Armstrong, Bitcoin, Fred Erson discussed on Business Wars
Fall 2013, San Francisco. Fred erson exits the caltrain depot at fourth and king, and heads to the creamery, a squat wooden eatery selling coffee and sandwiches. A few months ago, there are some quick Goldman Sachs and headed west, convinced that the future of finance lay in Bitcoin, not the button down Wall Street set. He enters the creamery and looks for the guy he's here to meet. Brian Armstrong, a ballo man, waves at him. Ryan? Yeah, you must be Fred. The two men connected on Reddit after Armstrong posted about needing a cofounder for his Bitcoin startup coin base. There are some like the sound of Armstrong's plan to make coinbase, the simplest place to buy cells store and sand Bitcoin. Armstrong like the sound of versum, the former Wall Street trader turned Bitcoin believer. Armstrong briefs ursa on coinbase's progress so far. The big break came this summer. When I got accepted by Y Combinator, Y Combinator is the Silicon Valley startup school where companies like Dropbox and air-b-n-b began. Y Combinator helped me attract $600,000 of seed funding. Wait a minute. I thought Y Combinator insists on cofounders. It doesn't take single founder operations. Yes, yes, but my cofounder didn't work out. We disagreed about how to manage customers private keys. It was a fundamental disagreement and cofounding like getting married. Y Combinator understood. I see. So what was a disagreement? Well, I want a coinbase to hold the private keys for customers bitcoins. It's ridiculous that people who lose their private keys can never recover their bitcoins. And my cofounder disagreed, he felt holding private keys ran counter to the Bitcoin ethos of empowering people to control their own finances. I'm with you. Normal people don't want to deal with private keys and encrypted software wallets. That's what's wrong with Bitcoin right now. It's full of people on political crusades to tear down the financial system. I don't want to tear the system down. I want to bring it into the 21st century. Armstrong smiles. He's found his man. Ursa and Armstrong, rent an apartment near the creamery and turn it into an office. They pull 16 hour days to get coinbase up and running. In October 2012, coinbase launches, offering a simple website where Bitcoin can be bought and sold with a single click. Simplicity proves to be a compelling proposition. Within weeks, coinbase is struggling to stop its side buckling from the growing number of users. Come January 2013. It's got 40,000 users who are buying and selling a $1 million of Bitcoin a month. And coinbase earns a 1% cut on every transaction. Then in March, an island 7000 miles away plunges into a financial crisis. There's growing anger in Cyprus. Most ATMs are out of money and the banks are closed. People are trying to pull their money after the government announced a proposal to tax everyone's account up to 10%. The money would be taken from citizens to help bail out the country's troubled financial system. The grim news from Cyprus is a gift for Bitcoin. For Bitcoin advocates, Cyprus bank raid is proof of why it's better to stash your wealth in bitcoins that no government can touch. Interest in Bitcoin soars. For the first time, the value of all bitcoins, tops the $1 billion mark. Coinbase's rush of users becomes a stampede. By April, it has more than 100,000 users. But it's still bit instant out in front. Bit instant now handles 35% of all Bitcoin purchases. Its CEO Charlie shrem is now the toast of the Bitcoin world. He's swapped his parents Brooklyn basement for the bright lights of Manhattan. He's even touring the world as an in demand public speaker, spreading the gospel of cryptocurrency far and wide. But behind the scenes, things are falling apart. April 2013, Manhattan. Cameron and Tyler winklevoss march Charlie shrim out the doors and onto Lexington avenue. Their faces are full of thunder. Cameron glares at sram as he props himself up against a window. I've never been so embarrassed in my life. The trio of just met with one of the biggest venture capitalists in financial technology. It was a meeting the twins moved heaven and earth to get. But schramm arrived late, stinking of booze and looking like last night's party never ended. Sram looks up at the angry brothers. Was it really that bad? You were unprepared. You looked high, you dodged every question he asked. Cameron stares at shrimp and wonders if this is all too much too soon. After all, shrem is only 23. You know, sometimes great founders don't make great CEOs. Sram jerks upright. You want to you want to fire me? From my own company? Roger vere was right. You're a pair of suits. Why are listening to roger? He's a felon, the government has a vendetta against him because of his politics. I just think you need to spend less time with him. If you want this to work, you've got to clean up your act. Okay, okay, okay, I screwed up. I'm sorry. But I get it. I'll do better. But deep down, the winklevoss twins sense that a lost cause. He's trapped between their desire to make bit instant the acceptable face of Bitcoin, and veers desire for it to stay true to the cryptocurrencies, libertarian values. But they're running out of time to save bid instant before it goes off the rails. On the next episode, sram gets a nasty surprise. A hacker attacks coinbase, and the law closes in on Silk Road. From wondery, this is episode two of crypto wars for business wars. If you like our show, please give us a 5 star rating in a review and be sure to tell your Friends. Subscribe on Apple podcasts, Spotify, the wondering app wherever you're listening right now. And to listen to episodes one week early, join one replies. You'll also find some links and offers from our sponsors in the episode notes, supporting them helps us keep offering our shows for free. Another way you can support the show is by filling out a small survey at wondery dot com slash survey and tell us which business stories you'd like to hear. A quick note about recreations you've been hearing, in most cases, we can't know exactly what was said. Those scenes are dramatizations, but they're based on historical research. And if you'd like to learn more about the winklevoss twins move into Bitcoin, we recommend the book, Bitcoin billionaires by Ben. I'm your host David Brown. Tristan Donovan wrote this story. Karen Lowe is our senior producer and editor, edited and produced by Emily frost. Sound design by Kyle Randall, a producer is Dave Schilling, our executive producers are Jenny Lauer beckman.