Tim Draper is a founding partner of Draper Associates and headmaster at Draper University.

For more on bitcoin’s 10th anniversary, check out our new interactive feature Bitcoin At 10


It wasn’t 10 years ago, but more like 15, when I first saw the potential for a digital currency. I’ve been through some big up and downs in bitcoin. But today, I’m more certain than ever that the bitcoin revolution is coming.

In 2004, I learned from a wealthy Korean industrialist that people were paying real-world money for digital items like weapons to use in massively multiplayer video games. The game was “Lineage,” which was taking Seoul by storm.

It got me thinking that there was an amazing business in virtual goods coming.

Later, Joel Yarmon first introduced me to bitcoin in about 2011. He brought in Peter Vincennes and his company Coinlab to pitch us. Bitcoin was a new currency that could be used to store value and pay for anything, not just for advancement in a video game.

I quickly absorbed the basics of bitcoin: miners, wallets and such. The decreasing number of bitcoins available to be mined over time meant that the price of a bitcoin would increase in value as fewer bitcoins were mined and usage increased. In fact, as bitcoins spread and their usage increased, it was likely that the currency would become more valuable.

Coinlab would become a bitcoin-focused innovator and miner. We made a small investment in the company. My son Adam started an accelerator called Boost VC, dedicated to bitcoin (and blockchain) companies. He was the first investor in Coinbase.

Around that time, I asked Peter if I could buy $250,000 worth of bitcoin. He bought some for me at about $6 each and stored them in Mt. Gox, the largest bitcoin exchange at the time. He said he would also buy a high-speed mining chip from Butterfly Labs to get us even cheaper bitcoin. Both of these efforts went south.

First, the mining chip was delayed. Rather than shipping it to Peter as ordered, Butterfly Labs used the chip to mine bitcoins for themselves. By the time Peter received the ASIC chips, mining had dramatically increased in difficulty. Meanwhile, the bitcoin I had bought was “lost” by Mt. Gox.

Bitcoin’s resilience

But something important happened with the failure of Mt. Gox. The price of bitcoin only dropped about 20 percent, and the currency continued to be traded on other exchanges. I was flabbergasted and fascinated.

I realized that the demand for this new digital currency was so strong that even a huge theft would not keep bitcoin from creating a new way for us to transact, store and move money. Since the financial crisis, people were losing their confidence in government or “fiat” currencies. I went on to back a number of the Boost VC bitcoin companies, and as I was discovering more and more uses, an enormous opportunity arose.

And something happened that gave me another shot at getting involved in the bitcoin opportunity. The U.S. Marshall’s office confiscated the bitcoins owned by the Silk Road, an online drug marketplace, and almost 30,000 bitcoins were put up for auction. I looked at this as an opportunity to rebuy the bitcoins I lost.

The market price then was $618 per bitcoin. At the last minute, I decided to bid higher than market price. I bid $632 and won all of the bitcoins!

After the inevitable buyer’s remorse for paying a higher price than anyone else was willing to pay, I thought about how I could best drive a positive use for these bitcoins with a tainted past. I decided that I would use them to support the proliferation of bitcoin through emerging country marketplaces where people didn’t have confidence in their own currencies.

Many people in such countries are not “bankable.” Banks lose money on people who don’t have enough to make all the paperwork worthwhile. Banking regulations set up to protect the little guy have actually kept the little guy from participating in the economy — almost guaranteeing that he will remain “the little guy.” There are billions of “unbanked.”

Avish Bhama, one Boost entrepreneur with a company called Mirror helped me figure out a good plan to spread the currency to emerging country markets. The idea was to allow people from developing nations the ability to invest in anything (even to go short against their own currency) by using bitcoin as the “rails,” the conduit for the trades.

Mirror later changed its business model, but companies I backed later — BitPesa in Africa, Bitpagos in Latin America, and CoinHako in Southeast Asia — are making the emerging world their marketplace.

Bitcoin’s great potential

I remain impressed by the possibilities for bitcoin and blockchain. Bitcoin is a currency that is accepted everywhere without any government friction or interference, a stored value solution that doesn’t require a holder to keep a room full of metals and art, and a frictionless currency that can move automatically based on a contract, without the usual drag that comes from regulations and accounting rules.


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