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Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze
By Laura Shin
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In their short history, Bitcoin and other cryptocurrencies have gone through booms, busts, and internecine wars, recently reaching a market valuation of more than $2 trillion. The central promise of crypto endures—vast fortunes made from decentralized networks not controlled by any single entity and not yet regulated by many governments.
The recent growth of crypto would have been all but impossible if not for a brilliant young man named Vitalik Buterin and his creation: Ethereum. In this book, Laura Shin takes readers inside the founding of this novel cryptocurrency network, which enabled users to launch their own new coins, thus creating a new crypto fever. She introduces readers to larger-than-life characters like Buterin, the Web3 wunderkind; his short-lived CEO, Charles Hoskinson; and Joe Lubin, a former Goldman Sachs VP who became one of crypto’s most well-known billionaires. Sparks fly as these outsized personalities fight for their piece of a seemingly limitless new business opportunity.
This fascinating book shows the crypto market for what it really is: a deeply personal struggle to influence the coming revolution in money, culture, and power.
Notes on Reporting
THIS BOOK IS the culmination of more than three years of reporting and writing. It is based on more than two hundred interviews conducted on background, meaning that, for the most part, I promised not to attribute information to any particular source. Not everyone in the book chose to speak to me, but I was able to interview nearly all the main players, including all eight Ethereum cofounders, as well as many additional people whose names do not grace these pages.
To depict events, I combed through archived internet pages, social media postings, block explorers, forums, and other online materials, as well as documents, emails, screenshots, photos, recordings, videos, and other files my sources generously shared with me. In many cases, I was able to re-create dialogue from text chats, and for spoken conversations, I sometimes obtained recordings; when I did not have the language verbatim, I did my best using multiple sources’ memories. I’m especially grateful to the technical people who gave me their time and energy and to blockchain and crypto data and analytics providers Chainalysis, Coinfirm, CoinMarketCap, CryptoCompare, Etherscan, ShapeShift, Smith + Crown, TokenData, and YCharts, who helped me parse blockchain data and track people’s movements on-chain and/or gave me other data, charts, and analytics to paint a fuller picture. For prices, I generally used CoinMarketCap; for earlier crypto history, I used Bitcoincharts and either Mt. Gox or Bitstamp prices, depending on the time frame.
For the infrequent cases in which I wasn’t able to verify specific details around what happened when, I used my best judgment, letting stronger, more specific memories take precedence (unless they could be cross-checked in other ways and disproven) and/or going with the most likely or logical version of events based on other known facts.
In recounting these events, many of which occurred online, I’ve chosen to leave in all typos, mispunctuations, miscapitalizations, and other grammatical and spelling errors without a sic. There were so many that it became more distracting to note them than to let them live on in all their internet-y glory.
To make it easier to follow this unwieldy, “decentralized” story about a subculture with a sprawling set of actors and its own jargon, I’ve included a list of characters up front, as well as a timeline and glossary in the back. However, for those of you who don’t care about spoilers, you’ll miss much of the story if you only skim the timeline.
Disclosure: Some companies in this book have been sponsors of my podcasts and/or videos. They are CoinDesk (owned by Digital Currency Group), ConsenSys, Cosmos, Kraken, Microsoft, ShapeShift, and Tezos. Also, in September 2021, I began writing a Facebook Bulletin newsletter.
List of Characters
Vitalik Buterin, creator of Ethereum
Mihai Alisie, founder of Bitcoin Magazine
Anthony Di Iorio, founder and chief executive officer of Decentral, funded Ethereum pre-crowdsale
Gavin Wood, started C++ client, chief technology officer (CTO)
Jeffrey Wilcke, started Go client (Geth)
Charles Hoskinson, CEO
Joe Lubin, chief operating officer (COO), founder of ConsenSys
Amir Chetrit, cofounder of Colored Coins, a Bitcoin-based project
Ethereum Leadership Group
Taylor Gerring, director of technology
Stephan Tual, community/communications, chief communications officer
Staff in Zug, in the Spaceship
Roxana Sureanu, executive assistant
Mathias Grønnebæk, operational manager
Ian Meikle, graphic designer
Richard Stott, graphic designer
Jeremy Wood, Charles Hoskinson’s assistant
Lorenzo Patuzzo, carpenter
ETH Dev in Berlin
Aeron Buchanan, Gavin Wood’s friend and business partner
Jutta Steiner, chief of security
Christoph Jentzsch, lead tester
Christian Reitwießner, C++ team/Solidity
Péter Szilágyi, Geth team
Lefteris Karapetsas, C++ team
Alex van de Sande (aka Avsa), user experience (UX) designer
Bob Summerwill, software engineer, C++ team
Kelley Becker, COO
Frithjof Weinert, chief financial officer
Christian Vömel, office manager
Ming Chan, executive director
Lars Klawitter, board member from Rolls-Royce
Wayne Hennessy-Barrett, board member from Kenyan fintech start-up
Vadim Levitin, board member; physician and technologist with United Nations Development Programme background
Patrick Storchenegger, board member, Swiss lawyer
Hudson Jameson, Ming Chan’s assistant, DevOps (development and operations), helped with DevCons
Jamie Pitts, assisted with DevCons
Toya Budunggud, Ming Chan’s assistant
Christoph Jentzsch, cofounder, CTO of Slock.it
Simon Jentzsch, cofounder, CEO of Slock.it
Stephan Tual, cofounder, COO of Slock.it
Lefteris Karapetsas, lead technical engineer at Slock.it
Griff Green, community organizer at Slock.it
Robin Hood Group
Jordi Baylina, programmer in Barcelona who took the DAO ninja course
Alex van de Sande (aka Avsa)
Fabian Vogelsteller, Ethereum Foundation front-end developer eventually credited as the “father” of the ERC-20 token standard
White Hat Group (Known Members)
Gian Bochsler, one of four cofounders
Alexis Roussel, one of four cofounders, CEO, and chairman of the board
Taylor Van Orden/Monahan, cofounder and CEO
Kosala Hemachandra, cofounder and CTO
Poloniex (aka Polo)
Tristan D’Agosta, founder and co-CEO
Jules Kim, COO and co-CEO
Mike Demopoulos, co-CEO and chief experience officer
Ruby Hsu, management consultant
Johnny Garcia, head of customer support
Tyler Frederick, senior compliance specialist
IN THE END, it took only seven weeks to trigger the slow-motion toppling of global finance and, though no one saw it then, begin upending the centuries-old method for establishing societal trust.
On September 15, 2008, the 158-year-old investment bank Lehman Brothers filed for the largest bankruptcy in history. Television and computer screens worldwide broadcast images of its twenty-five thousand employees streaming out of the firm’s global offices, carrying their belongings in bankers’ boxes.1 The same week, the sixty-thousand-strong “herd” of Merrill Lynch, the world’s largest brokerage, whose bull logo also symbolized Wall Street, suddenly found itself reporting to a group of what some employees saw as “hillbillies” at North Carolina–based Bank of America.2 In mid-October, the S&P 500 suffered its worst week since the Great Depression, while the Dow’s loss broke its Depression-era record.3 But the damage wasn’t contained to one week: year to year, as much as $8.4 trillion in investor wealth had vanished. And then, although it generated no news at the time, on October 31, a person or group named Satoshi Nakamoto published a white paper that described how people could bypass banks and use the internet to send each other money.4
Over the next nine years, during which a seven-year stretch of 0 to 0.25 percent interest rates managed to produce only the slowest economic recovery in history, this strange new network attracted a peculiar pastiche of supporters.5 Geeks were seduced by its magical fusion of cryptography, game theory, and the age-old ledger. Drug users loved it because, instead of having to meet strangers on street corners, they could have their postal carrier deliver illicit substances with a few mouse clicks. Libertarians adored its potential for enabling people to transact outside the thousand-year-old system of government fiat currencies. Silicon Valley entrepreneurs dreamed it could form the foundation of a faster, cheaper financial system. And the 1 percent, investing either on their own or through hedge funds and family offices, grew a taste for returns of not just 10 percent but 100,000 percent from this futuristic asset: bitcoin.
What was so revolutionary about it was simple, really. Previously, whenever someone sent something on the internet, he or she was always sending a copy. So, if Alice sent Bob a PDF, photo, or text message, she always had a copy of that PDF, photo, or text message. With bitcoin, for the first time, she could send him something online, and everyone in the world could be certain that she no longer had the item (in this case, a bitcoin), that Bob now had it and therefore Alice could not spend a copy of it elsewhere. Better still, even if Alice were in Afghanistan and Bob in Zimbabwe, he could have the money in ten minutes, and Alice would have paid a fee of just a fraction of a cent rather than exorbitant fees of $30, $50, or more for an international wire transfer that could take a week. Making all this possible was a blend of technologies called a blockchain.
Technologists quickly understood that a blockchain could be applied beyond Bitcoin. In the aftermath of credit default swaps and banks’ confusion over which balance books held bad mortgages, even stodgy, marble-halled incumbents, perhaps mindful of the Occupy Wall Street protesters who had once camped out a stone’s throw from the former headquarters of Merrill Lynch and Lehman Brothers, could see how novel a blockchain was. Soon financial institutions as powerful as JPMorgan Chase, Nasdaq, Visa, HSBC, State Street, UBS, Santander, and many others worldwide began exploring the technology. In late 2015, “Blockchain, not bitcoin” became the mantra on Wall Street, and from January 2014 into February 2017, more than fifty financial services firms invested in the space.6 Throughout 2016, firms raced to be the first to adopt “permissioned” (or private) blockchains akin to private intranets. Having seen what the open, permissionless internet had done to the media and music industries, they knew what happened to those who didn’t at least attempt to innovate: disruption.
But before any of those private blockchains could be implemented in any meaningful way, a new idea got the attention of investors large and small: initial coin offerings (ICOs). A cross between a Kickstarter campaign, an IPO, and bitcoin, ICOs enabled projects to raise funds in cryptocurrency by giving people a new token, and they took off, showing how quickly a tsunami of economically incentivized developers could raise money to shake up financial services. In 2017, everyday people from Argentina to Zimbabwe disbursed $5.6 billion worth of digital coins into decentralized projects aiming to disrupt titans such as Amazon, Facebook, and Apple, dwarfing the paltry $558 million of venture capital investment in the space, and making these hot but speculative, and even scammy, investments more democratic than those owned by a small number of big-money firms.7 By the end of the year, an asset class that had started 2017 worth $18 billion had ballooned thirty-four times to $613 billion. Two massive commodities exchanges—including the storied CME, which had been founded in 1898 as the Chicago Butter and Egg Board and, the year prior, had cleared more than $1 quadrillion worth of contracts—began trading rival bitcoin futures contracts within a week of each other.8 The price of bitcoin, which had started the year around $1,000, flirted with $20,000. Another asset, ether, from a newer blockchain, Ethereum, created by Vitalik Buterin, saw an even steeper rise from $8 to $757, a return of ninety-five times in less than a year. Early adopters who were now millionaires (or just a lot wealthier than they’d been a year ago) glutted Reddit with “Lambo” memes—or actually bought the Italian sports car. Bitcoin’s every price jump was recorded for posterity and hashtagged #tothemoon on Twitter, where discussion of Bitcoin grew at unprecedented rates.9 And to think—it had all begun nine years earlier as a quiet white paper proposing a “peer-to-peer electronic cash system.” That obscure submission to the cypherpunk mailing list for encryption enthusiasts had now snowballed into the phenomenon that every cable news channel, website, magazine, newspaper, podcast, and video was breathlessly covering: “crypto.”
To understand how we got here, let’s go back to a mid-November day in 2013, to where the roaring blue Pacific meets San Francisco’s green northwest tip, the Presidio. There, amid the forested hills, eucalyptus-scented air, and remnants of the Spanish Empire and the Gold Rush, walks a lanky nineteen-year-old.10 A few years ago, he was earning $4 per hour writing about a breakthrough technology; now, he is noodling on a new computer science problem. In less than five years, the solution will be worth more than $135 billion.
1994 to January 20, 2014
VITALIK BUTERIN WAS like a seed that had been blown far out of its habitat and struggled to take root in its new environment but was about to find the right soil in which to grow tall and flourish. Commonly described as “alien” by all manner of people—both strangers online and close collaborators, by those who meant it affectionately as well as those who didn’t—Vitalik exuded an awkwardness that practically manifested physically. His father was tall and muscular with a round face and a soft smile. His mother was blue-eyed and petite, with curly red hair and full cheeks. But with Vitalik, it seemed as though, before birth, his whole body had passed through a fun house mirror. His build was tall and slight, his gait gawky and stretchy. His nose was pointy, his ears craned forward to hear, and his chin jutted into the future. His deep-set, blue eyes were burrowed in so far, they didn’t seem to be windows to the soul so much as the soul itself, peering out, and the top of his head stretched up and out, as if to make a statement about the intellect housed within.
It was the fall of 2013, and he had been ruminating on an idea he was calling “cryptocurrency 2.0.” In February 2011, when he was seventeen, his father had told him about Bitcoin, a new currency not controlled by the government or banks. Vitalik had at first ignored it, thinking it was a weird digital token with no intrinsic value, though it was trading at roughly eighty cents. But after seeing another reference to it a couple months later (in April the price surpassed $1, then $2), he figured he should research it more.
Since then, he’d written extensively about Bitcoin, had paused college to travel and hang out with the global Bitcoin community, had become an owner of Bitcoin Magazine, and had worked as a freelance cryptocurrency developer. After several months in Europe and Israel, plus a pit stop in Los Angeles, he was in San Francisco, working out of the office of a cryptocurrency exchange called Kraken and staying in the cofounder and CEO Jesse Powell’s apartment. But the problems he saw with blockchain technology, which make cryptocurrencies like Bitcoin possible, gnawed at him.
Bitcoin was built for payments. The Bitcoin white paper was subtitled “A Peer-to-Peer Electronic Cash System.”1 Developers were now realizing Bitcoin’s underlying technology could also be used to create things like a decentralized domain name system or to underpin more complex contracts like bets.
The problem, Vitalik felt, was that each project was building a blockchain for one function, like a calculator performing basic arithmetic. A few blockchains were trying to be more like Swiss Army knives with multiple functions. But still, each of those would lose out the second a blockchain came along offering a new function. Vitalik wondered why they couldn’t be more like smartphones, able to support any application created by any developer, who could then upload it App Store style to be used by anyone.
Finally, Vitalik, long an avid rambler, spent a few hours wandering the Presidio. In the hilly, wooded former army base, an expanse of green with incredible views of the Golden Gate Bridge, he worked out how to create one blockchain on which people could perform all these functions, forming a decentralized computer that could support many kinds of applications. He wrote up his idea in a white paper. On November 27, 2013, the same day Bitcoin crossed $1,000 for the first time, he emailed it to thirteen friends.
Though he thought his idea was the next logical step with blockchains, he wasn’t sure why something so obvious—a blockchain that wouldn’t quickly be rendered obsolete—hadn’t been done before. Perhaps the design had a fatal flaw. He could imagine accomplished cryptographers reading his white paper and putting him, a nineteen-year-old with two terms of college, in his place. His fears weren’t unfounded. Although he was unaware of it, when he went to Bitcoin conferences to staff the Bitcoin Magazine booth, sometimes technical people—even if he said he was interested in technical matters—would think, Yeah, right, and peg him as “a magazine person” who couldn’t “possibly be interested in the really cool stuff.” Nevertheless, he clicked send.
VITALIK WAS BORN in 1994 in Kolomna, Russia, a town of more than 150,000 people seventy miles southeast of Moscow whose major landmarks lent it a Disney-like air. His parents, Dmitry and Natalia, two computer science students, finished their college degrees in Moscow with the help of their parents, who looked after him as a baby; when he was three, they separated. Both his parents ended up working for American companies—his father at Arthur Andersen before starting his own ventures, his mother at Heinz, where she switched from programming to finance and accounting, before jumping to other multinationals. Later, Natalia moved to Canada to get a business degree in Edmonton, and a year and a half later, by which point the couple had divorced, Dmitry followed with six-year-old Vitalik, settling in Toronto.
From the beginning, it was apparent that Vitalik was smart. Natalia’s father taught him the times tables when he was three or four years old. On a doctor’s visit, where five-year-old Vitalik ran around the waiting area multiplying three-digit numbers, other patients widened their eyes in disbelief. Like his father, he began reading at around age three, and because Dmitry had dreamed of getting a computer when he was young but hadn’t been able to, he excitedly gave Vitalik a computer at age four. The boy loved playing with Excel and eventually produced the seven-year-old’s equivalent of an Excel masterpiece, “The Encyclopedia of Bunnies,” a treatise on the lives, culture, and economy of the long-eared, short-tailed creatures. The table of contents contained sections such as
How long does it take to eat one ship?
When did the bunnies pass the weight 100 tons?
When will they die?
When did they start fighting with bombs?
How do they use a bunny card?
How do they earn money?
At what temperatures can bunnies live?
How can bunnies pass the speed of light?
What number system do bunnies computers use?
The text read,
How much do the bunnies weigh? Tons. They weigh about 614.3 tons by the year 2000… What do they drink? A bunny drink. How to make that drink. Step 1: put ships in the blender and grind it. 2: mix it with water. 3: take the ships out… How many man and women bunnies are there? There are: 8 men. There is only 1 woman. That is the cat… How do bunnies use their credit card? They put their card in the machine and hold A. They put their card in the machine and hold B. How much money you want to take? Then wait two seconds, and they take their card out. They take the card that’s paying.
There was even a bunny periodic table.
Despite how precocious Vitalik seemed on the computer—he also played and developed video games—talking to him gave a different impression. For almost his first decade, he barely spoke. He would start to express himself, then find it difficult, get frustrated, and give up. Dmitry would see other six-year-old children speak in long, complicated sentences, but Vitalik would talk in random little bursts. His stepmother, Maia, Dmitry’s second wife, thought Vitalik did not always connect the vast thoughts in his internal world to life on earth. She and Dmitry would tell Vitalik, “If you need something, stop, formulate it.” Although Dmitry worried about Vitalik’s delayed speech, he didn’t take Vitalik to a therapist, thinking psychological labels would be unhelpful.
Finally, when Vitalik was nine, his speech began to blossom, but his newfound communication abilities didn’t translate into social success. Loneliness marked his early years in Toronto. He and Dmitry settled in on the fifth floor of a thirteen-story building in North York in an area with many Korean shops and restaurants. Vitalik attended public elementary and middle schools with mostly Asian kids. But his isolation didn’t come from having a different heritage. In junior high, he suddenly realized his classmates were hanging out after school—they’d go to each other’s houses and have parties and get-togethers. Not only was he not a part of that, but he had no idea how to be part of that. His sense of solitude cemented. He just wished he could be normal.
Then came a turning point. For high school, he enrolled in the Abelard School, a private academy with a total student body of fifty across all four grades. Founded in 1997 by a group of teachers, Abelard boasted a student-teacher ratio of 5:1 and an average class size of ten.2 It had a preschool’s atmosphere of trust and informality but a graduate school seminar’s structure and intellectual rigor. (Also, Abelard’s student body was mostly white, a shift he found jarring.)
Vitalik excelled academically. He took twelfth grade calculus in ninth grade, won a bronze medal at the International Olympiad in Informatics in Italy, and competed in National Model United Nations in New York City.
- On Sale
- Oct 24, 2023
- Page Count
- 512 pages