(9/) The following post is part 9 of a super long story about how I came around to crypto. Part 8 can be found here. Part 10 can be found here.
It was so rough and difficult to buy digital bitcoins and messing with security and wallets, that I started sniffing around and discovered some physical bitcoins - called Casascius Bitcoins - and I was fascinated by these things. I searched far and wide for one but they were all *extremely* overpriced. I’m talkin like 1 BTC coins would be for sale for the USD equivalent of 2 BTC. It was crazy. But so this guy had physical coins created, then created holographic, tamper-evident stickers that held private keys behind them. Owners could rip off the holographic sticker to reveal the private key and if you entered them into a ‘wallet recovery’ app your BTC was now digital. (This was actually the basis of my Sneaker Savant grading tokens). These Casacius coins were selling on eBay for FAR above the price of Bitcoin and I just couldn’t stomach the thought of purchasing one that could have already been used…again, something eBay nor PayPal would cover. The creator had sold out far before I found out about them but I was itching to find one…
Soon after, I found another company - Titan Mint - that did the same thing. They had different denominated coins (ie: full, half, 1/10th of a bitcoin), so I pooled together some money and purchased one directly from them (for about 40% above market) and put it in a safe. I quickly found out that it was a ‘neat to have’, but really didn’t do anything just locked up in a safe. Kind of dumb if I planned on actually using the currency for anything digital.
Shortly after they emerged - both Casascius and Titan - they had to cease production. From what I understand, they were *creating currency out of thin air*, and the US Government wasn’t down with it.
All these struggles aside, while I was struggling to figure out how to buy bitcoin…a couple of major things happened: the dude who built ‘The Silk Road’, Ross Ulbricht, was arrested a few blocks from where I was working in downtown San Francisco. The Ross Ulbricht thing sounded like a farfetched idea. Like this criminal mastermind was checking his email at a public library and they just happened to find him there? I dunno, I was skeptical. But the movie made it seem believable. And this dude got a LIFE sentence.
But the second thing that happened: Mt. Gox was hacked.
This is something that a lot of people don’t know, but Mt. Gox was largely considered the first exchange where people could actually trade Bitcoin using a digital middle man. At one point they handled 70% of the world’s Bitcoin trades. And even fewer people know that Mt. Gox was actually an acronym for ‘Magic The Gathering Online Exchange.’ Seriously. They started as a place where Magic The Gathering fans could trade their cards and just so happened to transition into trading Bitcoin. That is…until it was hacked..and 850,000 Bitcoin were transferred out to a number of wallets and everyone ended up losing their bitcoins. Scary.
Bitcoin crashed hard after that. No one wanted to touch it. Too scary. (To this day - people are STILL hoping they can get a portion of their losses back from Mt. Gox. It’s not looking good, but the current rate they’ve agreed to reimburse is about 0.23 BTC for every 1 BTC that was lost; which is much, much better than nothing. )
My Bitcoin future was, yet again, on hold. Maybe I’ll just learn how the internet works…maybe things’ll be safer and easier in another year?
And the saga continues…Part 10.
One of the most difficult thing about computer security is authentication: how do I know that you are who you say you are? Regardless how good security technology gets, the problem always comes down to the ultimate fact that we are dealing with humans. Computers execute programs, commands, and protocols perfectly; it's easy to authenticate computers. But their human operators can easily be duplicitous.
To communicate face-to-face is easy: you know who you're talking to, and there is only one person to trust. As soon as a mediator is involved, whether it's a classmate passing along a note, a chat server owned by a profit-making corporation sending and storing messages, or a corporation facilitating a trade of valuable assets, a network of trust is implied, and this makes things very, very complicated. Bitcoin enabled secure, direct party-to-party exchanges of money without the mediation of financial institutions or government-controlled currency, but it did not even attempt to solve the very difficult problems of authentication and trust.