NOTE FROM EDITOR: This is the original article written for Penthouse Magazine, assigned in December 2012. Due to the volatility of the virtual currency at that particular time, the author’s editor was not confident that with a typical six-month lead time for magazine publication bitcoin would still even exist by the time it hit shelves. What ensued was a year-long editing/rewrite process, which led to a much pared-down version titled “Bitcoin Basics” in the Spring 2014 issue of Penthouse Magazine.
By Robin Postell
Ignore the facade, see the turmoil, and captureJon Matonis
what most don’t want to be seen.
The Department of Homeland Security has let me down, along with countless others all over the world. Now a Cook County sheriff deputy’s blue lights are flickering in my rear view.
Sweat and tears are clear to the deputy even a couple of car-lengths apart, and I can’t care. I just let it rip.
Summer sits down on Southwest Georgia this time of year and doesn’t get back up till mid-September. I’m hot, bothered, and Scout howls from the pet carrier riding shotgun in my Cadillac.
Windows down, music blaring, I glide off onto the long slip of Exit 29 and make a left onto Highway 37 before pulling over on the shoulder – a mere mile from my destination to deliver the howling kitten to my friend, BD; I don’t even bother putting on my seat belt to pretend I’m law-abiding.
My sobbing has been steady since I woke up and discovered Mt. Gox, the Japan-based international exchange for bitcoins, was seized by DHS, meaning I would have to modify the article gestating in me for weeks. I also avoid thinking about the fact I still haven’t added the Eldorado to my insurance policy and I might have been exceeding the speed limit by 20 mph.
Instead of pulling in behind me the deputy glides up parallel, rolls down his passenger window – suspended in the mid-air fast lane of a fairly busy East-West thoroughfare.
“You ok?” he asks. I knew he had been tailing me for miles on Interstate 75
In a cathartic gush I unload on the deputy, telling him that I’m under deadline and my best friend just had a baby and my boyfriend was tired of kittysitting because he’d been unable to sleep for the past two nights because of it playing with his feet and I’m writing a piece about bitcoins for Penthouse, due in the morning.
“Bitcoins?” he says. “Lemme pull over.”
For the first time in my Penthouse history, the topic I’m writing about gets more attention than the magazine I’m writing for. It’s a sign.
The day gets brighter and I don’t mind because the heat turned out to be cool. I stop crying.
The traffic thunders past as the deputy adjusts his heavy uniform and sidles up next to my car. “Bitcoins?” The newly-deputized member of the Cook County Sheriff’s Department has been getting constant updates via his smartphone from his friend down in Florida who’s been telling him about bitcoins.
He asks me, “What are they at?” and I tell him, which is the best conversation I could be having with this deputy. I’m covered with snot, sweat, and tears – and uncovered by my Geico policy.
“What about Mt. Gox?” he says, which roused my love for the law. What were the chances I’d find somebody with which to intelligently converse on a topic at once obscure and trending hot as this Georgia sun? Another sign.
The Department of Homeland Security, I tell him, seized Mt. Gox – the Tokyo-based bitcoin trading platform, and the biggest in the digi-bucks bitcoin biz. Other exchanges exist but Mt. Gox is the leader – and till now the most resistant to hacking, theft – which had shut down many.
Mt. Gox and its CEO, Mark Karpeles had been in the hot seat to the tune of $75 million, when its U.S.-liaison, CoinLab, and its acting CEO Petter Vessenes picked up stakes as Mt. Gox’ stateside HQ it’d been sharing with CoinLab in an effort to transition North American clientele to CoinLab.
Unfortunately, this hadn’t gone over well, making it all the more difficult,
I tell the deputy, because Karpeles and Vessenes aren’t just business partners, they are actually founding members, and on the board of directors (Vessene the Executive Director) of the nearly-year-old Bitcoin Foundation.
Two bitcoin big ballers, recently joined to serve the needs of bitcoin as a facilitator/support crew for the bitcoin software users, both current and potential.
Outreach globally with foreign chapters had been laid out as part of the Foundation’s mission; understanding bitcoin’s widespread adoption hinges on the critical learning curve almost everyone not involved with bitcoin yet would ultimately face when introduced to it for the first time.
The deputy who can talk shop gives me his blessing and tells me have a nice day and I aim to.
Since it is a near-holy venture discovering how ignorant I have been about Austrian Economics and cryptography – not to mention cypherpunks – I feel that introducing none other than the bitcoin community’s own personal messiah, Roger Ver, 34, aka Bitcoin Jesus, right out of the gate is the best course of action.
Ver believes in bitcoin – this open-source, peer-to-peer crypto-cash developed in 2008 by a pseudonymous creator, Satoshi Nakamoto.
Ver pays the originator a debt of gratitude but does not bother with by-now banal questions of who he, or they, might be.
If anybody knows, nobody’s saying, and never will.
Ver is as good a candidate as any, I think.
And there it goes again.
The won’t-go-away romance of Nakamoto’s mystery is part of what drives bitcoin into the stratosphere.
People yearn for discretion, in themselves, in others. The cultural deletion of anything remotely private makes all of us drool when encountering the phantom presence of a genius coder whose face remains forever obscured by the shadows of the Dark Net passageways on which he saunters moodily – a cyber-Healthcliff and everyone, male and female both, his tempestuous Catherine.
Ver doesn’t seem exactly suited for the Nakamoto role, although he’s given me plenty of reasons, tiny hints here and there, that at least suggest a possibility.
At first, I was convinced that he and his cronies, other members of the insider bitcoin gaggle, were the cohesive, but detachable consortium that was Satoshi Nakamoto.
Ver, I surmised, along with Forbes contributor Jon Matonis, who happened to be the former CEO of the Dublin-based anonymous email company, Hushmail, were in on the gig.
The core group which populated the Bitcoin Foundation, at least in part, must have some affiliated involvement with a concerted movement based on their involvement with Austrian economic philosophy and laissez– faire approach towards everything.
Ver, too, has the affliction of a felony conviction that cost him 10 months of his life back in 2002 and 2003 for trumped up charges involving the sales of fireworks used by farmers to scare off critters in their fields, a product sold in Cabela catalogs.
This assault of his civil liberties resulted from his 20-year-old Libertarian bravado during his candidacy for the California State Assembly back in 2000.
During a debate – in typical Ver fashion, unfiltered and free – he began a thorough verbal dressing-down of the ATF and how they had been responsible for the deaths of the Waco, Texas compound crew.
ATF was in the crowd, took offense, and as men will do, set out to defame the young liberty-bell-ringing Ver. With only the fireworks to work with, they framed it as if he were McVeigh wannabe, or gonnabe.
He vowed to flee the U.S. as soon as he was out of jail and done with his three-year probation. The day he was set free he boarded a Tokyo- bound flight.
Ver began building a business he’d begun while a student, MemoryDealers.
This comic book plot seems appropriately Satoshi-esque, at least in theory.
Trouble is, there are others.
Ver, who grew up in the same Silicon Valley where he now has a huge Bitcoin billboard, recalls his gifted youth when he made a killing using Rice Krispies Treats as a form of fiat currency, selling to his friends.
Ver moved onto Beanie Babies, and to Magic The Gathering Card Collecting – which coincidentally (or not) transmogrified with the advent of bitcoin into the Mt. Gox bitcoin trading platform. (Another coincidence : when he got out of the pen and moved to Tokyo he wound up living right up the street from the exchange.)
Ver has interests in numerous bitcoin-related startups, which have recently garnered the attention of major venture capitalists.
His name is showing up next to theirs in posts about this or that bitcoin startup, with shiny happy people grinning scalp-to-scalp looking rich and copasetic.
Where Ver got all the dough is presumably from his two businesses, MemoryDealers and Bitcoinstore, but maybe it’s from all those millions of bitcoin he mined off the first blocks of the bitcoin’s famous Genesis block – set into motion on January 3, 2009.
When he was Satoshi Nakamoto.
Ver will never relinquish his role as Ver, therefore Nakamoto’s identity is safely obscured if it is Ver – which I doubt.
But there are others, people who, in my estimation, would – as a team – be able to pull a coup off of this proportion with the kind of zipped-lip crypto-cypherpunk, anarcho-capitalistic stoicism necessary to dupe the jackboot thugs running all the corrupt shows in town.
Could they be the counter-cabal, this bitcoin-brood of faithful devotees?
Ver answers all my queries with the matter-of-fact bluntness of a robot, but when he starts talking about bitcoin – the principles, the possibilities – he glows.
The bitcoin world would not be the same without Ver – even though the original hub, bitcoin.org, where Nakamoto hung his hat during his brief exchanges while launching bitcoin to a select group of developers he called upon to help him tweak and critique it in 2009-2010, has deliberately removed him as a potential interviewee to rep bitcoin in the press.
The loose membership of bitcoin.org is an arbitrary collection, therefore their consensus regarding Ver, or his friend, Forbes contributor Jon Matonis, as inappropriate bitcoin reps is questionable.
People always are, though.
Ver assures me he could care less, and that is understandable. He’d rather confess the reason he is referred to as “Bitcoin Jesus,” which breaks down to him one day being spotted surrounded by a flock of high schoolers who eagerly hung upon his bitcoin parables, showing them how to set up their smartphone wallets – and issuing each of them a dollar’s worth of bitcoin to get them started.
“Somebody said I looked like Jesus surrounded like that and it stuck I guess,” Ver shrugged.
“Bitcoin is the most important invention since the internet,” Roger Ver declared with his typical Alka-Seltzer-enthusiasm. “The internet changed the world – giving everyone equal access to information. Bitcoin is going to do the same thing to finances. Now anyone will be able to do business with anyone else, anywhere in the world, free from the arbitrary control of dictators and petty politicians.”
Bitcoin in a nutshell is a virtually-rendered system of value, much like cold hard cash or sit-there-and-look-pretty gold; each is dependent on consensus of worth.
This is a matter of faith.
Ver’s understanding of this is a bit of a learning curve, just as Nakamoto had been quoted once saying bitcoin had so much potential if it could be explained right – but admitting he was more of a coder, not a word-guy.
Ver is giving it a run for his bitcoins, spreading the word – a sweeping phrase he uses liberally.
“You don’t have to trust anyone,” Ver says, “just the rules of mathematics.”
The problem with this is that most people don’t trust mathematics because they don’t understand mathematics; and a lack of understanding inevitably intimidates and isolates those it would benefit most.
Ver and other earnest bitcoiners set up the Bitcoin Foundation, officially announced as a bona fide bitcoin facilitator back in September 2012.
The five-man board of directors, which included Jon Matonis from Forbes (who also had a banking background with Visa and VeriSign), was spearheaded by an executive director, CoinLab CEO Peter Vessenes.
The Bitcoin Foundation kept a poker face and stuck to their mission; an adjustment bureau, its members would be able to – not control – but engage, educate and provide outreach to those in the outermost regions of the globe.
Countries where currency was inaccessible, or red-taped into obsolescence, would be verdant bitcoin locations on which Foundation chapters could focus.
The possibilities for heavily censored foreign countries with citizens cut off from the rest of the world.
Suddenly, they could feasibly find an unprecedented salvation in the uncontrolled bitcoin, able to cross all boundaries and use the universal language of math to connect a network which could grow and prosper in a way never before considered possible.
Matonis Hushmailed me, and I began to understand and appreciate the multitudinous dimensions of bitcoin’s cast of characters.
Matonis, for instance, an illustrious and prolific writer, editor of The Monetary Future blog (a swank economist hub) had the dashing savoir faire rarely combined with the brainiac depth of a math-club tech-geek. He was working off both sides of his brain and doing it well.
“Satoshi emailed me out of the blue in early 2010,” Matonis Hushmails me. “He asked me to take a look at his paper and architecture. He’d been mining himself for over a year – I wish he had told me to buy because bitcoin was only a few cents then. Then he vanished, poof!”
Admittedly, the notion of viewing his archived Satoshi email makes me flush. What is it about a masked -or in this case, invisible – man that is a turn on?
The Hushmails from Matonis, the encrypted wallets, the intellectual stimulation has turned sexy and it’s abrupt, intense and flattering.
You cannot deny the sensational, clever genius pulsing throughout the bitcoin protocol and all the connected personas interrelated through its manifestation.
Bitcoin represents a classic ghost story – the haunted past of the world as it was, and the little friendly bitcoin poltergeist, exhibiting all the typical traits of a mischievous, single-minded rugrat.
Running and jumping and playing, up and down, round and round – bitcoin was the ephemeral equivalent of a spiritual entity.
Bitcoin has to be held fast in the mind, not in the fist – and this is the most difficult for our tactile culture to accept.
Bitcoin means different things to different people, and that I think is the central theme threaded throughout.
Different countries will use it to serve different purposes, and different people will rely on it for completely alternative avenues of transactions they choose to keep private – or not.
The adaptability of the bitcoin protocol is a rare feature of a currency – which is why P2P is the defining element between Nakamoto’s virtual cash and ones which have preceded it ever since 1989 when Tim Berners-Lee conjured up the “WorldWideWeb.”
This diversity is inherent in anything as diverse as bitcoin, given its open-source platform.
“The strategy of the bland bitcoin promoters is to keep it scientific (not political) which I think is ridiculous because it doesn’t fool anyone,” Matonis writes me when I ask him what he thinks about bitcoin.org’s press page nixing he and Ver from its list of potential interviewees as bitcoin reps. “It’s not like the regulators are going to say: ‘Well, this bitcoin stuff seems harmless enough, I don’t think it has any political ramifications for the health of the Nation-State.’ Besides, the genie is out of the bottle and editorials will be everywhere so their strategy is a fail on many levels.”
Matonis’ spin is the inherent natural right of financial privacy, “just like we have with paper cash today,” adding, “Don’t take that away from me and don’t drone me. We will never know who Satoshi really is and it doesn’t matter. Some have speculated that he is no longer alive.”
He includes a well-researched blog by someone who had traced the blockchain all the way back to Satoshi’s mined bitcoins and had determined each and every one through a presumably spine-cracking stretch of tedium which were his – still there, untouched, and worth millions.
Satoshi is bitcoin’s eternal flame, I inwardly muse.
“I believe that to make bitcoin palatable for the masses, you have to demonstrate the value of a monetary illusion outside of the control of the overlords,” Matonis asserts. “It’s a simple enough premise.”
Matonis elaborated about how bitcoin was somewhat erroneously referred to in the press as “anonymous,” when anonymity was user-defined.
Using PGP (Pretty Good Privacy), bitcoin adopters could also adopt the right combination of processes to erase themselves.
Considered too much trouble by most, Matonis learned how unmotivated most people were when it came down to implementing a few extra measures to obfuscate their communications and protect their sensitive information, including passwords and bank account numbers.
Nuts and Bolts:
The total number of bitcoins that will ever be mined is 21 million, and over half of those have already been forged and in circulation. Worth mere cents at the onset, they have risen slowly, chugging on through the years as they near a 5th birthday.
The last bitcoin will be issued in 2040 at which time it is anyone’s guess – even for the biggest brains in the room – where any of us will be. It is said that bitcoins could survive a nuclear attack.
Bitcoin “miner,” and blogger at www.codinginmysleep.com, David Perry, broke it down for me:
“One of the first things people want to know about is bitcoin mining. These people tend to fall into two categories: there’s one group for whom ‘it’s a SHA256-based proof-of-work system to solve the Byzantine Generals Problem’ is an adequate answer, then there’s the 99.999% of people who don’t have an advanced degree in information theory…
“I find it’s most effective when people put themselves in Satoshi’s shoes. Imagine you’re inventing a new kind of currency but you don’t want there to be any central authority. There are two big problems you run into that are traditionally solved by a central authority: timestamps and issuance,” Perry says.
Without a central authority to make that decision, how would you decide which transaction was first?
The simple answer in a big peer-to-peer network like Bitcoin is for each member of the network to accept the first transaction it sees, and take a vote of sorts – and whichever transaction was seen first by the majority of the network wins.
There’s a little more to it than that, but mining is essentially the voting mechanism by which the network reaches a consensus without requiring a central authority.
Mining is absolutely essential to bitcoin longevity. A problem conceivably could arise from the mutiny of miners, for without them, bitcoins cannot be decentralized.
As the number of bitcoins produced reduces through the years and the higher level of “difficulty” continues to ascend, the number of miners would, respectively, be reduced.
How does this not place in the hands of the few the ultimate control of a runaway currency which was set in motion by developers trusting the good-heartedness of a few egghead hearties like David Perry?
Thirty year-old Perry lives in Las Vegas with his wife and is the bright-eyed, rosy-cheeked sweetheart of the bitcoin mining community – whose blog serves as a go-to source for many looking for illumination in this most nuts-and-bolts end of bitcoin mechanics.
On the backs of individuals like Perry are routed the dreams of the moral architecture and design of bitcoin’s protocol.
“Bitcoin is what happens when a bunch of my fellow geeks realized that the stuff the banks are doing isn’t really difficult or complicated,” Perry explains in his cogent, matter-of-fact delivery. All they’re basically doing, he explains, is keeping a ledger of how much is in which accounts and allowing or denying transactions based on that ledger.
The three-day inaugural event held in San Jose May 2013, made possible by the auspices of The Bitcoin Foundation, brought together a thousand-strong crowd of enthusiasts, developers, CEOs, venture capitalists and media to listen to all the key players talk shop and rub shoulders with one another.
Identical twins Cameron and Tyler Winklevoss of Facebook fame delivered the keynote speech – putting a shiny-happy-face on bitcoin’s renegade perception.
To make nice with the big boys, it was beginning to sound like bitcoin had to grow up, turn into Bitcoin, stop being plebeian and paranoid, learn to behave and have some manners – learn how to lie better, for chrissakes.
Regulation and regulators – what? Did bitcoin ever say no regulators?
Peter Vessenes in a whimsical and brief speech announced that his appearance was a “swan song” as executive director, attributing being “busy” for the reason he was stepping down.
The new executive director, he assured, was somebody they would all like and know soon. He says the Foundation will be hiring a lobbyist to tackle the Hill – and engaging in open, civil conversations with regulators, domestic and foreign, about how best to please them and the Foundation.
The crowd applauded jubilantly and I wonder if they are drunk enough to not hear what he is saying, merely floating along and following his tones the way dogs respond to any tone instead of an actual word.
“Regulators want to regulate,” Ver responded. “And they will lock you in a cage and take your things if you don’t obey what they command. Bitinstant and all other Bitcoin businesses will need to obey the people with the guns.”
Ver, of course, has a first-hand account of what happens when you don’t play nice with the jerks playing cops and robbers, although he has often made a point of saying that math will not flinch when faced with a drawn gun.
Bitcoins don’t bleed…yet.
Mike Gogulski, a naughty Florida-born hacker who wound up stateless living in Slovakia is a lifetime member of the Bitcoin Foundation and when he watches the Vessenes podcast off YouTube he unleashes a maelstrom of vitriol on various websites, blogs, Twitter.
Owner of bitcoinlaundry, sold to him by Vessenes, news of Vessenes federal ass-kissing riles the anarchist to a spitting blind rage.
“Sending Bitcoin to DC is like sending My Little Pony to the veterinarian,” Gogulski seethed. “Accept the vet is actually there to help. Despite my rantings, for me it’s not about purity either, but about the Foundation running off in a direction starkly counter to the motivations of a good many members, without any consultation at all. I believe I also heard Peter Vessenes say, in that opening pitch, that there would be a Bitcoin Foundation members’ meeting during the conference. I guess that means that I’ll be getting an invitation with a teleconference number soon(?).”
Gogulski is a character of extremes; his past peppered with infractions and genius. With a noteworthy hacking past. Gogulski had his ass spanked but managed to carry on without being thrown into the dungeon and left to wither along with democracy, the First Amendment, and people like Bradley Manning.
The 23-year-old Army private who leaked thousands of damning documents to Wikileaks beginning in 2010 was thrown into Ft. Leavenworth and court-martialed – and anyone who has been on Facebook has seen the random individuals holding up “I AM BRADLEY MANNING” posters if they are not blind and illiterate.
The Bradley Manning Support Network is compliments of Gogulski, who, after renouncing his citizenship and moving permanently to Slovakia, took on the weight of the world – a proverbial Atlas who has not yet shrugged, preferring to bear the weight of it and let it purge his demons by spewing foul-yet-pedantic criticisms of the responsible parties for adding girth and heft to his burdensome back-breaking load.
Gogulski emails me his list of quotes which best sum of his total disgust and I am abundantly aware of this individual’s odd and special pedigree. Gogulski, without citizenship, about to be married with the first ever bitcoin-themed wedding, is what bitcoin stands for in many fundamental ways. His political position as anarchist is laurelled with a predilection for imbibing strong drink and smoke, which only fuels his fire rather than squelches it.
“Bitcoin’s current bulls are being led down a merry road to perdition and straight into the maw of the very monster that Bitcoin itself was devised to slay,” Gogulski wrote. “Those calling for regulation and lobbying, to me, are fools, frauds or both.”
The sudden gloss-over of premeditated usury blighted the otherwise perky event, and even though it reeked of platitudes to the jackboot thugs it swore to resist, something seems to warrant giving everything and everybody a break and a chance; maybe bitcoins knows what it is doing.
Math or not, maybe somewhere in the mix faith, real faith, figures into the number-crunching, the stats and the algorithmic gyrations, probabilities and gains, losses and values.
After a while the mind begins to creak under the weight of all the math and needs desperately to shake off the fiber-optic cables that have begun growing up into the body and mind as vines up a trellis of an old shadowy home.
Sunlight and glory, blast off the contemptuous and fatigued spirit of defeat and impotence. Let bitcoin win, stick up for the little guys, underdogs and crush the assholes – come on. Make it happen, God up there, do it for once because it kind of sucks down here in the land of robots and bastards – but thanks for the bitcoins.
Back in the Caddy, having finished this up, I roll into the drive-thru of Five Points Liquor. The twenty-something guy smiles and I say, “Fifth of Jim Beam,” and he nods.
“Do you take bitcoins?” I ask.
“Bitcoins.” I see his eyes twinkle, interest swells there.
“What’s that?” he asks, handing over my square bottle and some change.
“It’s a digital currency…” I begin. “Bitcoins are….”
This will take a while.