when
she
wandered into Jed’s study
one night and encountered his
frustration.
“There’s this really cool
thing called Bitcoin—it’s like
this nerd, libertarian thing,”
Jed told MiSoon, in his
hushed, intense voice. “But
it’s so lame. I can’t buy any
at night.”
Jed said he wanted to
build a site himself where he
could buy coins at any hour.
When MiSoon arose the next
morning, it was done. With
some experience in amateur
foreign-currency trading, Jed
knew the basics of what an
exchange required. But he
had never actually set up a
website
before,
having
previously worked more on
the sophisticated back-end
software. His new Bitcoin
exchange was something of a
fun experiment.
He and MiSoon discussed
possible names for the site.
He mentioned an old domain
name that he owned and was
not using—mtgox.com. Jed
had bought the site in 2007,
for use as an online exchange
to buy and sell the cards used
in the role-playing game
Magic:
The
Gathering—
hence
the
acronym
for
Magic: The Gathering Online
Exchange. It had operated for
just a few months before Jed
shut it down and the site had
been vacant since.
“Yeah, you should use
that,”
MiSoon
replied.
“That’s kind of weird and
easy to remember. Why not if
you
already
have
it
registered?”
Seven days after the
Slashdot post, Jed casually
advertised his new site on the
Bitcoin forum:
Hi Everyone,
I just put up a new
Bitcoin exchange.
Please let me know
what you think.
Mt. Gox was a significant
departure from the exchanges
that already existed, primarily
because Jed offered to take
money from customers into
his
PayPal
account
and
thereby risk violating the
PayPal prohibition on buying
and selling currencies. This
meant that Jed could receive
funds from almost anywhere
in the world. What’s more,
customers didn’t have to send
Jed money each time they
wanted to do a trade. Instead,
they could hold money—both
dollars and Bitcoins—in Jed’s
account and then trade in
either direction at any time as
long as they had sufficient
funds,
much
as
in
a
traditional brokerage account.
These advances made it
significantly more convenient
to buy and sell Bitcoins, but
also brought new dangers that
threatened to betray some of
the
currency’s
basic
principles.
Satoshi
had
designed Bitcoin to eliminate
the need for trusted central
authorities. It was supposed
to be a new money that
people could hold on their
own, without a bank, secured
with a private key that only
the user knew. Mt. Gox
customers would be moving
back to the old model in
which a single institution—
Jed’s
company—held
everyone’s money. If Jed
offered
good
security
measures, this might prove
safer than holding coins on a
home computer. But Jed was
not a security expert, and if
he did somehow lose the
private
keys
to
the
exchange’s digital wallets, his
customers had little recourse.
Unlike
the
banks
that
Bitcoiners had bashed, Mt.
Gox had no deposit insurance
and no regulators overseeing
the safety and soundness of
Jed’s operation. The choice
was between security and
principles on one hand and
convenience on the other.
When a forum member
asked
why
they
should
choose Mt. Gox over the
alternatives, Jed responded in
his characteristically modest
but confident way.
“It is always online,
automated, the site is faster
and on dedicated hosting and
I think the interface is nicer.”
Even Jed, though, was
surprised at how quickly
people trusted his setup and
sent money to his PayPal
account. During his first day
in business, July 18, twenty
Bitcoins were traded at five
cents each on Mt. Gox—an
inauspicious opening. But
within the first week he had
his first hundred-dollar day of
trading, and by the end of the
month Mt. Gox had overtaken
Martti’s service and the other
existing exchange in trading
volume to become the largest
Bitcoin business around.
These weeks marked a
subtle but dramatic transition
for Bitcoin. Until this point,
there had been occasional
transactions,
but
mostly
between aficionados making
them out of a desire to help
the
network.
After
the
Slashdot story, the difficulty
of mining new Bitcoins
ramped up quickly with the
surge in the number of people
racing to win coins. Satoshi
had determined that as more
computers
joined
the
network, the mining of new
Bitcoins would become more
difficult, ensuring that it
would always be roughly ten
minutes between releases of
new coins. The week after the
Slashdot story, the difficulty
of mining new Bitcoins
jumped 300 percent. Gavin
Andresen, who had initially
started mining Bitcoins to
help the network, now found
it all but impossible to win
new coins with his four-year-
old Mac laptop.
Suddenly, if a person
wanted Bitcoins, he or she
had to buy them. And people
were showing a willingness
to do just that and part with
real
money
for
these
unproved slots on a digital
spreadsheet. The growing
popularity of Bitcoin was
hard to miss. One new forum
member wrote:
What I like about
Bitcoin is that it is a
community with a
solution that we are
actually trying. I don’t
know many people in
real life that are even
close to as radical in
their thinking as I
(and many others on
these forums) am.
Surprisingly,
however, I am able to
talk with my real life
friends about Bitcoin
much longer than my
normal rants about
“what should be,”
because Bitcoin
actually exists.
IN LATE JULY Martti launched
the
first
foreign-language
forum, in Russian, and within
a few weeks it had hundreds
of postings. The English
forum grew much faster. In
one month, the forum had
gained more new members—
370—than
it
had
since
coming online in November
2009.
Craving
more
conversation, the expanding
herd of dedicated Bitcoin