“The analogy is a little off—they aren’t so much the house as they are the bank. Or to keep with the casino metaphor, the cashier’s cage.”
“Pay attention to the road, Cam. We’re not going to be the house or the bank if we’re wrapped around a telephone pole.”
Cameron lightened up on the gas pedal as he pulled their SUV into the slow lane. Tyler was right, Cameron had gotten so caught up in the conference call they’d been on since they’d pulled onto the Long Island Expressway forty minutes back, he’d been driving by reflex alone. Which meant driving fast, grand prix style, in synch with the thoughts racing furiously behind his eyes.
“I don’t think there are any telephone polls on the LIE anymore,” he said, his thumb hovering over the mute button on the car’s speaker console.
Who the hell needed telephone poles anymore? The smartphone on the seat next to him was Bluetoothed to the car’s onboard computer, which was invisibly linked to the closest cell tower. Once he pressed the button, undoing the mute function, which he’d made liberal use of whenever he and his brother needed time to digest whatever the disembodied voices on the other end of the line threw at them, every word he uttered would be turned into digital information, 1s and 0s bound together in electronic packets that would piggyback through those cell towers into larger data streams beamed straight up into space, bouncing from satellites to another cell tower miles away, ricocheting again to another smartphone sitting in an office on West Twenty-Third Street in downtown Manhattan, the destination of their morning drive.
Sure, it would probably have been more prudent to wait until they had reached the address, just a block from where they were still constructing their own offices, the headquarters of Winklevoss Capital, before starting the meeting, but Cameron had been on fire since they’d reconnected with Azar after they’d returned from Ibiza.
Azar had followed up with Cameron on Twitter. Cameron couldn’t remember if he had given the guy his email at the Blue Marlin; day drinking on a beach filled with models was distracting, and it didn’t help when you had a villa with a private pool. Thankfully, Azar had been resourceful. His first direct message on Twitter had made Cameron laugh out loud:
Not sure if I was discussing virtual currency with you or your brother in Ibiza at blue marlin. Let’s meet up in NY …
But it had quickly led to more formal conversations and finally an in-person meeting. Although Cameron and Tyler both owned loft apartments in the city, they’d been spending most of the summer at their parents’ house in the Hamptons. Although the area had a reputation for being a bit of a party destination itself—not on par with Ibiza, but speckled with exclusive restaurants and summer outposts of notable Manhattan nightclubs—the twins had spent most of their time relaxing on the beach and devouring anything they could find on the subject of Bitcoin. At the time, not a single book on Bitcoin had been published; but by diving deep enough into the internet, the twins were able to find blog posts, Reddit posts, and articles written by early adopters, known as “Bitcoiners,”—as well as Satoshi Nakamoto’s original Bitcoin white paper. They’d also reached out by email to former professors at Harvard and Oxford, where they’d earned MBA degrees, to get more academic opinions on this new virtual currency.
None of the professors they’d contacted—some of them among the most elite economics professors in the world—had ever heard of Bitcoin. When the twins had explained what they had learned so far, some responded in a knee-jerk way, labeling Bitcoin as some sort of scam or Ponzi scheme. But when Cameron pressed them on those notions, the professors couldn’t exactly say what the scam was, or why it was a Ponzi scheme.
Settling their SUV just below the speed limit, Cameron hit the button to unmute the conversation.
“The party is just getting started,” blurted a voice, words coming so fast they threatened to run right into each other. “The market cap of the entire Bitcoin economy is only about a hundred and forty million. That’s million, with an m. Gold is seven trillion. And gold is pretty much useless. Walk into a store and try to buy a pack of gum with gold.”
Sometimes it was hard to distinguish voices on a conference call, and doubly hard in a car going sixty miles per hour, with the blare of a siren from an emergency vehicle racing past on the other side of the median separating the lanes going in the opposite direction. But Cameron had no trouble identifying the voice of Charlie Shrem, the youngest member of the team they were on their way to meet. Not just because Charlie had a habit of talking fast, but also because his energy level was completely on par with his age. The kid was barely twenty-two, and from what Cameron had gathered from the emails they’d traded, still lived in his mother’s basement, in an Orthodox Jewish–Syrian neighborhood deep in Brooklyn. But he was obviously some sort of prodigy. The company he had cofounded, the business that Azar was trying to assemble a group to invest in, was already making waves in the Bitcoin community.
But before they could decide on whether or not they wanted to invest in a Bitcoin company, Cameron and his brother were going to have to better understand what Bitcoin was in the first place. What made it good, viable money? What made it better than gold? What was money anyway?
“Okay, but gold has some intrinsic value,” Tyler said. “It’s used in jewelry, and in transistors.”
“But what about cash?” Charlie responded. “It hasn’t been backed by gold since the 1970s, and the government can print as much of it as it wants. Talk about a Ponzi scheme. No intrinsic value there.”
“Cash has intrinsic value,” Cameron responded. “If you were freezing on top of a mountain and all you had was cash, you could burn it to keep warm.”
“Ah, the Cliffhanger maneuver,” Azar’s voice came through the car’s speakers. “Love that movie.”
“The intrinsic value of gold is overrated,” emerged another voice over the line.
Cameron glanced at Tyler. The new voice belonged to Erik Voorhees, Charlie’s head of marketing. Voorhees was a few years older than Charlie, soft spoken but obviously incredibly sharp, and well versed in Bitcoin. Born in Colorado, Voorhees was a staunch libertarian who had traveled all over the world before migrating to New Hampshire as part of the Free State Project, a political movement whose goal was to create a community based on libertarian ideals. Voorhees, who had recently joined Charlie in New York to help run his fledgling company, was an acolyte of the Austrian School of economics; a philosopher and an activist, he had gravitated toward Bitcoin in part because it was a form of money that did not rely on any state actors and was truly borderless.
“I suppose gold wouldn’t do you any good if you were shipwrecked on an island,” Cameron said in response to Voorhees. “You’d take food or water over a bar of gold, or a mountain of cash, any day of the week.”
“In that situation,” Voorhees said, “Bitcoin would have very similar intrinsic value to gold or cash. But the difference is, if you were trapped on that island with your cash and your gold and your Bitcoin, if you had your smartphone with you, you could still use your Bitcoin. Because Bitcoin has technological intrinsic value. Bitcoin has the potential to change the game entirely.”
Thirty minutes earlier, right before Cameron and Tyler had gotten onto the expressway, they’d stopped at a gas station attached to a 7-Eleven. Five miles later, Tyler had realized he’d left his wallet on top of the gas pump, and they’d had to turn around. Like the delayed deposit on their villa in Ibiza, it was another stark reminder of the inherent flaws of physical money and again begged the question: What was money, anyway?
Was it pieces of green paper, emblazoned with the pictures of dead presidents and luminaries, sitting in a leather wallet on top of a gas pump off the Long Island Expressway?
Was it some shiny rock pulled out of the earth, molded into bars or coins, then buried again in some vault somewhere?
Or could it be something else, something that kept pace with a rapidly changing world?
Something new, a form of technology as practical and current as the technology behind the smartphone on the seat next to Cameron, spouting out voices that already had been to space and back?
“Welcome to the ‘Bakery,’ gentlemen. If these walls could talk—well, they’d sound pretty fucked-up. There’s been a lot of secondhand smoke in this room. This is where most of our best thinking takes place. Lighting up neurons today, for a better tomorrow.”
Charlie Shrem certainly fit the mental image Cameron and Tyler had been building of the boy wonder CEO; miniature in stature, slightly bearded, curly hair plastered back against his small head by a coating of gel so thick it shimmered. But homunculus that he was—he was small enough to be the twins’ coxswain—his presence dominated the offices of his eight-month-old startup. He’d been playing the circus master since he’d met them outside the front door on Twenty-Third Street, arms wide at his sides, a grin plastered ear-to-ear. Then he’d grabbed each of them in an awkward, hipster hug. Cameron couldn’t help but feel the nervous energy bleeding out of the kid—Charlie was actually trembling—or smell the hint of marijuana seeping from his plaid short-sleeve shirt and distressed khaki pants.
The energy level had only risen from there; Charlie was practically bouncing out of his Converse Chuck Taylors by the time he’d led them through the main office, a mess of desks and computers and spaghetti twists of wires leading everywhere at once. Charlie had paused beneath a flat screen attached to an exposed brick wall, showing the current price of Bitcoin—seven dollars and forty-three cents—and made some comment about how he’d gotten in so early, something about the ass crack of Bitcoin’s dawn. Then he’d led them straight to the room he called the Bakery, for reasons that were obvious even before he’d made the joke about the talking walls.
Small, cramped, with windows overlooking Twenty-Third Street, the paraphernalia of what appeared to be Charlie’s favorite hobby was visible in every corner, and on every shelf. Cameron counted at least three bongs, as well as ceramic ashtrays littered between computer equipment and open file folders. He also saw a device that he didn’t recognize; eventually, Charlie would explain that it was called the Magic Box, a prototype of what would later be known as a vaporizer. It was—basically a wooden box with a glass tube coming out of it, within which you could burn marijuana and turn it into vapor—an invention that he was certain would catch on within a year or two, or maybe three. Cameron followed his brother and Charlie into the room, where they were joined by Voorhees—skinny, average height, with thinning reddish hair and angular features—and their old friend from Ibiza, Azar. Seeing a pair of canisters that looked like miniature oil drums, Cameron peered closer, only then noticing that the drums were covered in letters from the Cyrillic alphabet. They formed words that he couldn’t read, but he knew enough from taking Linguistics 180 back at Harvard to tell that it was Russian.
“Oh yeah, these are really cool,” Charlie said, grabbing one of the cans and offering it to Cameron. “Vodka in miniature oil barrels. Look at what it says on the other side.”
“ ‘NEFT, we support the Bitcoin economy,’ ” Cameron read out loud.
“You can scan the bar code on the back, and buy it with bitcoin. It’s freaking brilliant.”
To Cameron, this introduction to Charlie and his company was part funny, part WTF. The kid was something else; he was clearly smart and scrappy but a total whirling dervish. One thing was for sure, this wasn’t some startup in the Valley looking to court seed funding from the cabal of pleated khaki pants on Sand Hill Road—this was different.
“Bitcoin, the digital currency, with a lowercase b,” Voorhees said, pointing to the miniature barrel. “As Charlie implied, you send bitcoin with a lowercase b from your digital wallet to the address embedded in the QR code printed on the side of the can. It’s that simple, but that’s only a tiny part of the story.”
Cameron knew from his research that the first documented time bitcoin had ever been used to purchase a product happened on May 22, 2010. On that historic day, a Florida programmer named Laszlo Hanyecz was hungry for pizza and had decided he would use some of the bitcoin he’d accrued to quash his hunger; there was only one problem: no merchants accepted bitcoin as payment at that time. Undeterred, Hanyecz had posted a message titled “Pizza for bitcoins?” on Bitcointalk forum, the main congregating point online for Bitcoiners at the time:
I’ll pay 10,000 bitcoins for a couple of pizzas. like maybe 2 large ones so I have some left over for the next day. I like having left over pizza to nibble on later. You can make the pizza yourself and bring it to my house or order it for me from a delivery place, but what I’m aiming for is getting food delivered in exchange for bitcoins where I don’t have to order or prepare it myself, kind of like ordering a “breakfast platter” at a hotel or something, they just bring you something to eat and you’re happy!
An eighteen-year-old named Jeremy Sturdivant, who went by the online handle “jercos,” decided to take Hanyecz up on his offer. They’d finalized the details over Internet Relay Chat (IRC), and then Hanyecz had proceeded to pay jercos 10,000 bitcoin, worth roughly thirty dollars at the time, for two Papa John pizzas. Hanyecz confirmed the transaction on the Bitcointalk forum:
I just want to report that I successfully traded 10,000 bitcoins for pizza. Thanks jercos!
That day would be forever known and commemorated as Bitcoin Pizza Day. Since then, numerous Twitter accounts, such as @bitcoin_pizza, had been set up by Bitcoiners to track the current USD value of the two pizzas that Hanyecz had purchased. As of this writing, those two pizzas were worth approximately $36.6 million.
“But Bitcoin with a capital B is where the real action happens,” Charlie said.
Talking seemed to be the only thing that kept the kid’s energy at bay. In one of their earlier conversations, Azar had told the twins a bit about Charlie’s background as a socially awkward kid from the Syrian Jewish community in Brooklyn, which was Azar’s home, as well. The two of them had grown up within blocks of one another, and Charlie had always had a flair for computers. Now the kid who’d never been picked for dodgeball was suddenly the center of attention, and he was taking full advantage of the moment. He was not an entirely unfamiliar type of character to the Winklevoss brothers.
“ ‘Bitcoin’ with a capital B refers to the protocol, in other words, the entire Bitcoin Network,” Voorhees said, his more measured tone a stark contrast to Charlie’s verbal sprint. “While ‘bitcoin’ with a lowercase b refers to the digital asset that travels along the Bitcoin Network.”
“Same word, two different meanings, case dependent,” Charlie inserted.
“Protocols are the digital plumbing of the internet,” Voorhees continued. “They are the pipes that your emails travel through, the tunnels that carry your voice to a listener halfway around the world. The Bitcoin protocol allows bitcoin to move from point A to point B, and allows you to buy this miniature oil can of NEFT Vodka.”
“The analogy seems dangerous,” Cameron said. “If ‘Bitcoin’ with a capital B is plumbing, what makes ‘bitcoin’ lowercase b anything more than digital sewage?”
Voorhees smiled. “The same properties that make gold valuable, make bitcoin valuable.”
Cameron and his brother may have just started climbing the learning curve of this new digital currency, but as economics majors at Harvard, they were well versed in the world of old-fashioned money. At Harvard, they’d studied under Martin Feldstein, former chief economic adviser to President Ronald Reagan and the real-life inspiration for the character of Mr. Burns on The Simpsons. The brothers were steeped in the works of Adam Smith, Milton Friedman, and John Maynard Keynes. They understood that gold was worth what people were willing to pay for it—a case of classic supply and demand. They also understood what drove that demand—what made gold “good” money. They’d even once presented on the topic with a PowerPoint slide show.
Initially, gold’s chemical properties made it the natural choice; going down the elements on the periodic table and analyzing their properties, you could first cross off the gases—right from the get-go. Since whatever substance was going to be used as money couldn’t be highly reactive—otherwise it might explode in your hands—and it couldn’t be corrosive—otherwise it would rust—that disqualified another thirty-eight elements. And since money had to be rare, but not too rare—a metal like copper was too abundant, while a metal like osmium was too rare, being found only in meteorites—that ruled out another twenty-six elements.
Which left only rhodium, palladium, platinum, silver, and gold—five of the eight noble metals. Rhodium and palladium wouldn’t be discovered until the 1880s, well after money had been in use for thousands of years; and platinum’s melting point would have been too high for preindustrial furnaces. By process of elimination you were left with silver and gold. Silver tarnished easily and had a much greater industrial application—too useful to make good money—leaving gold just useful enough.
“Gold is valuable because of its naturally occurring properties: it’s scarce, durable, portable, divisible, fungible, hard to counterfeit, and easy to authenticate,” Tyler said.
“Exactly,” Voorhees responded, “and bitcoin has all of those properties too—”
“But Bitcoin is better at being gold than gold,” Charlie interrupted.
“Correct. Bitcoin is not just scarce like gold, but its supply is also fixed,” Voorhees said. “By the design laid out in Satoshi Nakamoto’s original white paper, there will never be more than twenty-one million bitcoins created, whereas the supply of gold increases as new deposits are discovered. And bitcoin is more divisible than gold. Each bitcoin can be subdivided into one hundred million pieces, and you can own as little as .00000001 bitcoin. And you can send it to someone instantly, like sending an email. Try emailing someone a bar of gold.”
“It’s gold with wings, gold 2.0!” Charlie said.
“All enforced by computer source code,” Tyler added.
Charlie seemed to be so enjoying how things were going, he decided to reward himself by grabbing for a large bong.
“Code is law,” Voorhees said. “Mathematical law.”
“What prevents me from spending the same bitcoin twice?” Cameron asked. “If I can email the same picture to more than one person, what prevents me from doing that with my bitcoin?”
“The double-spend problem,” said Voorhees.
This was a unique issue for digital currency that did not exist in the physical world of cash. If you gave someone a twenty-dollar bill, you couldn’t turn around and then give another person the same twenty-dollar bill. In the digital world, however, where 1s and 0s were plentiful, there were no such physical limitations. Historically, this problem had always been solved by invoking some central authority—the Federal Reserve, Visa, MasterCard—that monitored transactions and made sure the same digital dollars weren’t spent twice by the same person. But Bitcoin had no authority, no referee. It was also known as the “Byzantine Generals’ problem” in computer science circles and was a problem that was thought to be unsolvable: How do you create consensus in a completely decentralized system?
“That’s where this gets really cool.” Charlie looked up from his bong. “Satoshi solved the problem in his white paper, which started it all. The answer is what makes the whole Bitcoin system work: mining.”
Cameron had only had a few hours of internet reading to wrap his thoughts around the “mining” system, which acted as the engine to the Bitcoin ecosystem. He still didn’t have a complete grasp of how it all worked—but what he already knew fascinated him.
Voorhees explained how Bitcoin “miners”—people with computers running specialized software—validate and audit bitcoin transactions by solving complex math problems generated by the transactions themselves. Once a miner has solved the math puzzle for a new “block” of transactions, the block is added to the Bitcoin “blockchain,” the global ledger of every bitcoin transaction since the beginning of time. For their effort, miners were rewarded by the network with newly minted bitcoins. This is known as the “block reward.” And the more computing power a miner brings to the network, the greater the chance they have of solving the math problems and winning the block reward. The more you mine, the more likely you are to win.
“Or to put it in more technical terms,” Voorhees said. “The greater a miner’s hashrate, the greater their chances.”
Cameron had learned the term years ago, in a computer science class. Hashrate, or hashes per second, was a measurement of computational power: how many computations (i.e., hashes) a computer could perform in one second. Miners were furiously competing with one another to solve the mathematical problems that validated the current block of bitcoin transactions; the more these miners invested in their hardware—buying faster chips, housing their computers in coolant data centers, and so forth—the better their chances of winning a reward of newly created bitcoins. And then the race began all over again.
In trying to understand the process, Cameron had actually come up with his own simple analogy, which he decided to share with the room:
“Remember Charlie and the Chocolate Factory?” he started.
Charlie burped out a cloud of smoke as he took a pause midway through his hit.
“Never watch that movie high. The Oompa Loompas will scare the shit out of you.”
“The little boy in the movie,” Cameron continued, trying not to be distracted by the real-life Charlie getting higher and higher next to him, “is looking for a golden ticket inside candy bars. Charlie is a like a miner. And the golden ticket, which will grant him a tour of Willy Wonka’s factory, is like the block reward. Now suppose that by searching for this golden ticket, Charlie is also simultaneously validating purchases of candy bars and recording them in the factory’s business ledger—the Willy Wonka blockchain. And suppose there are many Charlies all around the world doing the same thing, searching for that golden ticket. As they open Wonka bars, they are auditing the Wonka blockchain and checking one another’s work. Willy Wonka’s contest has miraculously incentivized children around the world to work together to validate and record transactions of Wonka bars, helping Willy keep track of who paid for what, thereby protecting his profits and ensuring that his factory stays in business and can continue to make chocolate for everyone.”
Voorhees smiled.
“That’s very good. And it perfectly illustrates the magic of Bitcoin. Instead of middlemen, or gatekeepers, you have an open competition of miners, individually incentivized to validate transactions. No bank or government sits in judgment of transactions, or takes a piece of each slice of pie. Middlemen are replaced with math, or in the case of your example, an army of Charlie Buckets.”
“And the Willy Wonka of Bitcoin,” Tyler said. “Who set all of this in motion: Satoshi Nakamoto.”
Cameron knew from his reading that the creator of Bitcoin was no less mysterious than the fictional character from his analogy. On October 31, 2008, Satoshi Nakamoto had published his famous white paper titled: Bitcoin: A Peer-to-Peer Electronic Cash System, to the Cryptography Mailing List—“a low-noise moderated mailing list devoted to cryptographic technology and its political impact,” laying out “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” The white paper detailed bitcoin’s specific features:
• Double-spending is prevented with a peer-to-peer network.
• No mint or other trusted parties.
• Participants can be anonymous.
• New coins are made from Hashcash-style proof-of-work.
• The proof-of-work for new coin generation also powers the network to prevent double-spending.
And then three months later, the first version of the Bitcoin software was released into the wild. In thirty-one thousand lines of code, Satoshi was able to achieve what no one else before him had: the elimination of the need for trusted, central parties. On January 3, 2009, Satoshi verified the first Bitcoin block, block 0—the “Genesis Block.” Embedded in the Genesis Block was the headline of the London Times newspaper of that day:
CHANCELLOR ON BRINK OF SECOND BAILOUT FOR BANKS
The headline itself was a sobering reminder of human fallibility and the impact it had on the financial system.
And soon after, Satoshi vanished, never to be heard from again.
Over the years, numerous journalists had tried to track down the elusive founder, but they had very little to go on. Satoshi Nakamoto appeared to be a pseudonym. In Japanese, “Satoshi” meant “clear-thinking” or “wise,” while “Naka” meant “inside” or “relationship.” “Moto” was used to describe “an origin” or “a foundation.” Strung together, the made-up name translated to “thinking clearly inside the foundation.” Was it a clue? A mantra?
Between his white paper, source code, blog posts, and emails to Bitcoin core developers, Satoshi had left a total of eighty thousand words behind on the internet, approximately the length of a novel. Yet despite all of this, he had left almost no personal clues. If he was a Japanese man, he wrote in idiomatic, flawless English that alternated between American spellings and British spellings. The time stamps of his writings revealed no particular time zone. Investigative journalists had named at least fifteen people as possible alter egos to the mysterious inventor, including Elon Musk, the Tesla billionaire, and Hal Finney, a game designer and cryptographer who had received the first Bitcoin transaction from Satoshi in 2009; but none of these leads had led anywhere.
“To me,” Voorhees said, “the mystery surrounding Satoshi is a feature of Bitcoin, not a bug. The beauty of Bitcoin is that it is not built around Satoshi, it’s not built around anyone. To understand Bitcoin, you only need to understand Bitcoin.”
Charlie coughed from behind an epic ring of pot smoke, then grinned.
“Gravity doesn’t work because you believe in Isaac Newton.”
Ten minutes later, the group had moved out of the Bakery and back into the front office of the small startup, so Charlie could finish his guided tour.
He was showing them some of his software, running on a pair of desktop computers. “Our company, BitInstant, is part of the Bitcoin economy’s gravity. Specifically, we’re in the business of helping people buy bitcoin in an easy way. We take their cash, turn it into bitcoin, and then send it to them—instantly.”
“For a small fee,” Voorhees clarified, from behind Cameron and his brother.
“See,” Charlie continued, “if you buy bitcoin on an exchange—and at the moment, just one exchange carries most of the Bitcoin business, almost ninety percent—you have to go through the pain of opening up an account, filling out paperwork, wiring money overseas, and so on—waiting weeks for your account to be approved, waiting days for your money to arrive—it’s a lot of heavy lifting. At BitInstant, we take care of all of that for you. You give us cash, we do the rest.”
“You’re the cashier’s cage,” Cameron said. “You deal with the exchanges.”
“Correct. We turn cash directly into coin. You give us cash, and we can put bitcoins in your virtual wallet in under thirty minutes.”
“These ‘virtual’ wallets. Are they safe? From hackers? If you lose your phone, or your computer gets jacked—”
“It’s like your bank vault was just carried off, Wild West style,” Charlie said. “You’re right, Bitcoin brings about different security concerns; the thing about Bitcoin, it’s digital but it’s also physical.”
Charlie held up his left hand, and Cameron saw a glint of silver around the young entrepreneur’s pinky. Charlie carefully removed the ring and held it out so Cameron and his brother could see hundreds of tiny little alphanumeric characters etched along the inside of the ring.
“Is that your private key?” Cameron asked. He was referring to the “password” that gave you control of your bitcoin. Each bitcoin private key was a 256-bit number that could be any combination of 1s and 0s. It was a 256-bit number that allowed 2^256 possibilities; put in perspective, that was more possibilities than there were observable atoms in the universe. The chance of someone guessing a private key was 1 in 115 quattuorvigintillion.
“Almost, all but the last five alphanumeric characters, those are in my head.”
“Did you imbed your private key on a ring yourself?”
“Actually, my dad did. He’s in the jewelry business. I had him engrave it for me. I keep about twenty percent of my bitcoin right here, on my finger. This is what we call ‘cold storage’—offline.”
“Is this really practical?” Tyler asked. “Can’t you just keep it on a USB drive? Put it in a safe somewhere?”
“Sure. Put some on a USB. Leave some in a password-protected wallet on your computer. Put a bunch on a pinky ring. Hell, tattoo it on your arm. The thing is, we don’t really care what people do with their bitcoin. We just want to make it easy and fast for them to get them. Once they get their bitcoin, they should be free to do whatever they want with them.”
Voorhees was nodding in agreement, and Cameron knew they were now touching on philosophy. The idea that people should be able to do whatever they wanted with their own money, independent of any government oversight, was a cornerstone of the libertarian ideology that had fueled much of the interest in Bitcoin up to that point. Early Bitcoiners were mostly made up of people like Voorhees, people who believed that nobody else should have a say in how individuals chose to act, as long as it didn’t hurt anyone else. It was a philosophy that could extend in some dangerous directions.
“Storage is one thing,” Cameron said. “Commerce is something else. People aren’t buying just vodka and pizzas with bitcoin.”
He glanced at the industrial-size bong across the room. Charlie laughed.
“You’re talking about Silk Road.”
It wasn’t exactly an elephant in the room of Bitcoin, it was the room itself. Silk Road was an infamous, online bazaar that allowed users to buy and sell illegal goods and services. Its growth into a multimillion-dollar business, a sort of Amazon for illicit drugs, had coincided with the growth of virtual currency, and to the people who knew about either of them, they were inextricably intertwined.
“Not your typical due diligence,” Tyler said. “We checked out Silk Road. Not just drugs, but also guns, murder for hire. Pretty dark stuff.”
It hadn’t been as simple as typing in a web address on his computer to get to Silk Road. Cameron and Tyler had needed to download special software called Tor to make their computer anonymous, and even then they’d felt concerned just browsing a few pages of the online bazaar. What they’d seen on the site was almost hard to believe. Page after page of mostly drugs for sale, complete with pictures. You could search for cocaine, heroin, marijuana; when you found what you wanted, you could buy it with bitcoin—and only with bitcoin—and have it delivered right to your doorstep.
Although Voorhees, a dyed-in-the-wool libertarian, might have seen it as simply a place where people could shop without government intervention, Tyler and Cameron saw it as something different—something obviously criminal. Even the term “dark web,” the online subterranean world where sites like Silk Road existed, gave them the creeps. The fact that this was a potential first use case for virtual currency was troubling and a major potential hurdle if Bitcoin was going to go mainstream—something that could render the innovation dead on arrival.
“They also sell pretty good brownies,” Charlie said.
“Silk Road is just a proof of concept,” Voorhees said. “You can buy and sell real world goods with bitcoin. Our job at BitInstant is one step removed. We help people get bitcoin, no more, no less.”
Cameron had read enough of Voorhees’s opinions online to know that his views were much more fundamental than that: he was staunchly against the criminalization of drugs, of any sort of governmental regulation aimed at controlling how people behaved. In fact, when Charlie had hired him as BitInstant’s first real employee, he’d been living in New Hampshire, where he had moved as part of the Free State Project, a political crusade to populate the state with libertarian believers who were fighting for freedom from overbearing government. Voorhees appeared to be against most forms of taxation, most forms of military action, and many—if not most—financial laws. And yet, just a few years older than Charlie, he also seemed to be a practical, thoughtful businessman.
“We’re already moving about two million dollars a month through our system,” Voorhees continued. “Three out of every ten bitcoin in existence were acquired through us, and that number is rising.”
“We can’t keep on top of it,” Charlie said. “I’ve hired ten employees, but I need to double that, triple that. We’re going to be the Apple of Bitcoin.”
Cameron had been through pitch meetings before, so he was no stranger to hyperbole, but he could tell Charlie wasn’t playing a part; this kid really believed he was hanging on to a lightning bolt. And why shouldn’t he? He had started the company in his mother’s basement, with the help of someone he had met online, a silent partner named Gareth Nelson, who was apparently autistic and still handled the technical aspects of the business from off-site—somewhere overseas. Charlie had begun by borrowing ten thousand dollars from his mother. It was just the kind of rags-to-billions story the tech world was famous for.
BitInstant was simple, and just maybe, as Charlie believed, a rocket ship. Cameron and his brother had hoped to find that rocket in Silicon Valley, but Silicon Valley had unfriended them.
Charlie was welcoming them with open arms—through Azar, who had grown up around the corner from Charlie in the same insular community, and who was now hoping to put together an investment team to fund Charlie’s company—specifically, a team of identical twins with deep, deep pockets.
Cameron looked around. If there really were already ten employees at BitInstant, they were probably sharing desks and even chairs. So far, Charlie Shrem had raised $130,000. Ten thousand from his mom, and the rest in a single check from a colorful investor he had met after doing a live webcast at a conference in New York. Charlie had been telling the online audience about BitInstant, how none of the investors he’d approached understood Bitcoin and would fund him, how he just needed a little financing to make it work. Four hours after he was off the show, he’d received a Skype from a famous Bitcoin enthusiast named Roger Ver.
Ver, known in the Bitcoin community as “Bitcoin Jesus” because of his proselytizing and the many investments he’d made in the industry, had begun the brief Skype conversation by asking Charlie how much money he needed; when Charlie had thrown out a number, almost off the cuff, Ver had instantly agreed. And just like that, without ever meeting in person, they’d struck a deal; Ver had wired Charlie $120,000 for a 15 percent ownership of BitInstant.
From what Cameron had read about Ver, he held philosophical beliefs similar to those of Voorhees but seemed even more radical, even more of a fundamentalist. Ver had even once run for the California State Assembly under the Libertarian Party but then had immigrated to Japan after spending ten months in a federal prison back in 2006 for selling illegal fireworks over the internet.
Ver had begun buying bitcoin since the early days and had seeded more than a dozen fledgling companies like BitInstant. Cameron and Tyler had never met Ver, they had only been cc’d on a few emails with him; at present, there was no way to know whether he’d remain a silent angel investor, or become more vocal and involved as BitInstant grew.
Voorhees and Ver were driven by ideology, but they were also subject matter experts. Charlie was less driven by ideology, and more by passion, and was maybe a little deluded: all traits that good entrepreneurs shared. All of them were evangelists, talking about changing the world; and they meant it.
Despite some obvious concerns, Cameron knew that every early-stage startup deal had its warts. Something was telling him that getting his feet wet in Bitcoin by investing in BitInstant was the right move. This kid, Charlie Shrem, full of bravado, hubris, and a touch of deluded naivete, might just be the rocket ship they’d been looking for—even if it would just be them, Bitcoin Jesus, and Charlie’s mom on the capital table.
Earlier in their conversations, Azar had mentioned that there were other suitors for BitInstant—specifically, investors with experience in the crypto space, who were already considering making a play for Charlie’s term sheet. If Winklevoss Capital was going to be competing for BitInstant, then they had to move fast.
Cameron knew what steps he had to take next. He hadn’t closed a venture deal yet, but they weren’t in Silicon Valley, they were in the Flatiron District. This was New York, a city whose restaurants and clubs weren’t shy about turning away even Silicon Valley tech-stars. This was downtown Manhattan—the Winklevoss twins’ playground.
He thought he had a pretty good idea how to impress a kid like Charlie Shrem.