Tim Draper first encountered Bitcoin in 2011 and soon realized that it was far more than a way to pay for virtual products. It was a new currency, a unique store of value outside of government control, meaning it could cross borders and. with a finite supply, was likely to increase in value over time.
While Drapers own interest was piqued, that of his son. Adam, was more so. Adam started an accelerator program. Boost VC. dedicated to helping Bitcoin companies and the underlying blockchain technology they used. Adam was the first investor in Coinbase, one of the worlds biggest cryptocurrency exchanges.
Meanwhile, the elder Drapers first investment into Bitcoin went to the blockchain consulting firm CoinLab. It was part of the first official venture capital raise for a direct investment in Bitcoin. he recalled. Not long after. Draper bought $250,000 worth of bitcoin through CoinLab when the price of BTC was hovering around $6.
Most of Drapers bitcoin was stored with Mt. Gox. which handled about 70 percent of Bitcoin transactions until it was hacked in February 2014. When all was said and done, approximately 850.000 bitcoins — an amount valued at more than $450 million at the time — belonging to the exchange and its customers were stolen.
After Mt. Gox collapsed, the price of bitcoin dropped approximately 20 percent and would not rise to its January 2014 average until May 2016. Though initially furious. Drapers financial loss gave him a firsthand lesson in Bitcoins resilience. He was stunned that despite such an enormous theft. Bitcoin exchanges and other startups kept on. largely undeterred. New and more interesting use cases around blockchain technology appeared, and the need for a frictionless currency persisted. Drapers continued optimism around the technology would prove to be prescient.
When the FBI arrested Ross Ulbricht. founder of the Silk Road, on charges of money laundering, computer hacking and conspiracy to traffic narcotics, the agency dealt
Another major blow to Bitcoins mainstream reputation, as the cryptocurrency quickly became associated with illicit online purchases. Following Ulbrichts arrest, the FBI seized millions of dollars of bitcoin from Silk Road accounts and Ulbrichts personal computer. A portion of those seized — 36.000 BTC — was auctioned off by the U. S. Marshals Service on July 1. 2014, and Draper bought all of it
“If its a long-term bet. I like to look stupid early so I can look smart later, or really stupid later.” Draper said. “Im willing to do either.”
Bidding $14 over the market price per bitcoin. Draper found himself back in the Bitcoin ecosystem under unlikely circumstances: buying the dark webs preferred currency from the Feds. Needless to say. Draper was well aware that though intangible. BTC still carried a sentiment of its ill-reputed past The best way that he could personally reconcile Bitcoins reputation, he determined, was to make good with his new investment. Draper secured the bitcoin with Vaurum. later renamed Mirror Labs, a startup working on developing investor
Exposure to economies in emerging markets. He would later back other companies building exchanges and marketplaces for Bitcoin in the developing world, such as BitPesa in Africa. BitPagos in Latin America and Coinhako in Southeast Asia.
For Draper there is still no greater use of Bitcoin than as a currency that is not beholden to any one. centralized authority.
“Many people want money that is not at the mercy of some government” Draper explained. “Whenever people have less faith in their government they will gravitate toward cryptocurrency, where they can travel across borders while possessing value that will not be confiscated.”
For people in failing states. Bitcoins existence means their earned value is no longer directly subjugated to the detrimental inflation of a national currency, such as Venezuelas bolivar.
“It also allows the two to three billion people of the world who are unbanked to be able to participate in the global economy.” Draper said. “By consequence, it also means Bitcoin has the potential to grow the world economy quite a bit.”