out anonymously—they “felt
really strongly that this was
something important they
discovered and went rogue
with it,” Erik explained, even
while noting, with a laugh,
that he had no actual evidence
to back up his hypothesis.
Most of the weekend,
though, was spent talking not
about Satoshi, but instead
about
the
incredible
challenges that everyone in
this group faced. The one-two
punch of Charlie Shrem’s
arrest and Mt. Gox’s collapse
had killed much of the hope
that Bitcoin would gain
mainstream
acceptance
anytime soon.
Dan Morehead had been
running
his
Bitcoin
operations
from
inside
Fortress’s
San
Francisco
offices, and there had been a
vague plan for his small team
to be integrated into Fortress,
a publicly traded company.
With all the crises, though,
Pete Briger had let Dan know
that Fortress was not going to
be able to have a formal role.
Dan was going to have to
move his staff, operating
under the name of his old
hedge fund, Pantera Capital,
out of Fortress’s offices.
Things did seem to be
going well for the old college
fraternity
brothers
who
founded Bitpay, both of
whom were in Tahoe. They
had signed up lots of new
online merchants who were
happy to find a cheaper way
to process online transactions
—the 1 percent that Bitpay
charged versus the 2 to 3
percent charged by credit
cards—without
worrying
about chargebacks. But it was
now becoming evident that
consumers had much less of a
reason than merchants to use
Bitcoin for online purchases.
Consumers, after all, never
see the 2.5 percent processing
fee that merchants pay, so
products aren’t cheaper when
purchased with Bitcoin. And
consumers
generally
like
having the peace of mind
offered by chargebacks. For
the sake of Bitcoin as a
whole, there were many who
worried that the consumers
who were buying things
online through Bitpay were
pushing the price of Bitcoin
down; generally when online
retailers accepted Bitcoins
they immediately sold them
off for dollars, creating a
downward pressure on the
overall price.
Bobby Lee talked at
Tahoe
about
the
many
unusual stresses of running a
virtual-currency startup in
China. After the government
had forced the payment
processors to cut off Bitcoin
exchanges back in December,
Bobby’s
competitors
had
quickly opened bank accounts
where
customers
could
deposit funds. Bobby had
chosen not to follow the same
path—it seemed to violate the
clear intent of the statement
from the Chinese regulators
in December. Bobby had
grown
up
working
for
American companies, which
generally tried to obey, or at
least give the appearance of
obeying, not just the letter but
also the spirit of the rules.
Bobby had internalized this
cultural code. But as Bobby
watched
his
business
dwindle, and his competitors
thrive,
his
Chinese
cofounders pushed him to
understand
that
Chinese
regulators weren’t looking to
enforce a strict reading of the
law—they just didn’t want to
have anything shoved in their
face.
“Turns out, in China,
there’s no ethics—there’s no
moral
obligation,”
Bobby
would say of his discovery,
with a hint of amusement and
a
dash
of
frustration.
“Westerners see that as a bad
thing. Chinese see that as,
‘We’re being flexible.’”
With a sense that he was
caught in a street fight and
limiting himself to punching
with boxing gloves, Bobby
eventually
bent
to
the
Chinese
way
of
doing
business and opened up the
company’s bank accounts to
customer
deposits
shortly
before coming to Tahoe.
“If no one listens, and
there is no penalty, our
competitors do what’s best
for them and then we’re left
in
the
dust,”
Bobby
explained. “So instead we
decided to embrace the local
method.”
There were, though, limits
to how far Bobby would go in
his hunt for business. He was
outspoken about his belief
that his competitors were
faking their volume numbers
to make it look as though
they were attracting more
business. He also initially
declined to follow the lead of
one
of
his
increasingly
successful
competitors,
OKCoin,
which
had
introduced what is known as
margin trading. Customers of
OKCoin could essentially
borrow
money
to
make
bigger bets on Bitcoin. If the
price went up, customers
could pay back the borrowed
money, but if it went down
the customers quickly lost
their original money—the
normal outcome in margin
trading. This didn’t seem to
Bobby like a good formula
for a long-term business,
though he was coming to
reconsider all of his Western
judgments.
Despite all the challenges,
Bobby was clearly having a
good time, enjoying the
audacity and inventiveness
that were required of an
entrepreneur in China. He
was making plans to move his
staff into bigger offices and
he
had
announced
his
candidacy for one of the
Bitcoin Foundation seats that
Charlie Shrem and Mark
Karpeles had vacated—a seat
he would eventually win. In
Tahoe, he was the very
picture of the fun-loving,
confident risk taker, sweeping
the poker games. He likened
his situation in China to being
in a tunnel with no clear way
out.
“Everyone behind me is
like, ‘Dude, Bobby it’s a dead
end, you are not going to get
out,’” he said. “But I’m like,
‘If I get out, the prize is so
huge.”
The weekend provided
plenty of reminders of why
everyone had gotten into this
in the first place. After dinner
on
Friday
night,
Dan
introduced
a
celebrated
economics
professor
at
Stanford, Susan Athey, a
winner
of
the
most
prestigious award for young
economists, who had recently
been
diving
into
the
blockchain technology. She
told
the
group
of
her
discovery of Bitcoin in the
spring of 2013. At the time
she went to her academic
colleagues and found that