( Whirring )
Don't be filming my passwords.
I used to have a shirt in high school
that said "technology must be used to liberate the individual."
And I didn't really know what it meant for years,
'cause I didn't really think about it.
But today I look back and I'm like, "oh man, hell yeah, I like that shirt."
I'm glad I wore that shirt, 'cause it's how I really feel today.
My name is Daniel mross.
Today is may 3rd, 2012.
I go through college and watch the Internet come
and all these different things. And now, like, bitcoin,
it's just a single technology built on top of the Internet,
but it's so fascinating because there's so many
freaking things you can do with it.
It's also just a big experiment.
There's no guarantees with it.
We might just all be wasting our time...
Exploring concepts and ideas.
It's at this crossroads of technology
and philosophy and politics and everything.
Just be a part of it. It's fun.
It's crazy though, but it's fun.
Nick mross: Um, first question is
what is bitcoin?
- ( Chuckles ) - ( Dramatic music playing )
Daniel: I can't tell you what bitcoin is
in just a few sentences.
It takes time to understand it,
the same way it took people time to understand
what the Internet was
back in 1994.
That little mark with the "a" and then the ring around it.
- "At"? - See, that's what I said.
- Mm-hmm. - Katie said she thought it was "about."
- Katie: Yeah. - Elizabeth vargas: Oh, Internet is...
- That massive computer network... - Katie: Right.
...the one that's becoming really big now.
Allison, can you explain what Internet is?
Daniel: When the Internet was taking off,
I was in college at Virginia tech
studying computer science.
Looking back, it's amazing to think about
how much the world was changing.
Hey, Dan, ready for the game?
I'm just finishing up here with my new kayaking friends.
Kayaking friends on your computer?
Yeah, I just got America online.
Daniel: That same type of innovation is happening again
with bitcoin.
It's the smartest people in the room
that are the most excited about this. So what are they seeing?
Daniel: The Internet changed the way the world communicates
bitcoin changes the way money works.
You can basically put a bank in your pocket.
Psst!
Wanna buy some secret stuff?
There is now a new note
that people are starting to talk about--
the bitcoin.
The money of the future.
Daniel: Bitcoin was created to provide
an alternative to the banking system.
George w. Bush: We're in the midst
of a serious financial crisis
and the federal government is responding
with decisive action.
Daniel: Unlike most currencies,
bitcoins are issued according to a set of fixed rules.
The idea was to create money whose value
couldn't be manipulated by a central authority.
The government, no matter how many guns they draw,
cannot change a mathematical problem.
They can point their guns at "two plus two,"
but it's always gonna equal four.
Daniel: It's fascinating to imagine
what it means to have global decentralized money.
And that's what's happening.
( Instrumental music playing )
( Babbles )
My five-year-old's birthday.
First round of burgers is ready.
Second round is going on in a second.
First round of burgers is ready!
( People chattering )
First round.
Eliza mross: Dan has always been an idea guy.
Bitcoin is the perfect combination
of how can I change the world and make it better,
but how can I also be a nerd?
So mostly I've just been supporting him
in this craziness.
Daniel: Eliza and I met in college,
and we've been married for seven years.
We live in Pittsburgh, where I'm from,
and we have three boys,
I've spent most of my career
as a database administrator.
But for the past two years, I've been consumed with bitcoin.
Bitcoins come into existence through a process called mining.
I build computers to mine for bitcoins.
I'm glad that it's finally getting a little bit cooler out.
My wife won't be as angry that the basement is so hot.
I've still got a bunch of mining rigs running right now.
Actually they're right down here, if you wanna go take a look.
Here they are.
So what is bitcoin?
Bitcoin is a revolutionary technology
that enables a new way to send payments over the Internet.
- ( Beeps ) - You can think of it as an open accounting system
where thousands of computers all over the world
work together to track ownership of digital tokens called bitcoins.
When you send someone bitcoins,
the transaction is broadcast to the entire network.
After it's verified,
it's recorded in a public ledger
called the blockchain.
The blockchain contains a record
of every bitcoin transaction that has occurred
since the system began,
and it's shared and maintained on the network,
so everyone keeps the books, so to speak.
Most currencies are issued by a central authority
that controls the money supply.
Bitcoin is a peer-to-peer system,
so there is no central authority.
Instead bitcoins are issued to users
who help process transactions in the network.
This is known as bitcoin mining.
Bitcoin miners are specialized computers
that do the work required to verify
and record transactions in the blockchain.
As a reward for their work,
the miners earn bitcoins,
and this is how new bitcoins are released into circulation.
The system is programmed
so that only 21 million bitcoins will ever exist.
And as time goes by,
the mining reward decreases.
The result is a predictable supply
that's governed by scarcity,
making bitcoins somewhat like a digital gold.
It's the first currency of the Internet.
And everyone is free to use it.
With bitcoin, you can send any amount of money
to anyone anywhere in the world
as easily as sending an email.
My brother Nick is a filmmaker.
After hearing me talk about bitcoin incessantly for months,
we decided to start documenting things.
Nick: Hey, I don't think we'll need the small camera.
- It can't hurt. - Nick: No, I'd rather just leave it behind.
I have so much equipment. Do you mind?
Damn, you really cramped it up, huh?
Not that bad. What do you mean?
- Jeez. - Dude, they're right there.
Right in the back. Right there.
Daniel: I was convinced that bitcoin was going to be huge,
and I knew there were a lot of others like me out there.
Zipped my keys in my pocket, so I don't forget 'em later.
Bitcoin was created by what's believed to be a pseudonym,
a guy named satoshi nakamoto.
Invented in '09 by a fictitious person
named satoshi nakamoto...
Daniel: On Halloween 2008,
someone using the name satoshi nakamoto.
Posted on a cryptography mailing list...
The post contained a link to a white paper
in which satoshi proposed a new type of payment system for the Internet.
It described a protocol that used peer-to-peer networking,
proof of work and public key cryptography.
For years, computer scientists had been experimenting
with these technologies to create digital money.
But satoshi discovered a way to combine them
that had never been done before.
In doing so, he invented bitcoin.
There are no records of nakamoto's existence
prior to the creation of bitcoin.
On his profile page,
he claimed to be a 34-year-old man
living in Japan.
Although satoshi nakamoto is a Japanese name,
he wrote in perfect English when communicating online
and went through great lengths to keep his identity unknown.
Nonetheless, programmers and cryptographers
all across the world recognized the brilliance of satoshi's design.
And began collaborating with him to further develop bitcoin.
In October of 2009,
the first exchange rate was published.
Listing the value of 1,309 bitcoins at $1.
Bitcoins were cheap, and through the following year,
they continued to trade for fractions of a cent.
In the spring of 2010,
a Florida man named laszlo
decided to try using his bitcoins to purchase something.
He offered 10,000 bitcoins
to anyone who would buy him pizza.
A man in London accepted
and placed a long-distance phone call,
ordering him two pizzas from papa John's.
This is generally acknowledged
as the first bitcoin transaction for a tangible good.
Bitcoin was gaining momentum,
but in order for it to thrive
the coins needed to be more widely accessible.
A Tokyo-based exchange named mt. Gox was
the first on the scene to take hold of the marketplace
and trading volume started to pick up.
By November 2010,
already 4 million bitcoins had been mined.
And the exchange price briefly spiked to 50¢ per coin.
The market awoke and bitcoin was starting to look like
it might have real potential as a currency.
His name is Julian Assange.
Assange and his colleagues
collect confidential information and then make it public.
The release of 250,000 state department documents
no doubt presents a serious dilemma for this country.
Daniel: Following a massive release
of secret U.S. diplomatic cables,
donations to wikileaks were blocked
by bank of America, visa, mastercard,
PayPal and Western union.
An article in "pc world" suggested that bitcoin
could be used as a workaround
to send donations to wikileaks.
One of satoshi's last known posts
was in response to the article and stated...
Shortly after that
satoshi disappeared from the forums
and was never heard from again.
Two months later the silk road anonymous marketplace was launched.
It functioned as an online black market
for drugs and other illicit goods
and used bitcoin exclusively,
because it made the money trail
nearly impossible to trace.
The silk road caught the attention
of New York senator Charles schumer
who was outraged and publicly called
for a crackdown on the site.
Heroin, opium, cannabis, ecstasy,
- psychedelics, stimulants. - ( Camera clicks )
It's unbelievable.
Daniel: Throughout all this,
the exchange price continued to climb.
By February of 2011,
bitcoin reached parity with the U.S. dollar.
Sparking an influx of new users and speculators.
By June the price had soared to a peak of $31
before it came crashing down.
As the market tanked, the mt. Gox exchange was hacked,
further shaking the confidence of investors
and hammering the price all the way down
to the $2 range by October.
While bitcoin enthusiasts kept hope,
skeptics were quick to share their hindsights
and rants on blogs and in news articles.
Many thought that the party was over
and that bitcoin was on its way out.
I went online and I bought one bitcoin last night.
Really? It's the future.
I don't know.
It didn't feel real.
No. Real's gonna change.
Just watch.
Today I sent a total of...
2700 bitcoins
to butterfly labs.
I purchased, basically, a custom-designed
bitcoin-mining supercomputer.
If bitcoin fails...
Everything I have is worthless.
( Stammers ) The bitcoins I have,
the computers, the mining system
was all a waste of money.
But if it succeeds, then...
It will have been worth it, I think.
- ( Beeps ) - The bitcoin economy was a wild west in cyberspace
that was very attractive to hackers and scammers.
Over the years, tens of thousands of coins had been stolen
and 2012 proved no different.
Users had to be careful.
If somebody steals your bitcoins, there are no consumer protections.
Sorry, they're gone. You lost your bitcoins? They're gone
and you're not going to get them back.
But after months of stagnation on the exchanges,
the bitcoin price was on the rise again.
The price of bitcoin today is around $7 u.S.D.,
which just had a nice little bump this week.
By the end of the year, the blogging site wordpress
announced it would start accepting bitcoin payments.
And in early 2013, the discussion forum reddit
also announced bitcoin support.
They were the first major sites to incorporate bitcoin,
and these milestones signaled the beginning
of mainstream acceptance.
Bitcoin is the most subversive technology on the planet.
This is a system that is growing around the entire world.
So if it works, if this experiment continues to grow,
it doesn't just help a few of us in this state or in the country,
but it actually helps everyone around the world.
( People chattering )
Daniel: As the bitcoin price hovered around
it's previous all-time high of $31,
I visited a libertarian conference in New Hampshire.
It lost 20% and then it gained 20%
in 20 minutes.
It is-- they're silly.
Daniel: Libertarians are among
the earliest adopters of bitcoin.
Its nature as a currency that isn't controlled
by central banks makes it attractive to this community.
Once I was able to kind of grok the basic concept,
it was like, "this is the perfect money. "
Daniel: This is what a bitcoin address looks like.
Think of this long string of characters
as an account number where your bitcoins are stored.
When you send or receive bitcoins,
they are sent to these addresses.
The addresses are long and hard to remember
so using a phone to scan a q.R. Code
is a fast and easy way to read them.
Another good thing to know
is that bitcoins can be broken down
to eight decimal places.
This means that you can send fractions of a bitcoin.
So any amount of money can be represented.
With bitcoin, every transaction is public.
Everyone can see the amount that is being sent
without necessarily knowing the identity of the sender.
These guys even have one of the first bitcoin a.T.M.S.
You just scan your q.R. Code on your phone,
put in the dollar bills and press the button.
Bam. Done. Perfect.
You now traded your worthless piece of paper
for real currency.
It's like, "end the fed?" It's like, seriously, you think
you're gonna end the fed? You're not gonna end the fed.
You're not gonna change anything about the fed.
- Transcend the fed. - Bypass the fed.
- Right, yeah. ( Chuckles ) - That's what you should do.
My concern is how the governments will react.
They can't kill or stop bitcoin,
but they could impede it and they could get in the way of its development.
Daniel: A few weeks later across the ocean,
a financial crisis was reaching a breaking point
on the island of Cyprus.
Cyprus is on the brink of going bust.
The rest of Europe has agreed to a bailout,
but only if Cyprus raids people's bank accounts for quick hard cash.
Woman: People tried to get money out of the cash machines
but electronic transfers have been stopped.
- Never did I think that they would... - ( People chanting )
...in a completely unprecedented manner
resort to stealing money
from people's bank accounts.
Daniel: The Cypriots had placed their trust
in the banking system and it had failed them.
As news of the crisis spread around the world,
bitcoin believers were quick to point it out
as an example of why a currency
free from government control was needed.
There's actually bitcoin atms
apparently being set up in Cyprus.
Man: All of a sudden, bitcoin looks
like an attractive prospect.
Daniel: While this was happening in Cyprus,
regulators at the U.S. treasury
weighed in on bitcoin.
The financial crimes enforcement network, known as fincen,
issued its first regulatory guidance on virtual currencies.
The guidance implied that bitcoin,
in and of itself, was not illegal.
It was the perfect storm.
The situation in Cyprus suggested
that bitcoin could function as a financial safe haven.
And the approving nod of U.S. regulators
was a green light for investors.
The market agreed
and the exchange price continued to climb.
( Beeps )
It's moving from the super super-early-adopter phase
to possibly the early-adopter phase.
Daniel: Bitcoin was getting
international exposure
and people were starting to pay attention.
This is actually a live, updated map of the globe
and the lines represent bitcoin clients.
Basically where the bitcoin software is running.
And the length of the line determines
how long it's been online or how active it's been.
And every time I look at this,
I swear it gets more and more saturated.
You can almost see an outline of the U.S. now.
South America-- you're starting to get it.
But the big news, in my opinion,
is this-- China.
You used to see one, two, three, maybe.
And this is all within the last three weeks or so.
That's the most I've ever seen in China.
Look down here. Indonesia, Singapore,
Australia, New Zealand.
The following week it snowed in pittsburg.
I was eagerly awaiting the delivery of two avalon asics,
state of the art computers
with chips specifically designed for mining bitcoins.
Yifu guo is at the forefront
of the new generation of hardware,
and is the first to bring them to market.
Everybody, including myself,
had severely underestimated
the mining market and how big it is.
Daniel: When bitcoin began,
a standard laptop was powerful enough
to mine hundreds of bitcoins in a matter of days.
The technology evolved rapidly over the past couple of years.
A lot of people are getting into it
or still trying to catch up.
Daniel: I was on vacation with my family
when the new miners were scheduled to arrive.
The price of bitcoin had rocketed to $77
so I asked some friends to wait at my house
to get them running as soon as possible.
Mancini: All right! ( Laughs )
- I hope this is good. I hope it's worthwhile. - Oh, definitely.
These are new computer parts here...
- Excellent, excellent. - ...Fresh in from China.
- ( Laughs ) - All right, it's not official until you sign.
There we go.
Nick: Yeah, we'll see. Maybe down the road
you guys will start accepting bitcoin one day, I bet.
- That's cool. - Just a matter of time.
Driver: Good luck to you guys. All right.
Mancini: I notified Dan
and he has a little response here.
Welcome to the financial renaissance.
192.168.1.140.
255.255.255.0.
192.168.1.1.
That's the default gateway.
My first pull is gonna be stratum.Ozc.In, port 3333.
Port 80, but I can do 3333.
And when everything's all said and done, for at least a little while,
it should be pulling in 10 to 12 coins a day.
That's gonna change though, after another week.
It's gonna get dropped down to, like, eight,
- just because the difficulty's just going through the roof. - Yeah.
Everybody's firing these things up,
so it's always a race to stay ahead
and try to be the first guy with the hardware, you know?
Oh, I'm getting pings. Whoo!
Mancini: Yup, we're kicking.
We are accepting shares.
It is live.
We've got the Merlot!
( Both laugh )
( Mumbles )
Hey, that looks like johan.
Say, "I'm going to college 'cause my dad mines bitcoins."
Dad going bitcoins.
( Laughs )
Nick: So, big day today, huh?
Big day. Look at that. 104.
Current bitcoin price. Broke 100 today.
It is April fool's day.
The price rising so insanely high
is kind of a little bit unprecedented,
so-- I mean, it's bound to pop a little bit.
Maybe. I don't know.
Maybe it'll be at 225 in a week and a half,
so who knows? Bitcoin styles--
could go up, could go down.
Daniel: As the price passed 100,
we took a trip to visit Gavin andresen.
He is known to have worked closely with satoshi
during bitcoin's early days.
Here's the train tracks, and he did say
there would be train tracks maybe passing through.
Here we go. This is Gavin's house.
Gavin is one of the last people
to communicate with satoshi before he disappeared.
Morning. This is my brother Nick
- and his wife Ashley. - Nice to meet you.
- Ashley: Hi, nice to meet you. - Nice to meet you.
- Daniel: Found the place okay, so-- - good.
We're very excited to be here.
Come in. This is my humble house.
- ( Door closes ) - That's where I work. This is where I live.
- Beautiful home. - Well, thanks.
Nick: A little higher, please. Right there. Great.
- Got it. - ( Daniel chuckles )
How did you first get into bitcoin?
Tell us a little bit of the story of how you got involved.
I had been working at umass
as a staff programmer
in the computer science
department research group.
My wife's a Professor at umass.
I actually quit that job before going
on a six-month sabbatical in Australia.
I just happened to read a little blurb
online in somebody's blog
that mentioned this bitcoin project,
which is an open-source attempt to do money.
And it caught my interest.
I basically just spent a few days
read everything I could about it
looked at the source code, downloaded the source code,
thought about it and I really couldn't convince myself
that it would not work.
It seemed like satoshi had thought of everything.
Since then...
I've just been sucked down the rabbit hole.
Daniel: Bitcoin is open-source software.
With open-source software,
the code is publicly available.
Anyone can look at it and see how it runs.
And they can also contribute their own changes.
Programmers like Gavin were able to join satoshi to work on bitcoin
simply because they were interested.
Over time, I think satoshi learned to trust me.
He could see that I didn't make very many stupid mistakes.
I never had any personal connection with satoshi.
It was always purely business.
And I think that's because he was so worried about
people finding out his identity.
I don't know why. My last email to him
was telling him that I had
agreed to go visit the folks at the c.I.A.,
so... ( Laughs )
Whether that had something to do with him
deciding to cut off communication with me entirely--
he had been pulling away before then,
but the c.I.A. Invited me to come talk at the c.I.A.
And I agreed to do that.
Daniel: Knowing it would surely spark
conspiracy theories, Gavin posted an announcement
on the bitcoin talk discussion forum
to head off any rumors.
Having taken on the lead developer position
since satoshi's disappearance,
Gavin found himself facing an increasing number of responsibilities
and public scrutiny.
Do your neighbors know that you're kind of at the center
of one of the most disruptive technologies?
I think-- I think they know that I do this wacky bitcoin project.
I don't think they know quite how big it is yet.
Right now,
bitcoin's a billion-dollar project.
When I started it was this tiny little experiment.
And as it gets bigger,
the pressure to not screw up
just gets bigger and bigger.
Daniel: Two weeks later
the price soared past 150.
And some bitcoiners woke up
to find out they were bitcoin millionaires.
23-year-old Charlie shrem
is the c.E.O. Of a company called bitinstant.
Bitinstant was one of the first startups in the bitcoin space.
In bitcoin's infancy, people had to jump
through several hoops to buy them.
One of the only ways
was through the mt. Gox exchange,
but this process required transferring money
through several intermediaries
and could take weeks.
Charlie launched bitinstant to streamline this process.
And to help people buy bitcoins quickly.
- Man: Yeah, that's good. That's great. - ( Camera beeping )
- That's pretty nice. - You go like that.
Yeah, sure.
Daniel: Today Charlie is being photographed
for an article in "businessweek."
Man: One of the ideas they had
was that you're going-- throwing stuff up in the air
and they were gonna add bitcoins in later on.
- Going like that? - Yeah.
Shrem: This bitcoin thing can actually change the world.
But for this thing to succeed,
we have to figure out a way to get more money
in and out of the ecosystem.
Look out the window a bit. Totally-- yeah.
Then you can look-- yeah, that's good.
And not show that I'm super stressed out right now
and we have thousands of orders that are being processed
and I'm bugging out, trying to get the new site launched.
- No, don't look like that. - It's crazy.
I'm trying not to, but it's really hard.
Shrem: Things have been insane.
( Mouse clicking )
I haven't slept in days.
The price is just rising, so a lot of people
are putting money into it.
Daniel: Normally, Charlie can get bitcoins
to his customers in about an hour.
But with the recent flood of people
trying to purchase bitcoins,
bitinstant can't fill their orders fast enough.
When I pulled up our customer service interface,
we have close to 2,000 open tickets.
And that's just from Saturday to this morning.
Nobody was ready
for this kind of volume,
so we're trying to catch up
with the volume and keep everybody happy.
Man on phone: Can you just sort of describe quickly
what the last week or so has been like for you guys?
The last week or so saw our support staff
go from two people to five people.
When someone offers you
a seat on the rocket,
you don't ask where the seat is.
You just get on the rocket.
Further, our volume has basically tripled
in the past two weeks,
going from a few hundred transactions a day
to now two, three thousand transactions a day.
- Nick: You just came onboard here, right? - Yeah, I did.
Actually, today is kinda my first day.
- Oh really? - Yeah.
How does it feel to be a part of all this madness?
Um, well, madness, yeah.
It's overwhelming.
And what do you do for bitinstant?
I'm the c.F.O. ( Chuckles )
Man on phone: Can you give me a daily estimate
of how much money you're moving through your system?
Um, it's in the--
in the six figures every day.
All right. Well, thanks, Charlie.
- I really appreciate it. - Thank you.
I don't know how the government will react to bitcoin,
but I spend thousands of dollars on lawyers every day
just to make sure that I'm not gonna go to jail.
It's super terrifying. I mean, I don't wanna go to jail.
( Stammers )
I don't wanna become a martyr either.
( People chattering )
Daniel: Bitcoin was the talk of the town.
Charlie was in the limelight
and could barely keep up with media requests.
Within hours, the price passed $200.
Shrem: First day of spring,
first day bitcoin is over 200.
The start of a new era.
Nick: Hi. Nice to meet you.
I'm the nice warm loving mom
that makes him live at home.
'Cause we can't-- we can't part from him yet.
( Laughter )
Mother: We love him too much.
This is where it all started
and this is where it still goes down.
I've been collecting money from all over the world.
And it's just something I did way before bitcoin.
I've been doing it since I was a kid.
So it's funny that I'm collecting all this...
Fiat that's not worth anything
and then all of a sudden I get into this bitcoin thing.
I realized during high school that
I could never work for anyone.
I made up a term--
psychologically unemployable.
I started bitinstant while I was still
in my senior year of college.
Bitcoin currently is the largest social- economic experiment
ever conducted in the history of the world.
2013, possibly 2014,
will be the two years that really make or break bitcoin.
Bitcoin is the first product that's digital,
but it's also scarce.
I got some good news last night that
part of our licensing deals that we've been trying to do
for the past few months are finally,
hopefully, coming through.
We got approved to be licensed
in 30 of the 48 states in money transmission.
I've been working very hard on trying to be compliant
in the legal realm
and with fincen's announcement,
setting up a way for bitcoin companies to legally exist,
that really changes the whole game of bitcoin.
And for us, it helped us get that last push
that we needed from all the banks
and the regulators to finally, hopefully,
get that licensing that we need.
Daniel: Today, Charlie's meeting with a realtor
to talk about new office space.
Hi, Charlie, nice to meet you.
- Hi, I'm Mitch waldman. How are you? - A pleasure.
- Got a minute? - I have 10 minutes for you.
We're-- we're a company with no boss, essentially.
Everyone has their responsibilities.
It's just one big executive board.
- It's just one big executive board. - Okay.
If I don't do my job, these guys are all gonna yell at me.
- So that's how we do it, but we get things done. - Waldman: All right.
We're outgrowing this space, as you can see here.
- That's a good problem to have. - Shrem: Yes. ( Sighs )
Now Rachel said there was a great concern
- about security in this space. - Shrem: Yeah.
We're regulated, so we can't share an office
- with another company if they have access to us. - I get that.
Our asset is our software.
Our software is processing hundreds of thousands of dollars a day
instantly. Really quickly.
And that's on-site here? Or is it in the cloud?
No, this is in the cloud. It's all in the cloud, but we monitor--
we have to monitor everything from here...
- Right. - ...And debug, fix, take down, upload more--
- put up more workers. - We deal with high-volume data-oriented stuff every day.
Very very sensitive customer data.
Waldman: If there were not a doorman,
at the very least the space would be designed in such a manner
that there'd be a locked reception area.
If we want to pursue a guard at some point,
we could have them in that area.
- ( Waldman speaks ) - I absolutely think
- it will be at some point. It's just a matter of time. - Really?
The potential for theft is huge.
It's like operating a bank, essentially.
Shrem: That's pretty much it.
- Gotcha. - It's basic stuff.
Yup yup. All right.
Any other words for me?
- Okay. - Are you willing to handle the task?
- Sign me up, captain. - ( Laughs )
Daniel: That night, the price got as high as $266.
Every major news outlet had taken notice.
Bitcoin fever was at an all-time high.
It is getting a lot of attention.
People are fascinated by anything that makes new highs
every day for weeks on end, which bitcoin has done.
In terms of the total number of the people
using the currency, I'm not sure,
but you can say that there's a huge amount
of fluctuation in the volume of trading.
Daniel: And then the price crashed.
Bitcoin lost more than half of its value
in six hours.
From craze to crash.
It's the talk of many people in the blogosphere,
and it's certainly suffering some growing pains.
The value of the virtual currency bitcoin has plunged.
It's been a crazy day today.
I haven't slept in like 40 hours.
Your order processed. I don't understand
why we're still having this conversation.
We refunded your order. We sent you extra bitcoins.
Man on phone: I don't care, man.
When it comes to my money, I don't fuck around.
Shrem: I know, man. You need your stuff.
I hear ya, I hear ya. It processed.
Your bitcoins are there, man.
Nick: So, Charlie, what's been going on today?
- Crazy day, huh? - Yeah, mt. Gox--
their whole system pretty much failed
and their whole trading engine is broken.
Pretty much caused-- almost-- us to shut down for the day.
Further, the bitcoin price has just been
wildly swinging up and down
it was down $100 today.
It's gaining back up, but mostly because people can't buy and sell
and they can't withdraw and they can't deposit.
'Cause the whole thing is just-- it's just a Fritz.
So what we're trying to do is figure out a way
to mitigate orders somewhere else for now.
Daniel: With mt. Gox stuck in a nosedive,
the ripple effect is creating chaos in the bitcoin markets.
( Man mutters )
Shrem: I'm trying to figure out
why our orders aren't going through.
Rachel, am I allowed to take another advil
if I took one an hour ago?
They've been having problems ordering anything off of gox.
Yeah, I'm getting a lot of customers emailing,
saying "it says 'executed,' but it's not showing in the blockchain."
Shrem: Dude, gox suspended trading.
- Really? - Yeah.
"Orders placed suspended until 2100."
What time-- what's 2100?
What? That's 9:00 P.M. oh my God.
( Sighs )
( People chattering )
If you bought at 150...
And then you're at 260,
and then you watch it dip down back to 150,
do you panic some? Yeah, absolutely.
I don't know what a bitcoin is. I just bought it.
( Exasperated sigh )
Fuck.
You see buy orders, people buying
and selling at such a wide range.
It doesn't make any sense.
Shrem: The a.P.I. Is just constantly failing?
Is that what's going on? Or are we're not getting any orders.
( Bird chirping )
Daniel: Don't care about the price.
Speculators can play musical chairs
all day long for all I care.
I'm-I'm-- I'm long.
I was focused on expanding my mining operation.
The only people that are gonna be shaken out
by this drop
are people that are new to bitcoin.
Here's the avalons, spinning away,
mining away.
And if everything goes as planned,
we'll have 18 more of these guys
in a couple of weeks.
Bitcoin is a complicated thing.
You have to spend some time looking into it
and understanding it before you really care.
Now there's droves of people that--
you know, are giving it more than just that glance,
because the price has gone so high.
And they have dollar signs in their eyes like Uncle scrooge.
It's so much more than that,
and I think that's why the people who are mining
and the people who believe in it
are just kind of holding strong.
When trading resumed at mt. Gox,
the price fell even further, to around $70.
71 on b.T.C.-E.
Yeah, bitcoin-- it's volatile.
It's gonna be a long time until we have stability.
That's the nature of the beast.
Price discovery can be violent and volatile.
There's gonna be a lot of people that come and go,
and people that scream wolf.
But at the end of the day,
the only thing that really kind of stinks right now
is that everybody is trading on one platform
that isn't doing the greatest job, so...
Over time, hopefully we'll see some more exchanges pop up
and get some more options in.
People wanna keep using bitcoin,
I'm sure the infrastructure will come.
( Bird chirping )
It's just gotten ridiculously busy.
I get an email every two seconds now
- and pretty much more email than I-- - ( Lock buzzes )
--Than I can keep up with.
Daniel: Jered kenna is the c.E.O. Of tradehill.
The first U.S.-based bitcoin exchange
to compete with mt. Gox.
He's also on the list of bitcoin millionaires.
- ( Barks ) - This is finnegan right here.
Guard dog. Hey, finnegan.
( Mimics growl )
Daniel: Jered runs tradehill
out of a 41-bedroom residential hotel
called 20 mission that he also owns.
( Whirring )
We mostly rent out rooms to tech people, startup people.
There's a lot of bitcoiners.
I actually accept rent in bitcoin,
which is great, because we have a lot of international people.
( Acoustic guitar playing )
- ¶ Bitcoin! ¶ - ( Laughs )
¶ Came to us from the cryptogram ¶
¶ it came out of thin air ¶
¶ it saved us from those nasty dollars ¶
¶ and won and yen ¶
¶ bitcoin. ¶
- that's all I got. I'm done. - ( Mutters )
( Laughter )
Digital currency is gonna happen.
I mean, it's-- it already is happening,
and it will be the future,
whether that's now,
10 years from now, a hundred years from now.
We're going to be using digital currencies
that don't depend on fiat government.
Daniel: Jered originally launched tradehill about two years ago,
but ran into problems with a payment processor
and was forced to shut down.
Recently he met Ryan singer
and together they are relaunching the exchange.
The business we're in is
helping people speculate, right?
Markets are
price discovery mechanisms.
That's what they're for.
People-- they buy, they sell,
there's the bid, there's the ask
and the price moves. And when it levels out,
then that's what the market price is.
I can't even count the amount of people that have said,
"bitcoin's not backed by anything.
At least dollars are backed by gold."
I've realized that a lot of people believe that.
My grandfather, he got me into investing
when I was a kid. I was five years old.
I could explain a p/e ratio,
and what a bid and an ask was,
and the difference between a limit order and a market order
and all that stuff, so for me,
I saw this as a way that the average person
could actually take control of their finances.
I just grew up pretty nerdy.
I don't know. Then like at 15 years old,
I decided I didn't want to be a nerd anymore,
which was a mistake... 'Cause...
'Cause now I realize it's pretty awesome.
In 1999 I joined the marines.
I was originally with an engineering unit.
2005, I went over to Afghanistan.
I was mostly working with the Afghan national army.
It changed me a lot as a person.
I've always been interested in economics
and finance and technology and cryptography.
I was in a cryptography forum
and somebody I'd never met-- who was anonymously
in this forum that I was chatting with--
sent me 10,000 bitcoins
just as a way to test the system out
and see how it worked, and I got 'em.
I'm like, "that's cool, but what can I do with them?"
And he said, "well, nothing yet, but...
If people believe it has value, it will."
At the time, there was really only one bitcoin exchange
it was mt. Gox. I said, "we need an alternative.
Who cares if the technology is decentralized
and the method of transfer is decentralized
and the people are decentralized
if all the trades are in the same location?"
I thought that building another exchange
to give more people access to bitcoin
would be a key part of bitcoin's growth.
The day we launched, we got a quarter-million dollars in from user deposits.
And we said, "oh shit, this is-- this is real.
Yeah.
Hey.
We're all fans of "the big lebowski,"
so we're gonna have a "big lebowski" party.
Nice!
It's a... Very exciting day.
30 gallons of white Russian and hallway bowling.
- ( Man shouts ) - Yeah!
Kenna: We work hard, but we party hard too.
Okay. Okay, I'm good.
- Woman: All right. - I'm good. I'm not dead.
- ( Rock music playing ) - ( People chattering )
Yeah, I'm the first one in the house...
That opened a tradehill account.
Woman: What happened?
In the same day they went down to 90--
$65 or something, or $90 a bitcoin.
I stopped smiling. ( Laughs )
Kenna: Tradehill, round two, we optimized for success.
We launched expecting to have to do
hundreds of thousands of transactions a second.
Right now we've got about 15 people
in addition to that, we've got about eight attorneys externally.
A lot of people are depositing dollars.
A lot of people are depositing bitcoin. We're getting more trading.
We're pushing that from a business perspective.
Also, we're talking to people
who want to do more automated trading on our platform.
Get robots trading against each other.
We've stress tested this
and we can handle about 500 times as much volume
as mt. Gox was seeing.
So we'll see what happens here.
The interest in us is pretty crazy.
Just the news with bitcoin
has really kind of validated everything.
Now people are like, "oh, you're not this crazy person
talking about some digital made-up currency."
It's like, "oh, I've read about it in 'the wall street journal'
and 'the New York times.' It's real."
Kenna: We had an investor come in
and he said, "hey, I really appreciate
your scrappy nature and how you're hustling,
but I think it's time for you guys to spend 30 grand a month on rent.
When you have a billionaire client
and they want to come check out your office
before they send you a multi-million dollar wire,
asking them to walk past pawn shops
- is not always the right feel. - ( Laughter )
So we're leaving the mission. We're driving into soma right now.
We're gonna go take a look at what may be our new office space
pretty prestigious address-- one market.
Right now we're trying to forge this path,
and we're trying to comply with existing laws
and anticipate future laws,
which is extremely expensive and extremely difficult.
- Is there parking here? - Man: Yes.
Okay, is that included with--
( chuckles ) Of course.
- Right, what does that-- how much does-- - ( Laughs )
How much does that cost?
That's not terrible.
Whoa.
That's pretty sexy.
Twitter was here for over a year.
- Yeah. - Amazon comes and go every single year.
- Oh, fantastic. - I have Macy's, I have j.C. Penney.
All the big ones, they come over.
They are part of the club.
Kenna: Sounds good. We'll be here tomorrow.
- Picking it up. - Thank you for the business.
- Thank you. - I appreciate it.
Thanks so much.
- We move in tomorrow. - Nick: Just like--
- just like that, huh? - Just like that.
- That's how we roll. - Nick: It's pretty surprising
that that deal just happened so quickly.
What was it? You just liked the space
and decided, "hey, there's no point in waiting"?
We like the space, we like the address.
We just don't have the time to spend either.
We've got all kinds of important stuff we're working on
and if we spend a week trying to find an office,
and he and I put 20 hours into it
or 50 hours into it, it's a huge waste of time.
I thought they'd be in multiple bags
rather than one big one, but hey...
I believe that bitcoin will do to the banking industry
what email did to the postal service.
It didn't make it irrelevant,
what it's forced the post office to do
is concentrate on their strengths
and less so on their weaknesses.
Daniel: Mike Caldwell is the creator
of physical bitcoins,
known as casascius coins.
They're often featured
in mainstream media coverage of bitcoin.
They're a novelty item,
collectables that basically act
as physical carriers for bitcoins.
But they do something very important.
They give bitcoin a face.
Come on in.
Sorry, the kids are sleeping,
so I'm just being quiet so we don't-- you know.
Daniel: Each coin has its own bitcoin address.
And the private key required to spend it
is hidden underneath the hologram.
This is where you make the physical bitcoin.
Yeah. It's a random smattering of things,
but I'm pretty careful about the way I manage--
you know, the--
basically, this is the credentials.
This is the hologram and the private keys.
I'm pretty careful about those and don't keep them here.
I normally do them on this mirror
'cause that helps me get the fronts and backs right.
There's so many things that cryptography can do for us,
that if the world just knew,
so many social problems could be solved.
Cryptography can bring fairness to elections.
It's too difficult for people to understand
and someone needs to bridge the gap.
Daniel: Right now we're using bitcoin to send money.
But many believe it will revolutionize much more.
The technology behind bitcoin
can be used to build decentralized systems
with rules that can't be cheated.
Now see, this is my wife and my space.
- This is, you know-- - awesome.
It is what it is.
The more time goes by,
the more legitimate bitcoin gets
and the more proud I am to be associated with it.
Now what does your wife do?
She does crafts.
She's a lot like me.
We just sit around and make things all day.
It's just our obsession.
No, I'm not a drug dealer. No, I'm not a criminal.
No, I'm not a terrorist.
I believe in the rule of law.
I believe in structure that builds society.
I believe in families.
I believe in corporations.
I believe in all the essential elements
that a civilized society with law and order
need to be able to function.
Focal length matters.
( Whirring )
Cryptography is the basis
for us being able to implement the values we say we believe in.
Caldwell: This idea will never die,
the technology that bitcoin brought to the forefront.
The genie is out of the bottle.
Daniel: Since the crash, the bitcoin price
has been hovering around $100.
Bitcoins seem to have weathered the storm,
but there's still much controversy surrounding the currency.
The same cryptography that insures a user's privacy
also allows it to be used anonymously.
Steve: My father decided to retire
and he had an old failing print shop.
I basically took it over
and I converted it into an Internet place.
We're the only place in L.A.
That supports bitcoin right now.
This is my linux system here.
It's a system that also mines for bitcoins.
Makes about a dollar a day. I just do it for fun.
I was really really into the Internet,
literally in 1990, 1991, 1992,
and I had the hardest time describing
what the Internet was to people.
I would tell people, "well, it's like this network of computers.
And the network of computers
can talk with other networks of computers
and then you could exchange information."
And people would have no idea what it was.
- ( Beeps ) - When people ask me what bitcoin is
I have the hardest time describing what it is.
And I'd surmise it as, "it's basically money.
It's basically an anonymous PayPal.
It's one of those things that you have to use
before you understand.
Politically, I'm not a very big fan
of either the banks or federal reserve,
and bitcoin allows me to get around that.
One of the programs we support is a protocol called "Tor."
And basically what Tor does is it allows you to communicate
to a website anonymously.
Tor is a program that allows you to get on the silk road.
And this is silk road.
Basically, any drug you want is available.
There's a lot of weed. There's a lot of cocaine.
There's a lot of ecstasy.
But there's also unusual drugs,
like if you want some sort of anabolic steroid,
you can type "steroid."
You'll get all the different types
of steroids that are available.
Silk road itself is not selling the drugs.
This is basically a matchmaker
between buyer and seller.
Both the buyer and seller don't know each other.
Both the buyer and seller are anonymous.
It goes on this web of trust.
If you want to, let's say, buy this testosterone,
you'd click on this.
He has 99.3 positive feedback
from more than 300 transactions.
So even though the contracts aren't enforceable by law,
the reputation system makes it so that
the system works pretty well.
Oh, there's a fireworks section now. I didn't know that.
Florida I.D., 1.88 bitcoins,
which is around $150, something like that.
A forged auto insurance card,
forged passport.
There is over 9,000 entries for drugs.
That's a lot.
I would say there's around maybe five customers
that know about it and use it.
It's a very small percentage of the people that come in.
But the people who do know about it,
specifically come here to use it.
( Rock music playing )
What the customers do with the computers
is pretty much their business.
Another day in the office.
You gonna do drug dealing of any sort,
silk road is the place to go.
How many people are selling cannabis right now?
It looks like 2,011 people are selling cannabis.
They call me Mr. bitcoin.
I probably been dealing drugs
since I was like 17.
Right now I'm 26.
I think of it as a global thing
when I'm on the computer.
I'm doing business with the world.
Let's see, they have blue dream,
sour diesel, pineapple thai,
purple kush, girl scout cookies. Purple pays.
When I first heard about it,
I was laughing about it. It took me a week
to just even think about this for real.
"I can really make money off the Internet?
Selling this type of stuff on the Internet? You sure about that?"
This something I probably may buy right here.
They have looks like some good kush.
And some of these things only take a day to get here
with no harassment from nobody
instead of just being on the streets.
Once you get the hang of it, it's actually kinda fun
just looking through different things.
"Mr. bitcoin." I'm running with it.
I like the name. You know what I mean?
I'm not gonna lie. I get Booty off this.
I kinda like talking about this stuff with girls.
Girls like that shit hot. ( Laughs )
"Oh, you're street, and you got a little nerd knowledge?
This is great."
I have a lot of bitcoins saved up already.
My business is doing good.
It's a fun way of doing hustling these days.
The future brung a different way to hustle
and I like it.
Daniel: With so many people using bitcoin
in so many different ways,
it's becoming apparent that it can't be ignored.
- Let me see your driver's license. - Oh sure.
This stays at the desk until you leave the building.
Daniel: Today I'm visiting fincen,
a bureau of the U.S. department of the treasury.
Despite having released guidance on virtual currencies,
there's still a lot of uncertainty surrounding their outlook
on the future of bitcoin regulation.
Straight ahead and in the big fishbowl-looking--
okay, great.
( Beeping )
I'm not gonna say we're gonna have
every answer for you today,
but I mean...
- ( Snapping fingers ) - Ashley: Oh yeah.
( Laughs )
Daniel: Jennifer shasky calvery came onboard
as fincen's director last year.
During her career, she spent 15 years
at the department of justice
where she specialized in fighting money laundering
and organized crime.
Virtual currencies have been on my radar
for a while, even prior to coming
to this position, because of,
unfortunately, the abuse of some of them.
Bitcoin, on the other hand,
is one that really didn't come on my radar
probably until I arrived at fincen.
Depending on who you speak to,
the issuance of our guidance was
either the best thing that ever happened to bitcoin
or the worst thing that ever happened to bitcoin.
Some accusing us of trying to kill bitcoin
and others saying that it somehow legitimized it.
Of course, neither of those things I think is probably true.
And certainly neither of those things was our intent.
One of the clear lines is that if you're a consumer
who's using bitcoins to buy goods and services,
the guidance doesn't pertain to you.
We're focused more on the places where we think
we have risks to the U.S. financial system
from money laundering and terrorist financing.
And I think that might be kind of--
a lot of the bitcoin community has a little bit of a fear
that bitcoin may be characterized
in a way so as to tie it to some bad actor ruining it for everyone,
when a lot of people that are interested in bitcoin,
including myself, see it as just this technology that we don't--
really don't wanna see it falling
into the wrong categorization
with all the potential that's there.
Sure. So that innovation around bitcoin
and the virtual economy
is really one of the more interesting aspects,
I think, of this story-- the idea that
it can be used to potentially serve
the unbanked out there,
just to provide some really new services
that are convenient for consumers.
The flip side of it though
is that to be a part of the financial system--
the U.S. financial system, the global financial system--
also comes with some responsibilities.
And those responsibilities include
not allowing your institution to be used
by criminals and by terrorists.
Daniel: There's always been a concern
that the government might try to stamp out bitcoin.
But perhaps they see the risk of being left behind.
In may 2013, the biggest gathering to-date
of bitcoin enthusiasts and entrepreneurs
happened in San Jose, California.
Lindsay Holland: We're at bitcoin 2013.
It's the inaugural conference of the bitcoin foundation.
Roger ver: Bitcoin is worldwide and the vast majority of people
haven't even heard of bitcoin yet.
It's more powerful than every computer
on the top-500 list combined.
It's an awfully big world,
an awful lot of things could happen.
Really, we've been on a roller-coaster ride
and I expect, at least for the next few years,
we're gonna remain on a roller-coaster ride.
I happen to enjoy roller coasters.
- I think they're fun. - ( Applause )
Daniel: Just a few weeks earlier
Cameron and Tyler winklevoss,
known for their involvement in Facebook,
announce that they own a 1% stake
of all bitcoins in existence.
Worth around $11 million.
- How's it going? How are you? - Nice to meet you.
Daniel: They also made a $1.5 million investment
in Charlie's company, bitinstant.
We started looking seriously at it
at the end of last summer
and started purchasing around that time.
I think a light bulb just went off and we said, "wow.
The implication of this could be enormous.
Tyler: If everyone in the world could have a bitcoin address,
everyone in the world could be banked fairly quickly.
And when you consider that,
it's a very powerful idea.
And bitcoin can make that happen.
We're going all over the world.
We're going to the u.K.
We're going to Australia.
We're going to-- we're already in Russia.
We're going to South America.
We're already in Brazil now.
You can buy bitcoin at any of our locations.
Daniel: It's fun to think that satoshi might be here too.
I always wonder if somebody is--
if someone here somewhere is...
- Yes. I was planning-- - ...Standing in the corner going--
( both laugh )
What would he do?
What talks would he be attending, you know?
Trace Mayer: We're seeing the bitcoin players in the market
meeting with the venture capitalists
and they're all beginning to posture
and that's very exciting,
because it means that
there's gonna be a lot more
infrastructure built out,
and lot more money flowing into the space,
and it's really gonna be a big bull market for bitcoin.
Daniel: One of the companies best known for making
bitcoin accessible for commerce is Atlanta-based bitpay.
They are pioneers in bitcoin
and provide a service that enables merchants
to accept bitcoin payments
without dealing with its complexities.
We've grown about a factor of 10
since the beginning of the year.
We were doing about half a million dollars a month...
- Yeah. - ...Around the turn of the year,
and now we're doing about $5 million a month.
This is people using bitcoins to buy real goods and services.
They're not day trading. They're not exchanging.
They're actually buying things.
I'm confident that bitcoin is the most important invention
in the entire history of the world since the Internet.
Daniel: Roger ver is an investor
in several early bitcoin companies,
including bitpay.
His passion and enthusiasm
has earned him the nickname "bitcoin Jesus."
Ver: It is going to change everything.
And all of you here in this room
you're at the very very forefront of that.
( Cheers, applause )
Daniel: Roger lives in Tokyo
but travels the earth, spreading the good word of bitcoin.
Ver: The last couple of days we've been setting up
a business per day to accept bitcoin here in the bay area.
Today's business is going to be
this super kyo-po Korean supermarket.
So for you-- you accept credit cards right now?
- Right. - The credit card companies are charging you 2% or 3%?
- Right. - For bitcoin, you can do the same thing,
but they'll only charge you 1%
and you'll still get dollars in your bank account.
If you want, you can choose to split
some of the payments that you receive
into bitcoins and then some into dollars
in whatever ratio you want, so you can keep 99% in dollars
and 1% in bitcoin or 99% in bitcoin and 1% in dollars.
- Okay. - However you want. You can decide that.
Daniel: Roger is describing the service
provided by bitpay.
They take the volatility of bitcoin's price
out of the equation for merchants
by immediately converting bitcoins to dollars
at the time of sale.
So right now we have it set to 100% dollars,
so anybody that pays here with bitcoin,
they'll deposit the money into your bank account
the very next day with only a 1% fee.
And I guarantee you over the next couple of weeks
you'll have lots of computer nerds
that love bitcoins will be coming in here
specifically to shop at your supermarket,
so that they can pay with bitcoin.
The credit card companies, just for processing the payment,
they take anywhere from...
1.5% to over 3%
and then on certain cards
there's even a per-transaction fee,
like 20¢ per transaction
plus the percentage of the transaction.
...$11,000, $12,000 a month
on the average that they just take right out of our account.
I honestly think that
there's a really good chance
that bitcoins will be more than $1,000
by the end of the year, because everybody who hears about--
"wait, I can send money to and from anyone I want?"
It's impossible for anyone to freeze your account,
it's impossible for anyone to block you from sending or receiving these bitcoins.
...Euros, so you can see
all these different currency exchanges around the world
that exchange to and from bitcoins.
You can see there's maybe between 50 and 100 exchanges now.
When I first heard about bitcoin and started telling everybody about it,
if you looked at that same page, there were less than 10.
And there's no central office that they could raid or anything like that?
There's no central-- it's amazing.
There's no central office,
there's no central place they could go to
and say, "take Steve's bitcoins,"
or, "give Steve's bitcoins to Kevin." Do this or do that.
So who's the owner of bitcoins?
- Everybody that owns bitcoins? - Yeah yeah.
Just like who's the owner of gold? It's whoever owns some gold.
Short of shutting down the entire Internet
in the entire world, there's no way to stop bitcoin.
And hit "request payment."
And that's the q.R. Code for your bitcoin address.
So I'm gonna scan that...
So now I have your bitcoin address on my phone.
I think this is $2,
so I'm going to send you $2
worth of bitcoins.
There it is. You just received that many bitcoins
from me, directly with no fee
and if you hit the little green square
it'll show you the equivalent amount in U.S. dollars.
So you just received $2 worth of bitcoins
directly from my phone to your phone.
And you can send money just like that anywhere in the world.
You could've told me your bitcoin address
by email or posted on Facebook
or Twitter or anywhere.
So I could print this and have it at the register.
Yeah. Yup, and you can check right on your phone
any time that you received the payment.
- ( Laughs ) - Okay. Thank you, Steve.
- Steve: All right. Thanks. - Thank you for the tea.
( Chatting )
Daniel: One of the newest standouts in the bitcoin space
is a San Francisco company named coinbase.
They operate a digital wallet service
that makes it simple to buy, use and accept bitcoin.
Brian Armstrong: I would not be surprised at all
if Google, square, PayPal-- everybody--
is looking at adding bitcoin in one or two years.
By then we need to have 50 million wallets.
If we can make this easy to use,
it's gonna be huge.
Fred ehrsam: My involvement in bitcoin is not politically motivated.
- Yeah, dude. - Ehrsam: People are realizing large capital gains.
When professional investors enter the realm,
the stakes definitely change.
We raised $5 million from union square ventures.
Fred Wilson led the round there.
I think bitcoin is still
actually a little bit under the radar.
I think it's moved past the stage where people dismiss it,
but I don't think that it's totally
gone mainstream either.
I think we're in that middle stage right now.
Daniel: At the end of the conference,
jered from tradehill threw a party
to celebrate how far things had come.
- You guys are hot right now. - ( Chattering )
- Yup. - Congratulations on the raise.
- Thank you. - It's good money, man.
- Swell do. - Yeah.
- I mean-- - hopefully it's an advancement for the community.
I am completely pro-compliance.
I think if you don't want to attach your identity to this,
- just can't work with you. - Yeah, so I thought I just need to--
I mean the libertarian side of me is like, "ehh. Yeah, whatever,"
but like, from a business perspective,
if people don't play by the rules,
- you're not gonna last. - Yeah, I completely agree.
- You're gonna just shut down or you're gonna go to jail. - Yeah.
Daniel: Noticeably absent from the conference
were representatives of bitcoin's
biggest exchange, mt. Gox.
Just days earlier the department of homeland security
seized more than $5 million from their U.S. accounts.
The seizure warrant stated that mt. Gox had failed
to register as a money transmitter,
putting them in violation of the new fincen guidelines.
( People chattering )
I'm traveling to Tokyo to meet mark karpeles,
mt. Gox's reclusive c.E.O.
No bitcoins on here.
Not yet.
That will make this completely unnecessary.
But for now it seems kind of primitive
that we're exchanging paper for paper.
- ( Clicking ) - ( Coins clinking )
- Nick: And losing. - And losing value.
Someone's taking a cut. Someone's taking a little percent.
Mark and his business partner gonzague
are French but they operate mt. Gox from offices in Japan.
Originally mt. Gox was an exchange for trading cards
used in a game called "magic: The gathering."
M.T.G.O.X. Stood for
"magic: The gathering online exchange."
In 2011 mark's company tibanne
bought mt. Gox, and his focus has been bitcoin ever since.
One of the conditions of my visit
is to refrain from any discussion
about the d.H.S. Seizure,
due to the ongoing investigation.
We've arrived at mt. Gox.
This is mt. Gox right here.
There's no big sign or anything, no-- no--
it doesn't look like a crazy commercial establishment.
Despite their legal problems
mt. Gox still handles more volume than any other exchange
and is processing around
$6 million worth of bitcoin trades every day.
We had, last year, an average of 10,000 new customers a month.
January, it was 20,000.
Then 30,000, 60,000,
150,000.
With what's going on, we go down,
but we are reaching 100,000 new customers
- for may. - That's amazing.
- In a month? - In a month.
- Wow. - So it was like this...
Zip, bup!
But still, after what happened
I thought that a lot of people will go away
or don't create a new account.
But still, 100,000 new customers
it's... wow.
And here we've got the office.
( Laughs )
Daniel: Mt. Gox employs 18 people
not only is mark the c.E.O.,
he's also the c.F.O., the lead developer
and performs all technical operations to keep the exchange running.
( Daniel speaks )
- C++. - C++.
Is that your main-- is that your main
- programming language? - No.
I've got a lot of main programming languages.
Yeah? What's your favorite programming language?
Really depend on what I need to do.
I create a good something really quick
and I don't care about performance,
I use p.H.P.
If I care a little bit about performance,
I will use c++ with q.T. Available.
And if I care a lot about performance, I will use axum.
When we go in, cameras down first,
- until we get to your servers and then back up. - Exactly.
Okay.
Getting ready to go into the mt. Gox data center location.
Okay, cameras down.
We were allowed to snap a few photographs
( karpeles speaking )
( Speaking Japanese )
( Man speaking Japanese )
Daniel: If mt. Gox's new trading engine
can really support 100 million orders per second,
it should be able to scale with the demands of professional traders.
But with complex legal problems and increasing competition,
mark's attention is pulled in many directions.
Do you work seven days a week, typically?
- Karpeles: Yup. - It seems that you do
the majority of all the heavy lifting.
- ( Laughs ) Literally. - Karpeles: Yeah.
You need to remove your shoes in the entrance.
Daniel: Mark is a talented man
in one of the world's biggest cities...
But maybe he should stick to computer keyboards.
( Classical music playing )
( Scoffs ) Okay, I messed it up.
- ( Chuckles ) Awesome. - ( Nick claps ) Yay.
Yeah.
Erik voorhees. We are here in northern New Hampshire
for the porcupine freedom festival.
And this is an event put on each year
by the free state project.
Basically it's just a bunch of crazy anarcho-capitalists,
libertarian types in the woods,
with freedom and families.
Pretty much all of the vendors accept bitcoin.
- ( People chattering ) - Ahh!
It tastes much better when bought with bitcoin.
Thanks, guys.
Soups, salads and smoothies. ( Chuckles )
I would say one-third of our sales
have been in bitcoin.
It's 20 bucks. So you're gonna pay in bitcoin?
- Uh, yeah. - All right.
Last year was our first year accepting it
we did maybe 18 transactions, 20 transactions at the most.
And now we're up to close to 120.
- ( Sizzling ) - ( Folk music playing )
Daniel: This community is really one of the largest groups
of people in the U.S., I think,
that is truly adopting bitcoin and using it as a currency,
because of what it stands for and because of what it enables.
( People chatter )
The world is seriously changing now
and it is changing in a very interesting,
very radical, decentralized,
and, in my opinion, positive direction.
Shoot. Here it is.
"Price breaks the all-time high."
Daniel: Vitalik is only 19 years old,
but he has a profound understanding
of the complexities of bitcoin
and a gift for explaining them.
As lead writer for "bitcoin magazine,"
he's been traveling the world, covering bitcoin for the past year.
I'm a big fan of the decentralization concept, in principle.
You know, have lots-- lots of different societies
operating according to whatever people's own beliefs are.
Bitcoin has unique properties
that no other system in the world has had before.
It really seems like the only practical way forward.
As you move away from cash
into your debit cards and your credit cards,
you essentially are giving up
a certain degree of your privacy
without even really knowing it.
It's important to understand that bitcoin is not
automatically, perfectly anonymous.
But what it does is it enables you to be anonymous if you wish to.
Daniel: Erik voorhees is the founder and part owner
of a hugely popular bitcoin gambling site
called satoshi dice.
Satoshi dice is the first of a new breed
of provably fair betting games
that use bitcoin.
Since all bets are public,
anyone can verify the odds and payouts.
At its peak, satoshi dice was responsible
for more bitcoin transactions
than all other uses of bitcoin combined.
It played an important role in bitcoin's development
as one of the first applications
to really test what the bitcoin network could handle.
Recently Erik moved his entire operations out of the U.S.
And into Panama.
He started a company called coinapult
that lets you send bitcoin via s.M.S. And email.
Voorhees: I think most people,
at least in America,
believe that when they put $1,000 into their bank,
the bank is holding $1,000 in its vault for them.
And they don't realize that 99% of all the dollars are digital.
The fact that we have these tokens called paper cash
is the exception to the rule.
People see the cash and they think that that's what the money is,
but it's all digital and it's been that way for decades.
You guys moved your business to Panama.
What was the primary driver in that?
Voorhees: If you're a U.S. company,
you have to follow the arcane U.S. regulations
for all of your customers around the world.
So if you do business with some rural farmer in Africa,
you're gonna need to get his social security number,
you're gonna need to get all this information
that Washington tells you is important.
We did not want to have to apply
the U.S. financial regulatory scheme
to customers in sub-saharan Africa.
I don't think the developed world's
gonna be where bitcoin really takes off, long-term,
because our banking system's worked decently well.
Many people around the world
don't have any bank accounts whatsoever.
Ultimately, those are the types of people
who will find the most value out of bitcoin.
Daniel: One month later Erik announced
he had sold satoshi dice to an anonymous investor.
The price?
126,315 bitcoins,
worth around $11.5 million.
Most of the new offices in this city are in this condition,
all still what's called "gray."
Not ready, no Internet, no electricity-- nothing.
But we actually got one that was finished,
so we moved in and we are super excited about it.
You can see all the skyscrapers
of new banks and everything getting built up here.
This is the financial center for central America.
So it was fitting that we establish ourselves here as well.
Still setting up the office.
We've been here for two weeks.
We're getting walls put in.
We've got furniture.
Voorhees: This is the brains of the operation.
- This is Mr. ira. - Howdy.
He can program anything, and you can see all these books he's reading.
What have we got here? We've got "cryptanalysis."
We've got "everyday cryptography,"
"introduction to mathematical cryptography."
I read all of these, of course, when I was much younger,
but ira's trying to catch up with me.
The bitcoin phenomenon is trying
to take control of money away
from the state and return it to individuals.
It's trying to separate money and state
in the same way and for the same reasons
that it was important to separate church and state.
There's a wonderful quote from one of the rothschilds--
"give me control of a nation's money
and I care not who makes its laws."
So I'm trying to play my part in that narrative.
Daniel: Outside of the United States,
billions of people don't have access
to basic banking services.
Bitcoin can level the playing field
and help bring developing nations
into the global economy.
( Chattering )
Cheers, cheers.
Voorhees: Eventually people are going to use a currency
that is as free as the Internet
because people will seek out freedom wherever they can.
And just as the government can't stop the Internet
and the freedom of speech, it can't stop bitcoin and the freedom of money.
So we're just gonna have to see how hard they try to do it.
It's scary but it's exciting,
because at the other end freedom typically wins.
We just have see how long it takes to get there.
( Shouts )
Daniel: As summer rolled on,
the bitcoin industry continued to flourish.
It's hard to remember the days where I was
running this thing out of my basement
and with one or two people.
Bitinstant was just a domain name.
Daniel: Charlie and bitinstant
moved into their new offices
I always wonder if satoshi knew
that he was gonna build something that would foster
companies like this,
where we're actually like a company with jobs
based on something that someone we don't know wrote a paper on.
It's kind of creepy if you think about it.
I wonder if he's watching us right now or something.
Daniel: In San Francisco,
jered and tradehill had moved
into their new space as well.
It sounds funny. It's not a $100-million market anymore.
It's grown beyond that.
More professional people are in the space
and they're expecting to deal with other professionals.
Daniel: But just as things were ramping up,
regulators started taking a closer look at bitcoin.
Some bad news for bitcoin, or is it?
Its days of glory could be ending.
At least two dozen companies
have been subpoenaed by New York's
department of financial services.
Can't be a good thing.
Daniel: Bitinstant, bitpay, coinbase
and winklevoss capital were all issued subpoenas.
We want to make sure that as this enterprise grows
and if it does become a place where
a lot of people are engaging in financial transactions
that we have sufficient protections in place.
Daniel: With increased pressure in banking compliance issues,
bitinstant was forced to suspend services.
Jered faced similar battles.
Due to a lack of regulation,
many banks decided to cut ties with bitcoin companies.
Without a U.S. bank account
tradehill can't operate,
and jered was forced to pull the plug.
Regulation typically evolves
much more slowly than innovation.
And regulations cannot keep pace
with the pace of innovation.
Singer: Explaining bitcoin to a bank
feels like explaining Amazon.Com
to Barnes & noble.
Daniel: Until lawmakers catch up,
startups like tradehill and bitinstant
are left out on a limb.
Banks do not want to bank bitcoin companies.
When you have regulation, you can comply with it.
When you don't have any regulation, they're not exactly sure.
And if the banks aren't sure, they just default to "no."
New regulation takes at least one year to develop
propose and adopt.
And in many cases,
it can take much longer than that.
Shrem: I won't let this go.
I will fight till the end for bitcoin.
Whether I have to work on the street or sell lemonade,
bitcoin's gonna succeed one way or another
and I'm gonna be a part of it.
Daniel: Over the past several months
the bitcoin mining landscape has changed significantly
( machines humming )
( Whirs )
Daniel: When I started,
bitcoin mining was a hobby for geeks.
Now it's big business.
In order to continue mining
and continue playing in the game
and be competitive and be profitable,
I would have to spend
hundreds of thousands of dollars on gear.
The 18 miners I ordered from avalon
never arrived.
And the units from butterfly labs
took over a year to ship.
By the time I got them,
bitcoin mining was so competitive,
that I would never be able to mine back
all the coins I used to buy them.
See that computer? That computer makes bitcoins.
And this is all the other computers that are making bitcoins too,
and it goes straight up in a line up in the air.
And that's 'cause there's a lot people
that are making bitcoins with computers like that.
As my new units are arriving,
I'm selling them for bitcoins
to try to recoup what I can.
If you don't mind grabbing those other cables,
- I'm not coming back up. - Nick: Okay.
Daniel: I'm taking a pretty big hit...
But overall the mining experience
has still been worth it.
My mining days may be over,
but I'm still very involved with bitcoin.
With bitcoin, it's a money system where
it's backed by math. It's back by the laws of mathematics
and by the rules of the protocol.
I keep thinking that there's gotta be an easier way
to just set up a secondary protocol
to trade private keys.
Every time I log on, I see another dot on China
and I'm like, this is why right now the price has gone up.
Daniel: The price is nearing 150 again.
Many attribute it to the explosion
of bitcoin's popularity in China.
What's happened recently is Chinese people
have really come and adopted bitcoin.
As a culture, as a nation
Chinese people are keen to learn about
things that are on the Internet,
things that involve math and science.
We think that China can really contribute in this space
and help bring bitcoin to the mainstream.
Daniel: Germany's another part of the world
where bitcoin has found a home.
Woman: It's starting to get normal if one person a day
comes in and buys a coffee with bitcoins.
People are looking for a new way of paying--
not through banks, not with Euros,
not with dollars. Something new.
Daniel: The German ministry of finance
even became the first governing body
to officially classify bitcoin as "private money."
I believe if we want to get
some justice back into our society,
we should reduce the importance of the banks.
Bitcoin is banking without banks,
so here we go.
The FBI today shut down what it's calling
the most sophisticated Internet site
in the business of selling hard drugs,
including heroin, cocaine and LSD.
Daniel: In the Sci-Fi section
of a San Francisco public library,
undercover agents surprised a young man
quietly working on his laptop.
They arrested a 29-year-old software engineer
named Ross Albrecht
and accused him of being the mastermind
behind the silk road.
People have always tied the silk road to it.
Media has always tied the silk road to it,
as if silk road is bitcoin, but it's not.
This may be a sign that bitcoin is growing up.
It's funny. My friend just I.M.'D me and said,
"silk road got raided
and the government seized $3.6 million in bitcoin.
Is there a way to invalidate bitcoins?" ( Chuckles )
I replied, "no."
- ( Daniel speaking ) - ( Keyboard clicking )
People are starting to finally realize
that bitcoin has nothing to do with how people use it.
It's just money. It's like gold.
Of course, not everyone thinks
bitcoin is the way of the future.
James angel: Bitcoin will not be able
to survive or thrive
without becoming legitimate.
I don't see it
having a serious place
in our financial system.
There are really good reasons
why we have central banks
that have the power to put out financial fires
by printing money.
I'm worried about the technology.
As darth vader once said,
"don't put all your faith in technology."
I think 10 years from now,
we'll look back on this and just kind of chuckle
at the bitcoin fad.
"Oh yeah, I remember bitcoin.
Oh yeah, I remember that."
Man: It's financial freedom.
Come on, bro. This is the new world, bro.
Daniel: Others are more optimistic.
I think within 10 years,
you're gonna have a lot of people using bitcoin,
but they're not gonna realize that they're using it,
because it's gonna be a protocol that's imbedded underneath
whatever financial service they're using today.
And by bitcoin being open-source
it's what can allow all these different mobile wallets
and all these financial technologies
to all talk to each other,
especially around the world.
Voorhees: Whoever the hell satoshi was,
he should go down in history as one of the greatest people
or groups of people that ever existed.
This is a technology that mankind has needed
for thousands of years.
People have been dealing with monetary shenanigans
since the Roman empire clipping gold coins.
And finally people can escape it.
I'm cautious to try to predict the future.
We don't really know.
I tend to be a technological optimist.
I see the democratization of technology
as being a really positive thing.
And I think that's a really powerful force
that is really only just beginning.
Not bad. Oh!
( Grunts, breathing hard )
( Laughs )
( Sighs )
Recently, as the price has been floating around 200 again,
I have a lot of friends that have asked me,
"are you gonna cash out some of your bitcoins now?
The price is really high. You should get some dollars out of it."
I kind of tell 'em, "no, don't you see it?"
I've met so many interesting people
and there seems to be one thing that kind of binds
a lot of them together, and that is that
they're willing to face opposition
and follow through on the ideas that they believe in.
The people who try the crazy ideas
often fail and then everybody likes to point their fingers
and laugh and say, "that was such a stupid idea."
But once in a while it works out.
I think bitcoin is proving to be
one of those things.
The decision to bring virtual currency
within the scope of our regulatory framework
should be viewed as
a positive development for this sector.
I'm here to testify, because I believe
that digital currency represents
one of the most important technical
and economic innovations of our time.
We are enthusiastic about the potential
of virtual currencies
and the digital economy for social good.
This latest generation of technology
which we're talking about today
takes things to a whole new level.
There's a bit
of a shared responsibility here
in trying to figure out how to make this work.
It is a little strange that bitcoin--
we don't know who the creator is
and so that often
conjures up the idea that there's
some risk here that we have not--
you don't think it was Al Gore, do you?
( Laughter )
If you think a little broadly,
this could, again, have huge huge implications.
( Chimes )
Daniel: 2013 was the year bitcoin first entered the mainstream
and 2014 got off to a dramatic start.
Just as we were wrapping things up on our film,
Charlie shrem was arrested
after returning from a bitcoin conference in Amsterdam.
He could be facing up to 30 years in prison
on charges related to his activities at bitinstant.
In j.F.K., you walk right off the plane,
and you go straight to customs.
About three agents in front of me
and then four agents behind me said,
"Mr. shrem, please come with us."
They took me to an interrogating room,
told me that I'm being arrested
on federal crimes of money laundering,
running an unlicensed money transmission business
and failing to file suspicious-activity reports.
Daniel: The indictment alleged that Charlie had sold bitcoins
to a reseller that operated on the silk road.
What sucks is the house arrest.
I have to pretty much be here all the time, every day. I can't even go outside
unless I'm going to my lawyer's office, which is once or twice a week.
I pretty much lost my freedom,
lost everything that I've built over the past year.
Daniel: Charlie's arrest wasn't the only bad news
that rocked the community in the new year.
For months there had been rumors that mt. Gox had become insolvent.
And in February the site went offline.
- ( Man speaks ) - ( Karpeles speaks )
Do you still have everyone's bitcoins?
I'm not touching you. I haven't touched you.
Do you still have everyone's bitcoins?
( Karpeles speaks )
( Cameras clicking )
Daniel: The rumors turned out to be true.
( Speaking Japanese )
Daniel: Mt. Gox had reportedly been hacked
and nearly half a billion dollars worth of bitcoin were missing.
Mark was forced to step down as c.E.O.
And mt. Gox went into bankruptcy.
A national magazine claims to have identified
the mysterious founder of the worldwide
digital currency called bitcoin.
Tonight he is speaking out,
but he says he has
nothing whatsoever to do with bitcoin.
Man: Why did you create bitcoin, sir?
Okay.
( Laughs )
Man #2: Sir, can we ask you about bitcoin?
- No no no no no. - Why were you involved in bitcoin?
Okay, I'm not involved in bitcoin, okay?
- Who's involved in it? - Wait a minute.
I want a free lunch first.
I'm gonna go with this guy.
I want a big one. ( Laughs ) Yeah.
Oh, okay. Yeah, this will be good.
- Oh jeez. - We have some water.
Hey, where's yours?
Daniel: "Newsweek" claimed the creator of bitcoin
had not used a pseudonym.
They connected the dots
to a 64-year-old Japanese man
living in Los Angeles...
Named Dorian prentice satoshi nakamoto.
Nakamoto immediately denied the allegations
and said he'd tell his story to the first reporter
who agreed to buy him lunch.
The main reason I'm here is
to clear my name, that I have nothing
- to do with bitcoin... - Yup.
...nothing to do with developing.
I was just an engineer doing something else.
Daniel: As the media frenzy escalated,
"newsweek's" claims started to unravel.
Holes in the story led many to believe
it was nothing more than sensational journalism.
There was no conclusive evidence
tying Dorian to bitcoin.
Amidst the uncertainty,
on that same day...
A comment suddenly appeared
on satoshi's long-dormant profile page which read...
Maybe we'll never know who created bitcoin...
But the truth is
it doesn't really matter.
Bitcoin belongs to everyone.
And the future is ours to build.
( Electronica music playing )
Put $100,000 on market orders right now.
- Why? - Let's do it. Let's do it. Come on.
- Come on. - Why? What's gonna happen?
Buy 100k worth of bitcoins right now.
- Why? - Do it.
- I don't wanna do it. - Do it.
You owe me $100,000. Do it.
I'll send you $100,000 in bitcoins.
No, you buy it. But 100k right now.
Dude, I can't. I need the floating gox for volume.
Closing bell for satoshi square!
All right, does this look right?
1-n-p-w? Yup.
Yup, okay.
And I owe you 0.2?
- Uh... 0.18. - 0.18.
This is for bitcoin t-shirt.
I got 'em. A pleasure, sir.
Great doing business with you.
- Gonna wear your shirt proudly. - Do it.
That's one thing that's interesting about bitcoin.
It's like, how do you declare losses?
You point to two transactions that happened on the Internet
and you tell the I.R.S. That you owned that?
"Oh, I used to own that and I lost the private key."
And then if you really do lose it,
how do you write it off for taxes?
Oh, that's gonna be interesting.
( Thunder crashes )
We love bitcoin.
Okay, guys, we're gonna play a special version of hopscotch
called "bitcoin blockchain hopscotch."
Oh, you lost all your bitcoins!
( Sighs )
Daniel: Who is satoshi nakamoto?
( Chuckles )
I'd... rather not tell you,
- but yeah. - Oh, do you know?
Uh, maybe not, maybe.
Oh. ( Chuckles )
You know, I have a bitcoin and a half myself now.
Which I think probably in 10 years
Voorhees: When you think about it hard enough
on a global scale, this is a net gain for humanity.