were helping to bring into
existence—a new kind of
money that he believed would
change the world.
THE BITCOIN CONCEPT first
came onto the scene in more
modest circumstances, five
years earlier, when it was
posted to an obscure mailing
list by a shadowy author
going by the name Satoshi
Nakamoto.
From
the
beginning,
Satoshi envisioned a digital
analog to old-fashioned gold:
a new kind of universal
money that could be owned
by
everyone
and
spent
anywhere. Like gold, these
new digital coins were worth
only what someone was
willing to pay for them—
initially nothing. But the
system was set up so that, like
gold, Bitcoins would always
be scarce—only 21 million of
them would ever be released
—and hard to counterfeit. As
with gold, it required work to
release new ones from their
source, computational work
in the case of Bitcoins.
Bitcoin also held certain
obvious advantages over gold
as a new place to store value.
It didn’t take a ship to move
Bitcoins from London to New
York—it took just a private
digital key and the click of a
mouse. For security, Satoshi
relied
on
uncrackable
mathematical formulas rather
than armed guards.
But the comparison to
gold went only so far in
explaining why Bitcoin ended
up attracting such attention.
Each ingot of gold has always
existed independent of every
other ingot. Bitcoins, on the
other hand, were designed to
live
within
a
cleverly
constructed,
decentralized
network, just as all the
websites in the world exist
only within the decentralized
network
known
as
the
Internet. Like the Internet, the
Bitcoin network wasn’t run
by some central authority.
Instead it was built and
sustained by all the people
who hooked their computers
into it, which anyone in the
world could do. With the
Internet,
what
connected
everyone together was a set
of software rules, known as
the Internet protocol, which
governed how information
moved around. Bitcoin had its
own software protocol—the
rules that dictated how the
system worked.
The technical details of
how all this worked could be
mind-numbingly complicated
—involving advanced math
and cryptography. But from
its earliest days, a small
group of dedicated followers
saw that at its base, Bitcoin
was, very simply, a new way
of creating, holding, and
sending
money.
Bitcoins
were not like dollars and
euros, which are created by
central banks and held and
transferred by big, powerful
financial institutions. This
was a currency created and
sustained by its users, with
new money slowly distributed
to the people who helped
support the network.
Given that it aimed to
challenge some of the most
powerful institutions in our
society, the Bitcoin network
was, from early on, described
by its followers in utopian
terms. Just as the Internet
took power from big media
organizations and put it in the
hands
of
bloggers
and
dissidents, Bitcoin held out
the promise of taking power
from banks and governments
and giving it to the people
using the money.
This was all rather high-
minded stuff and it attracted
plenty
of
derision—most
ordinary folks imagined it
falling somewhere on the
spectrum
between
Tamagotchi pet and Ponzi
scheme, when they heard
about it at all.
But Bitcoin had the good
fortune of entering the world
at a utopian moment, in the
wake of a financial crisis that
had exposed many of the
shortcomings of our existing
financial and political system,
creating
a
desire
for
alternatives. The Tea Party,
Occupy Wall Street, and
WikiLeaks—among others—
had divergent goals, but they
were united in their desire to
take power back from the
privileged elite and give it to
individuals. Bitcoin provided
an apparent technological
solution to these desires. The
degree to which Bitcoin
spoke to its followers was
apparent from the variety of
people who left their old lives
behind to chase the promise
of
this
technology—
aficionados
like
Erik
Voorhees and many of his
new friends. It didn’t hurt that
if Bitcoin worked, it would
make
the
early
users
fabulously wealthy. As Erik
liked to say, “It’s the first
thing I know where you can
both get rich and change the
world.”
Given the opportunity to
make money, Bitcoin was not
only attracting disaffected
revolutionaries. Erik’s host,
Dan Morehead, had gone to
Princeton and worked at
Goldman
Sachs
before
starting his own hedge fund.
Morehead was a leading
figure among the moneyed
interests who had recently
been
pumping
tens
of
millions of dollars into the
Bitcoin ecosystem, hoping for
big returns. In Silicon Valley,
investors and entrepreneurs
were clamoring to find ways
to use Bitcoin to improve on
existing payment systems like
PayPal, Visa, and Western
Union and to steal Wall
Street’s business.
Even people who had
little sympathy for Occupy
Wall Street or the Tea Party
could understand the benefits
of a more universal money
that doesn’t have to be
exchanged at every border;
the advantages of a digital
payment method that doesn’t
require you to hand over your
identifying information each
time you use it; the fairness
of a currency that even the
poorest people in the world
can keep in a digital account
without paying hefty fees,
rather than relying only on
cash; and the convenience of
a payment system that makes
it possible for online services
to charge a penny or a dime
—to view a single news
article or skip an ad—skirting
the current limits imposed by
the 20- or 30-cent minimum
charge for a credit card
transaction.
In the end, though, many
of the people interested in
more practical applications of
Bitcoin still ended up talking
about the technology in
revolutionary terms: as an
opportunity to make money
by disrupting the existing
status quo. At the dinner a
few hours before the late-
night poker game, Morehead
had joked about the fact that,
at the time, all the Bitcoins in