Bitcoin Billionaires

by Ben Mezrich

  “First they ignore you,” Cameron bellowed from the center of the stage, his pulse rocketing beneath the glare of the spotlights hanging from the ceiling and the attention of all those eyes.

  “Then they laugh at you.”

  “Then they fight you,” his brother added, next to him on the stage, his voice reverberating through the massive speakers set throughout the room.

  “Then you win,” Cameron exclaimed.

  As a ripple of applause moved across the audience of close to a thousand people, Cameron’s nerves finally settled down. This was not a hostile crowd. These people were part of the same movement, and though many of them may not have known what to think about the choice of the twins as headliners, it was obvious from the minute Cameron walked onstage, they were willing to give the Winklevii a chance.

  Beginning their speech with a quote from Gandhi might be ambitious, but his famous words had a perennial appeal to this Silicon Valley crowd. They could have been the mantra of almost any company in Silicon Valley; but in their speech, Cameron and Tyler were actually going back farther than the Twitters and Facebooks to make their point.

  “Cars,” Cameron continued. “Once viewed as unreliable, especially when compared to horses. Faddish, not fit for wide adoption, limited in their range and utility.”

  To further make the point, Cameron and his brother presented a couple of quotes, including one from the president of the Michigan Savings Bank, circa 1903: “The horse is here to stay, but the automobile is only a novelty—a fad.” The idea that the automobile could have been laughed at when it was first invented seemed ridiculous, but as Cameron pointed out, most major innovations that ended up truly changing the world had been met with a similar initial response.

  Amazon had been thought by many to likely fail. These doubters believed consumers would be unwilling to use their credit cards online, or shop without a “crucial personal element.” The internet itself, Cameron explained, and its potential impact on the world had been doubted early on. In 1998, Paul Krugman, the famed Nobel Prize–winning economist and New York Times columnist, infamously said that “by 2005 or so, it will become clear that the internet’s impact on the economy has been no greater than the fax machine’s.”

  Now that Bitcoin was making headlines and part of the global lexicon, it was no longer being ignored; instead, the laughing part was in full gear and the fighting had begun. Bitcoin was either lampooned as a joke, or lambasted as “dangerous.” Skeptics compared it to proverbial bubbles, whether Dutch tulips in the 1600s, the dot-coms of the late 1990s, or the housing market in 2008. But Cameron and his brother didn’t believe any of these analogies applied. Bitcoin wasn’t some perishable flower masquerading as a store of value, or a company whose stock price was out of whack with its economic output, or a highly leveraged second home. Bitcoin was a network, and if there was one thing they understood, it was the power of networks. The more people that bought in, the more valuable it became—Metcalfe’s law, plain and simple. And networks didn’t grow at a slow and steady pace; they experienced viral growth.

  “It’s not a bubble, it’s a rush.”

  When the real fight came, and came fiercely, as it would, how would Bitcoin win?

  Cameron was convinced that the people who were most likely to fight Bitcoin were those who had the most to lose by its adoption. Which meant all the middlemen, rent seekers, and toll collectors of the legacy financial world—the banks, money transmitters, money remitters, credit card companies, and governments.

  Cameron and Tyler also knew that government regulation would come; and unlike many in the room, they believed that it was important to embrace and help shape that eventuality. Because over the past year, through their experience of buying bitcoin, pitching Bitcoin, and investing in one of the rising stars of Bitcoin, they had come to the following realization: the biggest danger the Bitcoin community faced was itself.

  Mt. Gox, failing again and again, caused tremendous instability in the market. Silk Road stained everything it touched. The radical philosophers, who were important in Bitcoin’s beginnings, were now so at odds with the campaign to bring Bitcoin mainstream. All of it was the Bitcoin community getting in its own way. Not because of some external threat or fight, which would arrive soon enough.

  Regulation would come. And should come. Before that, Cameron warned the audience, the community needed to be “buttoned up and have all our ducks in a row.”

  “Perhaps right now, the biggest irony of Bitcoin is that Bitcoin, the math-based currency, is being held back by man. We can all change this.”

  Bitcoin needed to learn how to stop fighting itself.

  For the speech, Cameron and his brother had left their suits at home. Cameron was in all-black, down to his sneakers, his brother in a patterned shirt, his sleeves unbuttoned and rolled up; nobody knew better than they that there was a time and a place to look like Valley entrepreneurs, creative, relaxed, like you were making up the rules as you went along. And there was a time and a place to look like you understood that some rules mattered, that there needed to be structure.

  There was a time and a place for the suits, and this was something the Bitcoin world would need to learn to understand, because it might help decide whether Bitcoin went the way of the automobile, or the tulip.

  * * *

  It was a hell of a high, coming off that stage to raucous applause, pushing through a crack in the billowing purple curtains and following Tyler down a narrow catwalk that led to the speakers’ lounge. Cameron shook so many hands along the way, mostly people he didn’t know—conference organizers, handlers, even the sound and lighting guys—that he barely had time to catch his breath before he reached the open doorway a step behind his brother, and found himself in the green room, where a buffet was set up along the back wall: water bottles, pastries, and Bitcoin-related promotional paraphernalia like hats, T-shirts, and pens. In this room he saw the CEOs of every significant Bitcoin-related company in the world, the heads of Mycelium, ZipZap, OpenCoin, Coinbase, Ripple Labs, CoinLab, Coinsetter—just about any company that had “coin” on its business cards.

  It wasn’t until he’d reached the buffet and retrieved one of the water bottles, imprinted with the Bitcoin symbol on the label, that he caught sight of his own investment in the flesh, in the far corner, standing under a blank TV screen, which undoubtedly had just televised their speech. Charlie Shrem was in animated conversation, his hands flying up and down, his body rocking on the balls of his feet.

  Across from him was Roger Ver.

  Cameron gave his brother a tap, then nodded toward the pair.

  “Here we go again,” Cameron said.

  “Give you three guesses what they’re talking about,” Tyler replied.

  “Explosives,” Cameron said. “Drugs. Armed rebellion.”

  The truth was, since the contentious reckoning they’d had in New York, as far as they could tell, Charlie had been on his best behavior. Though he was still traveling too much, living above a nightclub, and not spending enough time in the BitInstant offices to suit their wishes, the loss of Erik and Ira seemed to have pushed him to get his act together. He’d been saying all the right things about where his company was going and how it was going to get there. He had at least managed to keep the lights on at BitInstant.

  But obviously, he hadn’t taken their advice about Ver, who seemed to have cast a spell over their young CEO, a spell that didn’t look like it was going to lift anytime soon. Even from a distance, Cameron could see why.

  You had to hand it to him, Ver was charismatic. Although the twins had still managed to avoid spending any face-to-face time with their “investment partner,” there was no doubt, in their mind, that he was the kind of guy who was either going to be an eccentric billionaire, or a crazy transient, with no in-between. To those who latched on to his words with religious fervor, he was Bitcoin Jesus, the Messiah. Less because he’d gotten in so early, or made so many investments in the space, but because he had a ma
gnetism about him that pulled at those wanting to believe, those craving a different world, a different system.

  But Ver’s crypto cult revolved around some truly extreme beliefs. Ver hadn’t spoken at the conference yet, but he’d just given an interview to Coindesk, a Bitcoin-related blog that had recently sprung up to cover the burgeoning industry. Ver’s answers had sounded off alarm bells in Cameron’s head. When Ver had been asked if his prosecution, the one that had landed him in jail as a young man, had influenced his decision to get into Bitcoin, he’d responded:

  “My political views before my run-in with the law were more abstract and philosophical … [they] became much more real. The thing that has me most excited about Bitcoin is all the ways it will strip government control away.”

  Ver had gone on to describe Bitcoin as “this incredibly powerful tool that’s not going to [just] free Americans, it’s going to free every country on the planet … I’ve been shouting from the rooftops.”

  The idea that Americans needed to be liberated seemed bizarre to the Winklevoss brothers, and the idea of Bitcoin stripping away the U.S. government’s power seemed potentially dangerous. Cameron definitely agreed that one of the wonderful things about Bitcoin was that it brought economic liberty to places where people lived under tyranny, but ascribing this need for freedom to citizens of an open society like the United States—that seemed to him to be pushing things in a frightening direction.

  But Ver hadn’t stopped there.

  “I’m in favor of regulation,” he’d told the Coindesk reporter. “I’m not in favor of regulation at the point of a gun. That’s a really important difference. When the regulators from Washington, D.C., make a law they’re not asking you to do that. They’re telling you to do that. The difference between asking someone and telling someone to do something is fundamental. It’s the same as the difference between making love and being raped.”

  Making love and being raped. It wasn’t just an inflammatory comment, it was also tantamount to anarchism. Ver’s logic could easily apply to taxation, or really any law at all. And Cameron believed that was exactly what Ver meant. Ver seemed to believe that laws backed up by the power of government were analogous to rape. Ver was saying that Bitcoin was a way around laws, any laws.

  Whereas Cameron and his brother had just given a speech suggesting that the way for Bitcoin to win the fight was to preempt it and stop the battle before it began by working with regulators and lawmakers where needed, Ver had thrown down the battle-ax and declared war.

  And now there he was, across the green room, planting seeds as usual in Charlie’s head and watering them; and like a sponge, Charlie was soaking it all up.

  “Should we join them?” Cameron asked. “We’re the ones paying for the armed rebellion, after all.”

  Tyler pointed in the other direction, toward a group of assorted other Bitcoin power players.

  “Not tonight. Let’s enjoy the moment.”

  Cameron threw one last glance toward Charlie, who had both hands up in the air, in the midst of telling some over-the-top story, and Ver, who was grinning like the Cheshire cat.

  “We started the evening with Gandhi. Let’s not end it with Che Guevara.”

  * * *

  By the time Cameron had navigated through the mazelike convention center and finally arrived at the BitInstant booth—really, just an oversize poster painted with the BitInstant name and logo hanging above a desk inside a makeshift cubicle created by intersecting black curtains strung along with what appeared to be chrome towel-rods—Charlie was already at full Charlie. He was beaming and glowing like a cherub set on fire, and Cameron could immediately see why.

  A microphone.

  A camera.

  A pretty reporter in a low-cut top.

  Charlie was seated in a director’s chair, feet dangling in the air, soles searching for the ground. He was a few yards from the rest of the BitInstant team and was sporting a black BitInstant T-shirt, black blazer, and dark jeans. And he was halfway into an interview with the anchor of a show called Prime Interest on the international television station RT. Originally known as Russia Today, RT was a network funded by the Russian government. At that point, all Cameron knew about it was that it had some surprisingly good programming content, at least in the financial sector. Cameron could tell, even from five feet away, that the reporter was loving Charlie—and Charlie was loving Charlie. He was charming and talkative, a great interview—a little man with a big mug and even bigger maw, built for the camera. But Cameron could also tell that Charlie’s reality was becoming slightly unhinged, disorganized. The kid was playing to the camera, and as lovable as that made him, it was disconcerting.

  To be fair, the Convention Center, halfway into Saturday—the speaking sessions in full swing and the humongous trade show crowded with people—was Charlie’s playground. In this arena, he was a celebrity. On the walk over, Cameron had actually passed vendors hawking T-shirts with Charlie’s face on them. BitInstant was one of the most talked about companies in the place, and most of the people at this conference could recognize Charlie by sight.

  Charlie was being interviewed on RT to announce the Winklevoss twins’ investment in BitInstant, news that had been kept controlled until it had finally leaked out leading up to the conference. And as Cameron listened, Charlie launched into the news in truly bizarre fashion, telling the reporter that he himself had been the one who met the twins in Ibiza—“I gave them my lounge chair!”—and how Azar had coaxed them: “You gotta meet this Charlie guy, boy genius blah blah blah, and it was love at first sight.”

  Cameron had to laugh. It was a sheer combination of “what the fuck” and “you have to hand it to him.” It wasn’t just the fact that Charlie was not letting the facts get in the way of a good story; it was that Charlie actually believed what he was saying.

  Charlie told the reporter how he was in his basement when the twins came over and encouraged him to build BitInstant, saying: “Charlie, you’ve got to make this thing”—and now here he was, at the top of his game, and BitInstant was about to move into a brand-new, swanky SoHo office.

  SoHo office? Cameron shook his head. The BitInstant offices were still in the Flatiron District, and they were anything but swanky.

  Was Charlie losing his mind?

  Eventually Charlie shifted from his creation myth to the present-day business: “We have money-transmitting licenses in over thirty states. And federal licenses.”

  But then, as the reporter pressed, Charlie suddenly seemed to lose himself again. And right in front of Cameron’s eyes, in one sentence, his young CEO displayed the conflicting allegiances inside of him.

  “We want this Bitcoin thing to overturn everything—but at the same time we have to be compliant.”

  That simple sentence seemed to encapsulate everything Cameron and his brother were concerned about. The pull of Ver on Charlie in one direction, versus the way Cameron and Tyler wanted him to take the company. Cameron wished that Tyler had joined him in the stroll over to BitInstant, but at the moment, his brother was meeting with fellow VCs at one of the booths across the hall.

  Charlie always tried to say the right things: “You have to know every single customer no matter what … if they are spending a dollar or a thousand dollars,” but then went off script again. Cameron could clearly see where Charlie was really struggling with what he believed:

  “With money laundering, they treat you like a criminal right away, and that’s not fair.… You should be able to say to a customer if you trust us, we’ll trust you … we are trying to overturn it from treating you like a criminal to I’ll scratch your back you scratch mine.…”

  What the hell did that even mean? But then Charlie seemed to find his footing, going back to something he’d said during his own speaking session, a freewheeling, fun, off-the-cuff talk that had the audience applauding and laughing. “Bitcoin is cash with wings … take something local and do it globally.”

  “And that’s going to overturn
the financial infrastructure,” Charlie added.

  Another minute of talking and the interview was over. The reporter thanked Charlie and began packing up her gear, giving Cameron the opportunity to pull Charlie aside.

  “That was … interesting,” Cameron started. Charlie hopped out of his chair and suddenly gave Cameron an awkward baby bear cub hug.

  “This is so amazing, your speech was awesome, isn’t this place nuts?”

  The words were dribbling out of him like water from a broken faucet. In that moment, Cameron didn’t have the heart to say what he was thinking. It wasn’t just that Charlie was young or that he had too much energy or too many distractions, or as Tyler now firmly believed, he just wasn’t made to be a CEO. Charlie was clearly struggling, internally, trying to figure out who he was in this new world. He was being pulled almost visibly in multiple directions. Cameron, being more empathetic than his brother, felt for the kid; he’d played devil’s advocate to his brother multiple times, arguing on Charlie’s behalf. But in the end, he knew Tyler was right.

  To Cameron, it was clear: if Charlie Shrem, “boy genius, blah, blah, blah” didn’t figure himself out soon, he was headed for a fall.

  Let yourself get pulled in two directions long enough, and sooner or later, you’ll be ripped in half.

  * * *

  By 1:00 A.M., Cameron was having too much fun to spend any more time worrying about Charlie. And to be fair, as the day progressed—as the conference shifted from the trade floor and the speaking sessions to the outdoor casino someone had set up on one of the convention center’s many patios, to the cocktail parties at the nearby Hilton and Marriott, to the local restaurants, where the Bitcoin revelers mingled with a raucous crowd in San Jose Sharks hockey jerseys, out celebrating the fact that their team had just won a big playoff game—it was easy to forget about all of their philosophical differences. For that moment, however brief it may have been, they were all united and celebrating the thing they all loved.