Digital Gold

by Nathaniel Popper

  115“Have you ever thought about doing”: Richard Bates, RUTT, January 22, 2015.

  115“I’m sure the authorities would be very interested”: Richard Bates, RUTT, January 22, 2015.

  116He lied to Richard as one part of his effort to cover his tracks: RUTE GX 226D.

  116the site had generated $30,000 in commissions: RUTE GX 250.

  116in September Ross hired his first staff member: RUTE GX 250 and GX 240B.

  117he sold his pickup truck and moved to Sydney, Australia: David Kushner, “Dead End on Silk Road: Internet Crime Kingpin Ross Ulbricht’s Big Fall,” Rolling Stone, February 4, 2014, http://www.rollingstone .com/culture/news/dead-end-on-silk-road-internet-crime-kingpin-ross-ulbrichts-big-fall-20140204.

  117He would fit in his work around trips to Bondi beach: RUTE GX 240C.

  118“the biggest and strongest willed character I had met”: RUTE GX 240B.

  118Variety Jones came up with a clever idea: RUTE GX 226D.

  119vendors in at least eleven countries: Nicolas Christin, “Traveling the Silk Road: A Measurement Analysis of a Large Anonymous Online Marketplace,” Working Paper, November 28, 2012.

  120An academic study of Silk Road: Ibid.

  120In March, that amounted to nearly $90,000: RUTE GX 250.

  121In real life, DigitalInk’s name was Jacob George: Ian Duncan, “Silk Road Drug Dealer Pleads Guilty,” Baltimore Sun, November 5, 2013, http://articles.baltimoresun.com/2013-11-05/news/bs-md-silk-road-plea-20131105_1_drug-dealer-ross-william-ulbricht-jacob-theodore-george-iv.

  CHAPTER 12

  130“He has not broken any rules and silk road”: Sealed complaint against Charlie Shrem filed by IRS Special Agent Gary Alford, January 24, 2014.

  132Federal Reserve had held a daylong conference: Information about the conference is available at http://www.kc.frb.org/publications/research/pscp/pscp-2012.cfm.

  133Canadian government announced the launch: Emily Jackson, “Royal Canadian Mint to Create Digital Currency,” Toronto Star, April 11, 2012, http://www.thestar.com/business/2012/04/11/royal_canadian_ mint_to_create_digital_currency.html.

  CHAPTER 13

  137“it funds a decent percentage of the overall”: Sealed complaint against Charlie Shrem filed by IRS Special Agent Gary Alford, January 24, 2014.

  141group agreed that the bylaws for the foundation would be posted on GitHub: The bylaws are available at https://github.com/pmlaw/The-Bitcoin-Foundation-Legal-Repo/tree/master/Bylaws.

  CHAPTER 15

  154the company made $750 million for its investors: Eric Markowitz, “The $750 Million ‘Mistake,’” Inc., December 14, 2011, http://www .inc.com/articles/201112/argentine-entrepreneur-750-million-mistake .html.

  158the Argentinian government ordered his company, PayPal: “Paypal Suspends Domestic Transactions in Argentina,” BBC News, September 17, 2012, http://www.bbc.com/news/technology-19605499.

  15935 percent lower than the rate available on the street: Historical data on the two different exchange rates available at http://dolarblue.net/historico/.

  160the first-ever Bitcoin Meetup in Argentina: Information on the meetups is available at http://www.meetup.com/bitcoin-Argentina/.

  CHAPTER 16

  167Some $1.2 million worth of Bitcoin: Nicolas Christin, “Traveling the Silk Road: A Measurement Analysis of a Large Anonymous Online Marketplace,” Working Paper, November 28, 2012.

  167seventy thousand different topics on Silk Road’s forum: Eileen Ormsby, Silk Road (Sydney: Pan Macmillan Australia, 2014).

  168His work on Silk Road was done at an Internet café around the corner: Sealed complaint against Ross Ulbricht filed by FBI Special Agent Christopher Tarbell, September 27, 2013.

  168Over the summer, a Silk Road user had managed to follow a series of transactions: Ormsby.

  169paying the attacker $25,000: RUTE GX 250.

  169Ross explained that he was changing his writing style: Ormsby.

  169In November, Ross flew to Dominica: RUTE GX 291.

  169“put yourself in the shoes of a prosecutor”: RUTE GX 225B.

  170Ross decided to help nob sell his kilogram: Superseding indictment against Ross Ulbricht filed by the Grand Jury for the District of Maryland, October 1, 2013.

  171Ross had always been somewhat skeptical: RUTE GX240B.

  171“beat up, then forced to send the Bitcoins he stole back”: Superseding indictment against Ross Ulbricht filed by the Grand Jury for the District of Maryland, October 1, 2013. Ross has not yet been tried on the charges in the Maryland indictment and has not been found guilty on any counts related to murder.

  CHAPTER 18

  186“PayPal will give citizens worldwide more”: Eric Jackson, PayPal Wars (Washington, DC: WND Books, 2004).

  187Thiel advocating for floating structures: “Peter Thiel Offers $100,000 in Matching Donations to TSI, Makes Grant of $250,000,” Sea-steading Institute, February 10, 2010, http://www.seasteading. org/2010/02/peter-thiel-offers-100000-matching-donations-tsi-makes-grant-250000/.

  187aiming for the colonization of Mars: Adam Mann, “Elon Musk Wants to Build 80,000-Person Mars Colony,” Wired, November 26, 2012, http://www.wired.com/2012/11/elon-musk-mars-colony/.

  CHAPTER 19

  190In June 2012 the founders announced: BFL (Butterfly Labs) to BTCF, June 16, 2012.

  190a young Chinese immigrant in New York, Yifu Guo, announced: ngzhang to BTCF, September 17, 2012.

  191that power doubled again in just one month after Yifu’s machines: Historical data on the hashing power available at https://blockchain.info/charts/hash-rate.

  195“This is a dark day for Bitcoin”: “Breaking: The Blockchain Has Forked,” Bitcoin Trader, March 11, 2013, http://www.thebitcointrader .com/2013/03/breaking-blockchain-has-forked.html.

  196“clarify the applicability of the regulations implementing”: The FinCen guidance is available at http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html.

  CHAPTER 20

  199Martti Malmi posted an entry on his company’s website: Martti Malmi, “SC5’er Intro: The Bitcoin Guy,” SC5 website, February 5, 2013, http://sc5.io/posts/sc5er-intro-the-bitcoin-guy.

  205“As a VC, my interest in the Bitcoin ecosystem is not ideological”: Jeremy Liew, “Why VCs Love the Bitcoin Market,” TechCrunch, April 5, 2013, http://techcrunch.com/2013/04/05/why-do-vcs-care-about-bitcoin/.

  206The BitInstant engineers congregated with their laptops: The scene in the office was captured in unreleased footage from Nicholas Mross’s documentary The Rise and Rise of Bitcoin (2014), shared with the author.

  207Mark Karpeles assured his users that the problems were due to the volume of trade: Vitalik Buterin, “The Bitcoin Crash: An Examination,” Bitcoin Magazine, April 13, 2013, https://bitcoinmagazine.com/4113/the-bitcoin-crash-an-examination/.

  CHAPTER 21

  211“For the time being, Bitcoin is in many ways”: Felix Salmon, “The Bitcoin Bubble and the Future of Currency,” News Genius, http://genius.com/Felix-salmon-the-bitcoin-bubble-and-the-future-of-currency-annotated.

  211finally went public in the New York Times: Nathaniel Popper and Peter Lattman, “Never Mind Facebook; Winklevoss Twins Rule in Digital Money,” New York Times, April 11, 2013, http://dealbook .nytimes.com/2013/04/11/as-big-investors-emerge-bitcoin-gets-ready-for-its-close-up/?_r=0.

  211a national television station in China broadcast a half-hour segment: The May 3, 2013, segment is available at http://jingji.cntv.cn/2013/05/03/VIDE1367596319388137.shtml.

  211$2 million into BitPay: The announcement is available at http://www .marketwatch.com/story/bitpay-raises-2-million-led-by-founders-fund-2013-05-16.

  212$5 million into Coinbase: The announcement is available at https://www.usv.com/post/coinbase.

  213Mark was sued in a Seattle court by CoinLab: Complaint filed by Coin-Lab against Mt. Gox on May 2, 2013, in United States District Court for the Western District of Washington.

  213money in Mt. Gox’s two American bank accounts—some
$5 million—was seized: Romain Dillet, “Feds Seize Another $2.1 Million from Mt. Gox, Adding Up to $5 Million,” TechCrunch, August 23, 2013, http://techcrunch.com/2013/08/23/feds-seize-another-2-1-million-from-mt-gox-adding-up-to-5-million/.

  CHAPTER 22

  218federal prosecutors arrested the operators of Liberty Reserve: Information on the arrest is available at http://www.justice.gov/usao/nys/press releases/May13/LibertyReservePR.php.

  218the top financial regulator in California sent the Bitcoin Foundation: The letter was posted by the executive director of the foundation at http://www.forbes.com/sites/jonmatonis/2013/06/23/bitcoin-foundation-receives-cease-and-desist-order-from-california/.

  224announced a few days after Charlie shut down BitInstant: Erik Voorhees to BTCF, July 17, 2013.

  225one-millionth registered account: Eileen Ormsby, Silk Road (Sydney: Pan Macmillan Australia, 2014).

  225commissions collected by the site often approached over $10,000 a day: RUTE GX 250.

  225Ross agreed to pay $100,000 up front: RUTE GX 241.

  226“Don’t want to be a pain here”: Sealed complaint against Ross Ulbricht filed by FBI Special Agent Christopher Tarbell, September 27, 2013.

  226paid for with 3,000 Bitcoins, or roughly $500,000: Letter opposing Ross Ulbricht’s release on bail, filed by Assistant United States Attorney Serrin Turner, November 20, 2013. These alleged murders and the chats between Ross and redandwhite were discussed during Ross Ulbricht’s trial, but Ross was not charged with any counts of murder for hire and Canadian police never found any evidence of any suspicious deaths during this time that might be tied to Ross.

  227He moved out of his friend’s apartment in June: Sealed complaint against Ross Ulbricht filed by FBI Special Agent Christopher Tarbell, September 27, 2013.

  227“encrypt and backup important files”: Letter opposing Ross Ulbricht’s release on bail, filed by Assistant United States Attorney Serrin Turner, November 20, 2013.

  228“Without going into details, the stress of being”: Dread Pirate Roberts to Silk Road forum, September 20, 2013.

  228Ross assigned Variety Jones: RUTE GX 241.

  228When agents knocked on the door: Sealed complaint against Ross Ulbricht filed by FBI Special Agent Christopher Tarbell, September 27, 2013.

  229Ross changed apartments: Thomas Kiernan, RUTT, January 22, 2013.

  CHAPTER 23

  238opened 350,000 free Blockchain.info wallets: Data on wallets available at https://blockchain.info/charts/my-wallet-n-users.

  240At a Bitcoin Meetup in July 2013, two hundred: Information on the meetups is available at http://www.meetup.com/bitcoin-Argentina/.

  241“You don’t have to be battling”: Jose Crettaz, “Bitcoin: Fiebre argentina por la máquina de dinero digital,” La Nación, June 30, 2013, http://www.lanacion.com.ar/1596773-bitcoin-pasion-argentina-por-la-nueva-maquina-de-hacer-billetes-digitales.

  241the peso was down some 25 percent: Historical data on the two different exchange rates available at http://dolarblue.net/historico/.

  CHAPTER 24

  245wobbling out of control in late September: All details in this paragraph are from RUTE GS 241.

  245“I have poison oak rash”: RUTE GX 325.

  246The next day he spent the morning working: Jered Der-Yeghiayan, RUTT, January 14, 2015.

  246He headed to the far side of the library: RUTE GX 128H.

  246“sure, someone could stand behind you”: RUTE GX 225B.

  247“dread: im ok, you?”: RUTE GX 129C.

  247There were 25,689 orders in transit: Numbers are taken from a screen shot of Ross’s computer on the day of his arrest; it was submitted by the government as evidence before Ross’s trial.

  247This was the signal that cirrus had: Jered Der-Yeghiayan, RUTT, January 14, 2015.

  248“I’m so sick of you,” the woman shouted: David Kushner, “Dead End on Silk Road: Internet Crime Kingpin Ross Ulbricht’s Big Fall,” Rolling Stone, February 4, 2014, http://www.rollingstone.com/culture/news/dead-end-on-silk-road-internet-crime-kingpin-ross-ulbrichts-big-fall-20140204.

  248As Ross turned around to see what was: Thomas Kiernan, RUTT, January 22, 2013.

  248did so by searching on Google through old: Gary Alford, RUTT, January 26, 2013.

  249Users of Silk Road visiting the hidden site that morning: “FBI Arrests Silk Road Drug Site Suspect,” BBC News, October 2, 2013, http://www.bbc.com/news/technology-24373759.

  251In court, Ross was in shackles: “Attorney Denies Charges That San Francisco Man Operated Encrypted Drug Website,” Associated Press, October 4, 2013.

  CHAPTER 25

  257China’s previous experience with a successful virtual currency: Mark Lee, “China Bans Online Virtual Money Dealing for Minors,” Bloomberg, June 22, 2010, http://www.bloomberg.com/news/articles/2010-06-22/tencent-shares-fall-after-china-announces-virtual-currency-ban-for-minors.

  259The reporter for Channel 2 tracked: The May 3, 2013, segment is available at http://jingji.cntv.cn/2013/05/03/VIDE1367596319388137.shtml.

  260Macao, seven times bigger, in revenue terms, than Las Vegas: Charles Riley, “Macau’s Gambling Industry Dwarfs Vegas,” CNNMoney, January 6, 2014, http://money.cnn.com/2014/01/06/news/macau-casino-gambling/index.html.

  261a division of Baidu, the search engine giant and the fifth-most-visited website in the world, announced: Vitalik Buterin, “Baidu Jiasule and the Chinese Bitcoin Community,” Bitcoin Magazine, October 16, 2013, https://bitcoinmagazine.com/7492/baidu-jiasule-and-the-chinese-bitcoin-community/.

  262John Donahoe, said in an interview: Andrea Felsted, “Ebay to Expand the Range of Digital Currencies It Accepts,” Financial Times, November 3, 2013.

  CHAPTER 26

  266“long-term promise, particularly if the innovations”: Ben Bernanke letter to Senate Committee on Homeland Security and Governmental Affairs, September 6, 2013.

  268A story the previous week in Xinhua: Xinhua story is available at http://news.xinhuanet.com/fortune/2013-11/15/c_118148623.htm.

  269“I do not want to shut down or stamp out Bitcoin”: Morgan Peck, “If Senators Really Like Bitcoin They Should Encourage Banks to Cooperate,” IEEE Spectrum, November 21, 2014, http://spectrum.ieee.org/tech-talk/computing/networks/us-senate-.

  269Silk Road 2.0 showed up on the dark web: Eileen Ormsby, “Remember, Remember . . . Silk Road Redux,” All Things Vice, November 7, 2013, http://allthingsvice.com/2013/11/07/remember-remember-silk-road-redux/.

  270The number of Blockchain.info wallets: Data on wallets available at https://blockchain.info/charts/my-wallet-n-users.

  271But the relatively apathetic public response: David Lauter, “Public Largely Tunes Out NSA Surveillance Debate, Poll Finds,” Los Angeles Times, January 20, 2014.

  271“We see the intrinsic value of Bitcoin”: Gil Luria, “Bitcoin: Intrinsic Value as Conduit for Disruptive Payment Network Technology,” Wed-bush Equity Research, December 1, 2013.

  272“emerge as a serious competitor”: David Woo, “Bitcoin: A First Assessment,” Bank of America Merrill Lynch FX and Rates Research, December 5, 2013.

  274The good news was that the agencies: The Chinese government statement is available at http://www.pbc.gov.cn/publish/goutongjiaoliu/524/2013/20131205153156832222251/20131 205153156832222251_.html.

  CHAPTER 27

  286Krugman focused largely on Bitcoin’s claim: Paul Krugman, “Bitcoin Is Evil,” New York Times, December 28, 2013, http://krugman.blogs .nytimes.com/2013/12/28/bitcoin-is-evil/.

  286Cowen, meanwhile, argued: Tyler Cowen, “How and Why Bitcoin Will Plummet in Price,” Marginal Revolution, December 30, 2013, http://marginalrevolution.com/marginalrevolution/2013/12/how-and-why-bitcoin-will-plummet-in-price.html.

  287“to an extent that makes a sub-Saharan African kleptocracy”: Charles Stross, “Why I Want Bitcoin to Die in a Fire,” Charlie’s Diary, December 18, 2013, http://www.antipope.org/charlie/blog-static/2013/12/why-i-want-bitcoin-to-die-in-a.html.

  289“It represent
s a remarkable conceptual”: Francois Velde, “Bitcoin: A Primer,” Chicago Fed Letter, December 2013.

  289Overstock announced that it would begin: The announcement is available at http://blog.coinbase.com/post/72787431702/coinbase-and-overstock-com-announce-largest.

  290Overstock processed more than $100,000 in orders: Sales data available at http://www.prweb.com/releases/bitcoin2014Keynote/PatrickByrne/prweb 11699797.htm.

  CHAPTER 28

  291Thiel called him the “firefighter-in-chief”: Evelyn M. Rusli, “A King of Connections Is Tech’s Go-To Guy,” New York Times, November 5, 2011, http://www.nytimes.com/2011/11/06/business/reid-hoffman-of-linkedin-has-become-the-go-to-guy-of-tech.html?pagewanted=all.

  291Hoffman later introduced Thiel to Mark Zuckerberg: David Kirkpatrick, The Facebook Effect (New York: Simon & Schuster, 2010).

  294“The gulf between what the press and many”: Marc Andreessen, “Why Bitcoin Matters,” DealBook, New York Times, January 21, 2014, http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/.

  295He believed that it could help open the door: A transcript of Balaji’s talk at Startup School 2013 is available at https://nydwracu.word press.com/2013/10/28/transcript-balaji-srinivasan-on-silicon-valleys-ultimate-exit/.

  299The prosecutors had e-mails in which: Sealed complaint against Charlie Shrem filed by IRS Special Agent Gary Alford, January 24, 2014.

  300“If you want to develop a virtual currency”: The press release announcing Charlie’s arrest is available at http://www.justice.gov/usao/nys/pressreleases/January14/SchremFaiellaChargesPR.php.

  303told CNBC in late January: Jamie Dimon, interviewed on CNBC, January 23, 2014.