief executives. Even

among the rich and powerful,

Briger

stood

out.

After

attending

Princeton

and

working at Goldman Sachs

for fifteen years, he had risen

to the top of the Fortress

Investment Group, a firm

overseeing

array

enormous private equity and

hedge funds.

Briger was a big gruff

man, who was known for his

bold bets on distressed debt—

the troubled bonds and loans

that everyone else was too

afraid to touch, and that gave

Briger and his firm arm-

twisting leverage over large

companies and occasionally

small

countries.

sometimes called himself a

“financial garbage collector”

and he looked the part. In

2009 Briger had been named

cochairman

Fortress,

which

then

controlled

investments worth around

$30 billion, including the

resort company that owned

the lodge where the men were

staying.

Wences was not an alpha

male like most of the other

guests. He liked to stay in

touch with his humble origins

Patagonia,

and

his

driveway was filled with

Subarus instead of Teslas or

sport cars. Rather than taking

luxury vacations, Wences

used his time off to go with

his wife to Burning Man, and

he had recently done a vision

quest—involving

days

without any creature comforts

—in the wilderness of the

Andes with one of his best

friends from his younger

years

Argentina.

But

Wences had a good-natured

self-confidence

and

willingness to listen that had

always allowed him to get

along easily with hard-driving

power players.

The morning after they

arrived at the Valemont

lodge, Wences, Briger, and

the rest of the men climbed

into a red-and-white Bell 212

helicopter sitting just outside

the lodge and lifted off

toward the high white peaks,

for a day of heli-skiing. In the

afternoon, the group returned

to the lodge and sat around in

the expansive common room,

an enormous fire crackling

away. This was not a crowd

to chat about kids and the

upcoming Super Bowl. The

men had dedicated their lives

to making money and Pete

pressed them to present their

best investment ideas.

“Pete, I told you, I’m

interested

Bitcoin,”

Wences said when his turn

came to talk. “It hasn’t

changed.”

Wences drew the group in

with an explanation of the

basic notion of a new kind of

network that could allow

people

move

money

anywhere

the

world,

instantaneously—something

that these financiers, who

were

frequently

moving

millions between banks in

different

countries,

could

surely appreciate.

“You can call someone in

Jakarta on Skype,” Wences

told them. “You can see them

and you can hear them and

there’s

synchronous

connection with a lot of

bandwidth. There’s a ton of

magic happening, which is

incredible. And you hang up

and you want to send them

one cent and that’s not

possible. That’s ridiculous. It

should be a lot easier to send

a cent than to see video and

audio.”

The

blockchain

technology

made

that

previously impossible task

possible. But it was much

more than that, Wences

emphasized. It was the next

step in the evolution of

money. He tried to explain

his recent discoveries about

the ledger as the foundation

of all money. With Bitcoins,

unlike

pesos

dollars,

everyone using them knew

exactly how many existed,

and they were not tied to one

country. Unlike gold, which

was universal but difficult to

acquire and hold, Bitcoins

could be bought, held, and

transferred by anyone with an

Internet connection, with the

click of a mouse.

“Bitcoin is the first time

in five thousand years that we

have something better than

gold,” he said. “And it’s not a

little

bit

better,

it’s

significantly better. It’s much

more scarce. More divisible,

more durable. It’s much more

transportable. It’s just simply

better.”

Pete had a habit of taking

long, anxiety-inducing pauses

before

responding

anything,

and

his

first

questions for Wences were

distinctly skeptical. But his

subsequent

questions

suggested that something was

clicking. Pete’s job as an

investor

distressed

companies made him good at

spotting broken systems, and

the more he thought about it,

the more broken the current

methods of moving money

around the world seemed to

him.

Something else caught

Pete’s attention. Wences had

put his wallet where his

mouth was. Throughout 2012

Wences had methodically

ramped up the pace of his

Bitcoin purchases, so that

now he had over 10 percent

of his net wealth—tens of

millions

dollars—in

Bitcoin.

Pete

respected

numbers and bold, confident

moves like the one Wences

had made.

From the ski lodge, Pete

e-mailed one of his most

trusted lieutenants at Fortress,

Bill Tanona, and asked what

Bill knew about Bitcoin.

When he got back to San

Francisco he opened a Mt.

Gox account and quickly

built up his own $100,000

position in Bitcoin. At work,

started

talking

with

Tanona and a few other

colleagues

about

how

Fortress could get involved in

this new market.

CHAPTER 16

December 2012

For all the new mainstream

interest, the most successful

entrepreneur in the Bitcoin

world was still Ross Ulbricht,

the operator of the world’s

largest online drug bazaar.

Silk Road had continued

adding new members and

new products through 2012.

Some $1.2 million worth of

Bitcoin was changing hands

each month, spinning off

$92,000 in commissions for

Ross. By the end of 2012

there were seventy thousand

different

topics

Silk

Road’s forum, and there were

even resident security experts

who helped users ensure their

anonymity and a resident

doctor

who

answered

questions about drugs and

their health effects.

Initially,

Ross

had

enjoyed

the

success

traveling to Southeast Asia

and Costa Rica. But as the

year went on, the site

increasingly

required

all-

consuming work. Ross now

had several moderators and

administrators on staff who

helped

him

deal

with

customer support and mediate

disputed

transactions.

chose members whom he

trusted, even when he didn’t

know their identity.

In the fall of 2012 Ross

had

moved

with

childhood friend on a hilly

street

one

San

Francisco’s

residential

neighborhoods.

could

have afforded his own place,

but by now he was trying to

leave as few traces as he

could for the authorities to

pick up on. His work on Silk

Road was done at an Internet

café around the corner from

his friend’s house; at this café

he would log in remotely to

Silk Road’s servers, making it

that much harder for anyone

to find him.

Ross

was

becoming

acutely aware of just how

difficult it was to remain

anonymous even with the

best technologies. Over the

summer, a Silk Road user had

managed to follow a series of

transactions and find one of

Silk Road’s main Bitcoin

wallets,

which

contained

coins worth about $2 million.

This didn’t cover any losses,

but it was a reminder that

while Bitcoin did not require

users to provide an identity,

accounts

were

pseudonymous, attached to a

particular identity, rather than

anonymous.

Australia,

police traced transactions to

make the first arrests of Silk

Road vendors in that country.

None of this, though,

dented Ross’s boldness and

ambitions for the site—if

anything, he grew more

committed as time went on.

On the forums, under his

screen name Dread Pirate

Roberts, or DPR, he wrote

that he would keep this up to

his “last breath”:

Once you’ve seen

what’s possible, how

can you do otherwise?

How can you plug

yourself into the tax

eating, life sucking,

violent, sadistic, war

mongering,

oppressive machine

ever again? How can

you kneel when

you’ve felt the power

of your own legs?

As Dread Pirate Roberts,

Ross became a kind of folk

hero

for

his

members,

engaging with them on the

Philosophy, Economics, and

Law section of the forum and

later on DPR’s Book Club,

where he advocated for a

world in which “the human

spirit flourishes, unbridled,

wild and free!”

As time went on, though,

it was hard to avoid the

growing reminders of the

dangers of living in an

anonymous world with no

source

authority.

November 2012 a hacker

threatened to release an

enormous trove of data about

Silk Road users if Ross didn’t

pay a ransom. That was soon

followed by a denial-of-

service attack that eventually

forced the site down. The

only way Ross was able to

get the attack to stop was by

paying the attacker $25,000.

When the site came back

online,

Dread

Pirate

Roberts’s style and approach

had shifted, leading some

users to suspect that the site

had changed hands. Ross

explained

that

was

changing his writing style to

elude capture.

In November, Ross flew

to Dominica, an island in the

Caribbean known for being

an easy place to secure

“economic

citizenship”

(Roger Ver was also trying to

obtain citizenship from the

country). The small island

offered

passport

exchange for a $75,000

donation. The sum was no

problem for Ross and he

began

filling

out

the

application on his laptop,

listing his profession as “IT

consulting.” A new passport

would allow him to move that

much further out of the reach

of a government that he knew

was chasing him.

He was, though, getting

used to his new life. When he

chatted with a Silk Road

member, scout, who was

thinking about joining his

staff, Ross answered scout’s

concerns

about

getting

arrested by explaining why he

believed it would be hard to

ever get caught.

“put yourself in the shoes

of a prosecutor trying to build

a case against you,” he said in

chat

with

scout.

“Realistically, the only way

for them to prove anything

would be for them to watch

you log in and do your work.”

But Ross acknowledged

how much even the small

possibility weighed on him.

“the biggest con about

this work is not the risk of

going to jail or having your

life disrupted,” he wrote; “it’s

getting used to and living

with that possibility no matter

how remote.”

“and,” he added, “keeping

your work a secret.”

By now he had been

hardened enough that he

knew how to keep things to

himself. Even the friend he

was living with and the girl

he began dating didn’t know.

The only people with whom

he could be honest were the

users and administrators of

his site, who didn’t know his

identity, and it was becoming

increasingly hard to believe

that he could trust even them.

Silk Road forums were rife

with debate about which

users and vendors on the site

were likely to be undercover

cops. One of the most

vigorous debates sprang up

around a user named nob.

Toward the end of 2012, nob

put up a listing for a kilogram

of cocaine for $27,000 in

Bitcoins.

nob

had

done

almost no reviewed sales of

drugs on the site and many

other

users

were

very

suspicious.

“If this acct isn’t [law

enforcement], it’s some other

bullshit for sure,” a user

named

Haberdasher

wrote on the forum. “I’d

rather wake up from a heroin

induced blackout sitting bitch

in a car full of fat chicks

listening to speed garage than

even attempt to order from

this guy.”

In this case, though, Ross

trusted nob, who had slowly

built a relationship with him

over the course of the

previous year. Ross decided

to help nob sell his kilogram

of cocaine, connecting him

with

one

the

site

administrators, chronicpain,

who had been the first

employee Ross hired back in

2011. The administrator was,

in real life, Curtis Green, a

forty-seven-year-old

poker

player and grandfather living

just outside Salt Lake City.

Green found a buyer for

nob’s cocaine and offered to

receive the package at his

home before sending it on to

the buyer. The package was

delivered to Green’s house on

January 17, 2013. Just as he

took it inside and was

opening the package to check

its contents, a SWAT team

swarmed in. As the agents

spread through the house,

they found a stack of black,

custom-made Bitcoin-mining

machines. The floor around

the computers, and in the rest

of the house, was littered with

hardened dog shit.

Even after Ross learned

about Green’s arrest—and his

release on bail—he did not

assume that it was nob who

had compromised the deal.

Ross

had

always

been

somewhat skeptical about

Green, believing that he was

doing it for the money rather

than the ideals. Ross asked

nob (who he still believed

was a powerful drug dealer) if

he could have Green “beat

up, then forced to send the

Bitcoins he stole back.”

nob

agreed

the

proposition. But a day later,

Ross changed his mind: “can

you change the order to

execute rather than torture?”

Ross explained to nob

that he was concerned that

Green

would

give

the

authorities information about

Silk Road users, potentially

jeopardizing the whole site

and its grand mission. He said

that he had “never killed a

man or had one killed before,

but it is the right move in this

case.”

The federal agents who

had Green in custody, and

who were the undercover

puppeteers behind the user

nob, obliged by staging

Green’s

death

(without

actually killing him), and e-

mailing bloody photos to

Ross. When the photos came

through, Ross responded that

he was “a little disturbed, but

I’m ok.”

“I’m new to this kind of

thing is all,” he said, before

quickly adding: “I don’t think

I’ve done the wrong thing.”

The purported murder of

Green was paid for with a

transfer of $80,000 to a

Capital One Bank account in

Washington, DC. The money

was

sent

through

anonymous

money-

transferring

service

Australia that hid the location

and identity of the sender.

But the agents were already

digging into the wealth of

information

Green’s

computers, seeking clues to

find their way to their real

quarry, Dread Pirate Roberts

himself.

CHAPTER 17

January 2013

Ross Ulbricht was not the

only Bitcoin entrepreneur

who had gotten himself into

something bigger than he

could have ever imagined. In

January

Charlie

Shrem’s

BitInstant was taking in over

$250,000

commissions

each

month

record

transaction volumes.

But the growth obscured

strains that were threatening

to tear Charlie’s company

apart. The fights with David

Azar that had started almost

as soon as BitInstant took

David’s

investment

had

grown worse and usually

ended in a shouting match or

a slammed-down phone. In

December, Charlie and Erik

Voorhees had looked to

David’s investment partners,

the Winklevoss twins, to help

foster a more productive

relationship.

The brothers had been

relatively

hands-off

after

putting in their $550,000. But

they had grown concerned

from afar. The e-mail chains

between Charlie and David

signaled that the twins were

not dealing with the cool,

calculating entrepreneurs of

their Harvard alumni circles.

They saw that Charlie’s

initially

attractive

energy

came with a distressing

inability to concentrate on

one task. Between constant

travel and media appearances,

Charlie

was

relishing,

perhaps

too

much,

the

elevated social status that

Bitcoin was giving him.

When

Charlie

did

talk

business, he often seemed

more intent on selling the

idea of Bitcoin than of his

own company.

There was another more

immediate problem that the

twins hadn’t bargained for.

Earlier in the year, Erik and a

friend he had brought into

BitInstant, Ira Miller, had

started

independent

company called Satoshi Ltd.

with a number of subsidiaries.

One was a technology called

Coinapult that BitInstant used

to send Bitcoins via e-mail.

Another, Paysius, allowed

merchants to accept virtual

currencies.

The Winklevoss twins

asked how Erik and Ira could

run those businesses at the

same time that they were

working

full-time

for

BitInstant.

Erik

and

Ira

proposed solving the issue by

merging Satoshi Ltd. with

BitInstant in exchange for a

higher

equity

stake

BitInstant—all that David and

the twins had to do was give

up 1.5 percent of their own

stake in the company.

Around the New Year,

Erik wrote up a lengthy

strategy document listing how

a merger could be handled,

allowing the company to go

after new markets like mobile

payments in Africa and poker

sites in need of payment

networks around the world.

The document reflected the

team’s big ambitions. Erik

and Ira didn’t want BitInstant

to be just a place to buy

Bitcoins. They wanted to

offer all the services that

banks did, in a new, cheaper,

and more democratic way.

But the Winklevoss twins

and

David

Azar

were

thinking in more immediate

and practical terms. Glancing

at the pages of long-term

strategy, they blanched at the

value that Erik and Ira

assigned to Satoshi Ltd.

The

twins

wrote

increasingly peeved e-mails

to Charlie, pushing him to

resolve the situation without

giving in to Erik and Ira. The

conversations between the

twins and Charlie began to

end with the same sort of

recriminations that had been

so common between Charlie

and David weeks earlier.

Charlie

and

his

team

appeared to the twins like

inexperienced entrepreneurs

who didn’t know how to put

business

interests

above

social

and

political

allegiances. The Winklevoss

twins, meanwhile, confirmed

the fears of the BitInstant

team

regarding

what

happened when people who

didn’t care about the big

principles underlying Bitcoin

tried to make money in the

space.

Charlie and Erik reached

out to Roger Ver, Charlie’s

first investor, hoping he

might be able to resolve

things from Tokyo. Their idea

was that Roger could buy out

the stake that the twins and

David had taken in BitInstant.

“My one hope was that

perhaps the Winklevii would

be far more helpful and

productive, but a long insult-

filled call between Cameron

and Charlie today proved that

my hope was naive,” Erik

wrote to Roger in early

January.

Charlie and Erik wrote a

lengthy, acerbic letter to the

twins,

pleading

for

resolution that would allow

both sides to go their separate

ways.

“If we’re all being honest,

then it’s clear we neither need

nor want your money, and

you neither need nor want to

be risking your money with a

team that you believe to be

childish

and

2/3rds

expendable,” the letter said.

“Let’s be gentlemen and

move on. If you are so

interested

building

Bitcoin business, and you are

so skillful at navigating these

waters, then I welcome you to

go and do it.”

The

twins

considered

selling to Roger. But they

also believed BitInstant was a

good idea that could work

under the right management.

In January BitInstant had its

best month ever, processing

almost

million

transactions. The price of a

Bitcoin, meanwhile, had risen

from $13 at the beginning of

the month to around $18 at its

end. Some of this was due to

the twins themselves. They

had asked Charlie to continue

buying them coins with the

goal of owning 1 percent of

all the Bitcoins in the world,

or some $2 million worth at

the

time.

This

ambition

underscored

their

commitment to sticking it out

with Bitcoin.

The tension came to a

breaking point at the end of

January. Patrick Murck, the

general counsel at the Bitcoin

Foundation, flew in from

Seattle to see if he could help

Charlie and Erik make their

argument to the twins. In a

meeting in the BitInstant

conference room, Charlie,

Erik, and Patrick, sitting on

one side of the table, offered

to provide Maguire Ventures,

the entity put together by

David and the twins, with a

full refund for the money they

had put in. The twins

responded angrily that they

would accept no less than five

times what they had put in.

They also said that the

technology being offered by

Erik’s company, Satoshi Ltd.,

was worth little. Erik and Ira

responded by walking out of

the room as the twins

“continued with emotional

insults and absurdities,” Erik

wrote in an e-mail after the

meeting.

The next day Erik and Ira

sent in their resignations and

moved into the offices of

Larry Lenihan and FirstMark

Capital; Lenihan had always

been more interested in

investing in Erik than in

Charlie.

Charlie, Roger, and Erik

were

constant

conversation, contemplating

whether Charlie should join

Erik, and if the whole group

should sue the Winklevoss

twins.

They

ultimately

decided not to sue—mindful

of the way the twins had

responded

when

Mark

Zuckerberg left them out of

Facebook.

Charlie

decided

couldn’t leave the company

he created, but when he went

to work the next day, he did

not

peace.

demanded

that

Maguire

Ventures deliver the final

installment of the investment

it had agreed to make the

previous fall:

“You guys are screwing

up my company, and Ira and

Erik left because of it. Give

me my money or I will wire it

all back to you today.”

Roger, who still had a 15

percent stake in the company,

continued pushing the twins

to sell their stake in the

company or let Roger sell his:

You guys obviously

don’t understand

Bitcoin, or BitInstant.

You are

destroying your equity

and mine, and I don’t

want to be any part of

it.

If you disagree,

then make me an offer

for my 15% of

BitInstant.

Name your price.

I will gladly sell it

to you for less than

the valuation you

bought in at.

There

was

some

confirmation

Roger’s

assessment a few days after

Erik left, when Charlie got a

letter from the latest bank to

decide that it would no longer

service BitInstant’s accounts.

It was unclear if BitInstant

would have anywhere to put

all the money customers were

sending it. As the value of

Bitcoin continued to shoot up,

the value of Charlie’s idea

seemed to be falling apart

before his eyes.

CHAPTER 18

February 2013

The desk where Wences

Casares worked on his digital

wallet, Lemon, was mounted

on a treadmill, in an office

overlooking

the

main

shopping street in Palo Alto.

His monitor was perched on a

short pile of books, hardcover

copies of Debt: The First

5,000 Years. When he spoke

about Bitcoin with visitors to

the office and invariably

began talking about the

history of money, he would

frequently give them a copy

of the book.

Wences shared the space

with Micky Malka, an old

Venezuelan

friend

and

business partner. Micky was a

big investor in Lemon and

chairman of the company’s

board. Wences was, for his

part, one of the largest

investors in Micky’s venture

capital firm, Ribbit Capital.

Micky’s recently opened

fund was technically focused

on financial services. But

after Wences got Micky

excited about Bitcoin, Micky

was trying to find virtual-

currency

investments.

Because there were so few

viable

Bitcoin

companies

around, Micky made the

somewhat

controversial

decision to use his investors’

money

buy

Bitcoins

themselves.

Both Micky and Wences

turned the office into a kind

virtual-currency

salon,

hosting a constant parade of

interested visitors. Among

them was Pete Briger, the

chairman

Fortress

Investment

Group,

who

dropped by soon after the

skiing trip, with his deputy

Bill

Tanona.

Wences

marveled at how quickly Pete

had managed to get others at

Fortress

excited

about

Bitcoin, but when he heard

Pete speak about it he

understood why. Pete, a

normally reserved man, got

fired up when talking about

the inefficient “oligopoly”

that the big banks had over

money movement and the

transaction fees that the

oligopoly forced everyone

else to pay. Wences was

getting more of a response

from Fortress—a Wall Street

giant managing nearly $60

billion—than he was from

Silicon Valley venture-capital

firms with just a few hundred

million dollars. Pete assigned

Tanona to the almost full-

time

job

exploring

potential Bitcoin investments,

and also drew in another top

Fortress

official,

Mike

Novogratz. All of them began

buying coins in quantities that

were small for them, but that

represented

significant

upward pressure within the

still

immature

Bitcoin

ecosystem.

The

purchases

being

made by Fortress—and by

Micky’s team at Ribbit—

were supplemented by those

being

made

the

Winklevoss twins, who were

still trying to buy up 1

percent of all the outstanding

Bitcoins.

Together,

these

purchases helped maintain the

sharp upward trajectory of

Bitcoin’s price, which rose 70

percent in February after the

50 percent jump in January.

On the evening of February

27 the price finally edged

above

the

long-standing

record of $32 that had been

set in the hysterical days

before the June 2011 crash at

Mt. Gox.

THE

AFTERNOON

Sunday, March 3, Wences

boarded a Gulfstream two-

engine jet at a private airport

in San Jose favored by the

Silicon Valley elite.

Wences was headed to

one of the most exclusive,

and

secretive,

annual

gatherings of tech-industry

power players, held at the

Ritz-Carlton resort outside

Tucson, Arizona, and hosted

by the investment bank Allen

& Co. Only a few hundred

people were invited and it

was private enough that the

news media rarely even found

out it was happening.

Wences

flew

the

conference on eBay’s private

jet. eBay owned PayPal, the

company

headed

Wences’s good friend David

Marcus, and David was

among the twelve passengers

on the flight. He had been

quietly working to make sure

PayPal was ahead of the

curve on virtual currencies

and had pulled together a

group in-house to look at how

PayPal might harness the

Bitcoin technology. He had

also begun to talk about it

with his boss, John Donahoe,

the chief executive of eBay.

When

the

eBay

jet

touched

down

north

Tucson, the passengers were

quickly whisked away in

SUVs to the Dove Mountain

Resort, which sat in the

foothills of the mountains that

separate Tucson and Phoenix.

That

evening,

everyone

congregated for drinks on the

Tortelita Terrace and then

proceeded to dinner on an

immaculately

maintained

lawn overlooking the scrubby

mountains.

This was the most casual

dinner of the three-day event,

with unassigned seating and a

buffet to accommodate the

guests arriving at uneven

intervals. Wences took notice

as the big names showed their

faces:

Twitter’s

chief

executive,

Dick

Costolo;

LinkedIn’s

founder

Reid

Hoffman; Rupert Murdoch’s

son, James; and perhaps the

most recognizable venture

capitalist in Silicon Valley,

Marc

Andreessen,

enormous man with a shiny

bald head.

Wences found his way to

a table with another budding

Bitcoin nut, Chris Dixon, one

of the up-and-coming stars at

Andreessen’s

firm,

Andreessen Horowitz. The

men

quickly

began

comparing

ideas.

Dixon

explained that he had gotten

excited about the importance

of the blockchain protocol as

a new way of moving value

around the world, just as the

Internet

protocol

had

provided a decentralized way

to move information. Dixon

had been pushed to think

about this by the writings of

Fred Wilson, the New York

venture capitalist who had

backed Wences’s first big

company.

Wences

smiled

with

gratitude to find someone

who had seen the beauty of

the system without his help.

Wences, in turn, told Dixon

about

the

international

potential he saw for Bitcoin,

in countries like Argentina

where people lack a safe

place to keep their money.

Dixon hadn’t thought much

about that opportunity and

asked Wences to tell him

more.

They were interrupted by

Henry Blodget, a former Wall

Street analyst and founder of

the

news

site

Business

Insider, who asked what they

were talking about: he had

never

heard

Bitcoin.

Wences responded with his

favorite introductory line:

“It’s the best form of money

the world has ever seen.”

Blodget’s

famously

childlike curiosity provided a

great opening for Wences to

work through all of his finely

honed arguments.

After touching on the

history

money

and

Bitcoin’s advantages over

gold, Wences explained his

back-of-the-envelope

calculations of what Bitcoin

might be worth if people

began to realize its value as a

substitute for gold. All the

gold in the world was worth

around $7 trillion. If Bitcoin

became even half as popular,

that would put the value of

each Bitcoin at around half a

million

dollars—or

about

fourteen thousand times more

than its $34 value that day in

March.

The

conversation

continued as the sun went

down and the desert air grew

chilly.

The

little

crowd

around Wences’s table grew,

with Marcus and others

stopping by.

Wences saw the interest

build when he told one of his

newest

stories

from

Argentina. A friend of his

sister had recently wanted to

buy an upscale $1.5 million

apartment in Buenos Aires.

As with most Argentinian

real estate transactions, the

seller—distrustful of the peso

—wanted the payment in

dollars and in cash, no small

feat when the sum was $1.5

million. The bigger problem

was that the sister’s friend,

many

wealthy

Argentinians, kept his savings

in dollars in an American

bank account. To transfer the

money into an Argentinian

bank and then take it out in

cash would eat about 10

percent of the money in bank

and exchange fees—some

$150,000—and

would

involve

several

days

waiting. To get around this,

the sister’s friend purchased

$1.5

million

worth

Bitcoins from Mt. Gox. Once

the friend had the coins, he

took his Bitcoin wallet to the

signing for the apartment in

Buenos Aires and transferred

it over to the seller, with the

notary as witness. Afterward,

Wences’s sister sent him a

picture of the two old men

holding up their smartphones

and smiling.

To prove how easy this all

was, Wences asked Blodget

to take out his phone and

helped him create an empty

Bitcoin wallet. Once it was

up,

and

Wences

had

Blodget’s

new

Bitcoin

address, Wences used the

wallet on his own phone to

send Blodget $250,000, or

some 6,400 Bitcoins. The

money was then passed to the

phones

other

people

around the table once they

had set up wallets. Anyone

could have run off with

Wences’s $250,000, but that

wasn’t a risk with this

particular crowd. Instead, as

the money went around,

Wences saw the guests’

laughter

and

wide-eyed

amazement at what they were

watching.

The next two days were

filled with panels covering

topics

“eBay

and

Innovation” and “China: The

Road

Ahead.”

the

afternoon

there

were

scheduled activities: tennis,

horseback riding, and clay-

pigeon

shooting,

among

others. During the interludes

Wences

was

approached

constantly by people who had

heard the Sunday evening

conversation or heard about

it. LinkedIn founder Reid

Hoffman pulled Wences aside

to ask more, as did Michael

Ovitz, the former president of

Disney. During a hike on

Wednesday

afternoon,

Wences spent the entire time

explaining the concept to

Charlie Songhurst, the chief

of strategy at Microsoft. At

night, many of the same

people

approached

David

Marcus. As the president of

PayPal, he would have as

informed a view as anybody

on the viability of Bitcoin.

“What do you think of

this?” they asked him. “Is this

real?”

Marcus replied that he

already believed in the idea

enough to put his own money

into it. They shouldn’t invest

money they couldn’t afford to

lose, he said, but it was

certainly

worth

some

investment.

On Monday, the first full

day of the conference, the

price of Bitcoin jumped by

more than two dollars, to $36,

and on Tuesday it rose by

more than four dollars—its

sharpest rise in months—to

over $40. On Wednesday,

when everyone flew home,

Blodget put up a glowing

item on his heavily read

website, Business Insider,

mentioning

what

he’d

witnessed

(though

not

specifying where exactly he’d

been, or whom he’d talked

to):

I was at a technology

conference earlier this

week, and the most