reclusive
Ukrainian
programmer, Val Nebesny,
who had designed several
generations of ASIC chips
after
reportedly
teaching
himself
chip
architecture
from a textbook. Initially, Val
Nebesny and his business
partner Val Vavilov had
packaged
the
chips
in
computers that they sold to
other Bitcoiners, under the
brand name Bitfury. But over
time the two Vals kept more
and more of the computers
for themselves and put them
in data centers spread around
the world, in places that
offered
cheap
energy,
including the Republic of
Georgia and Iceland. These
operations
were
literally
minting money. Val Nebesny
was so valuable that Bitfury
did not disclose where he
lived, though he was rumored
to have moved from Ukraine
to Spain. And Bitfury was so
good that it soon threatened
to represent more than 50
percent of the total mining
power in the world; this
would give it commanding
power over the functioning of
the network. The company
managed to assuage concerns,
somewhat, only when it
promised never to go above
40 percent of the mining
power online at any time.
Bitfury, of course, had an
interest in doing this because
if people lost faith in the
network, the Bitcoins being
mined by the company would
become worthless.
THE TWO
VALS
running
Bitfury were rare as outsiders
who were succeeding in the
new, more sophisticated, and
heavily scrutinized Bitcoin
world.
The
Vals
were
certainly not entirely alone.
Roger Ver, who had recently
managed to renounce his
United
States
citizenship,
after years of trying, owned
Blockchain.info, which was
doing better than ever. The
number of wallets hosted by
the company had passed 1
million in January and in
March was approaching 1.5
million.
It
became
increasingly
clear
that
Blockchain.info’s
careful
structure—holding
only
encrypted
files
for
its
customers—allowed
it
to
totally avoid the regulations
coming
down
on
other
Bitcoin companies. Roger
was
constantly
getting
entreaties
from
venture
capitalists who wanted to pay
millions for some of his 80
percent stake in the company.
Newcomers to the Bitcoin
world were trying to emulate
the Blockchain.info model
and create technology that
could allow Bitcoin to work
as originally intended and
escape regulations.
But most of the outsiders
who had been pioneers in the
early days of Bitcoin had not
been able to transition to the
new world. Charlie Shrem
was sitting at home, under
house arrest, while Mark
Karpeles was dealing with
prosecutors who were looking
to punish him for the role he
played in the ruin of Mt. Gox.
The
early
Bitcoin
aficionados had certainly not
gone away or lost heart. The
online forums were still as
lively as ever. But whereas
these people had mixed and
mingled
with
the
big
investors
at
the
Bitcoin
conference in 2013, they were
now part of an isolated
community that was cut off
from the more sophisticated
investors and programmers.
This was not dissimilar to
other protest movements that
had sprung up after the
financial crisis. Occupy Wall
Street, which initially drew
lots of attention—and raised
issues that became a part of
the
national
debate—
ultimately
splintered
into
many groups and disappeared
from the public spotlight.
The
marginalization
facing the early Bitcoin
community was on display at
a conference for the more
ideologically minded Bitcoin
community in early March
2014, held by the Texas
Bitcoin Association at a
Formula One racetrack on the
outskirts of Austin, Texas.
Austin was a fitting place for
the event because this was
where Ross Ulbricht had
grown up and founded Silk
Road, the truest experiment in
many of the early ideals.
Ross was now in jail in
Brooklyn, awaiting trial, and
his parents had moved to
New York to be closer to
him. But his mother, Lyn,
returned to Austin for the
conference.
Now
raising
funds
for
Ross’s
legal
defense, she explained that
the Bitcoins Ross had when
he was arrested had all been
confiscated and the family
was using its savings to pay
for his expensive lawyers.
At the conference, she
looked shrunken, but she was
treated like an honored guest
and she delivered greetings
from Ross, who called her
frequently from prison in
Brooklyn, where he said he
was doing well, practicing
yoga, and serving as a tutor
for other inmates as he
awaited trial. The market that
Ross
had
created
was
generally viewed, in this
crowd, as a moral good that
had allowed people to make
their own choices about how
they wanted to live, without
government intrusion. Rather
than doing any sort of evil,
Silk Road had made the
world a safer place by
allowing people to buy their
drugs from the safety of their
home.
The accusations that Ross
had solicited assassins to
murder people were more
divisive. In legal papers,
prosecutors
in
Maryland
charged Ross with hiring the
Silk Road user nob (actually
an undercover agent) to
murder
Curtis
Green.
Prosecutors in New York
accused Ross of hiring the
Silk Road user redandwhite
to kill several Silk Road
scammers. But there was no
evidence in either case that
anyone ended up dead (in the
redandwhite case, Canadian
police could not turn up
anyone matching the names
of the people Ross allegedly
tried to have killed). What’s
more,
in
the
indictment
moving toward trial, these
accusations of murder for hire
were not included as formal
charges. Ross’s mother said it
was
terribly
unfair
for
prosecutors to pin these
accusations on Ross if they
were not willing to charge
him. But even if Ross had
done the things the agents
claimed, there were plenty of
conference attendees willing
to argue that he had made the
right decision.
“What if the scammer
was going to expose every
Silk Road customer?” one