# 九 区块链Ⅰ：数字淘金热

> 从“费”到比特币，实现货币自由的漫漫长路。这对这座城市意味着什么?
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> In the southern expanse of the Pacific Ocean, around 1,100 miles from the Philippines, lies a tiny island called Yap. Surrounded by a shallow lagoon of emerald waters and long stretches of coral reef, Yap is a paradise for divers. It’s one of the few places in the world where you can swim with a large population of manta rays, graceful creatures that cruise through the calm clear channels all year round.
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> Often referred to as ‘The Forbidden Island’, its people are proud of their vibrant traditions and warm indigenous culture. Women walk around bare-breasted, frequently wearing only grass skirts, their bodies rubbed in a mixture of coconut oil and turmeric. The men, at ease in red loincloths, carry woven handbags containing their betel-nut mix–a narcotic chewed with lime. Everything on Yap happens on ‘island time’. But the island is famous for something other than its beauty and history. It’s famous for its use of ancient stone money known as ‘fei’ (or sometimes ‘rai’), the primordial bitcoin.
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> In 1903, an American anthropologist called William Henry Furness III spent several months on Yap and wrote a fascinating account about the islanders’ monetary system.[1](#1__For_William_H__Furness_s_acco) Sometime between AD 1000 and 1400, Yapese explorers set out in bamboo canoes on a fishing trip. Using only the stars to navigate, they happened upon the Palau Islands, some 250 miles away. It was there that they encountered for the first time the glistening walls of limestone caverns. The adventurers, using simple shell tools, broke off some of the stone and brought it back to Yap. When the rest of the Yapese people saw the beautiful translucent material they thought it must be valuable. Hundreds of voyages followed, with men sent to Palau to quarry larger and larger stones.
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> Back on Yap, the limestone became a currency and was used to pay for significant transactions–a daughter’s dowry, for example. The huge stone circular discs with a hole carved in the centre, just like a rocky doughnut, are physically the largest and heaviest currency in the world. Some are huge, reaching almost four metres in diameter and weighing as much as four and a half tons each, more than your average-sized car.[2](#2__See__David_O_Keefe__The_King) The villagers would often proudly put fei in front of their homes, creating an outdoor bank of sorts. ‘The great advantage of the fei being made from this particular stone is they’re impossible to counterfeit, because there’s none of the limestone on Yap,’ writes author John Lanchester in a brilliant article in the London Review of Books that examines the history of money. ‘The fei are rare and difficult to get by definition, so they hold their value well.’[3](#3__See__When_Bitcoin_Grows_Up) The precise value of each fei depends on its size and craftsmanship but also its provenance. Transporting the stone discs on the outrigger canoes–fragile-looking, narrow boats–was a treacherous undertaking and sometimes fatal for the sailors. Their deaths would in fact increase the value of the fei.
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> Some of the stones are so large they require more than twenty adult men to move them, with the help of a massive wooden pole. To avoid the colossal effort, and the risk of damaging the stone, the islanders decided to leave most of the stone discs in their original spots.
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> Critically, the cumbersome nature of fei meant ownership could change hands without the stones themselves ever being physically moved. Stone discs in front of a house, for example, could belong to somebody else from another village far, far away. The islanders just agree that somebody else now owns the fei, with ownership held in a collective register, the minds of the community.
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> ‘My faithful old friend, Fatumak, assured me that there was in the village nearby a family whose wealth was unquestioned–acknowledged by everyone–and yet no one, not even the family itself, had ever laid eye or hand on this wealth,’ writes William Furness. According to his accounts, one boat got caught in a violent storm on its way back from Palau. To save their lives, the sailors had to cut adrift the raft with a massive stone on it. It sank out of sight, forever lost to the bottom of the ocean. The islanders never saw the stone again but that didn’t undermine its value–in fact, it added to it. ‘The purchasing power of that stone remains, therefore, as valid as if it were leaning visibly against the side of the owner’s house,’ explains Furness.[4](#4__See_The_Island_of_Stone_Money) It’s remarkable to think that the people of Yap have so much faith in their currency that it can sit, unreachable, miles down on the ocean floor, and still have value. Now, that is trust.
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> The island of Yap has long been of interest to economists because it helps answer a fundamental question: what is money?
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> In 1991, American Nobel Prize economist Milton Friedman wrote about the ‘island of stone money’. He compared Yap’s monetary system to the gold standard. Friedman emphasized the importance of ‘myth’ and ‘unquestioned belief in monetary matters’. Money can be anything–paper, coins, shells, beads or stone–as long as people have faith in its value. ‘How many of us have literal direct assurance of the existence of most items we regard as constituting our wealth?’ wrote Friedman. ‘Entries in a bank account, property certified by pieces of paper called share of stocks, and so on and on.’[5](#5__See__The_Island_of_Stone_Mone)
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> Fei stones may have been basic, not to mention unwieldy, but they represented an innovative technology. They changed the way the Yapese could store value, pay for things and have a unit of account–the three primary functions of money. The stones were a physical ledger, a new method for keeping track of payments and credits. The real ‘money’ isn’t the fei itself, but the collective agreement over who owns the fei.
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> The total amount of all money in the world, in terms of value, was estimated in 2006 to be around $473 trillion. That works out to be around £45,000 per head for 7 billion people on the planet.[6](#6__For_the_estimated_total_amoun) But less than 10 per cent of it is physical money–banknotes and coins in vaults and wallets. The remaining 90 per cent is simply electronic debit and credit entries in financial registers and accounts. There is also value in assets such as air miles and supermarket reward points that don’t exist in physical form. For the most part, digits moving around on ledgers are what we call ‘money’ and we have to go through lots of middlemen–a bank, PayPal or a credit-card company–to spend it.
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> Since the Medici bank, set up in 1397 by Giovanni di Bicci de’ Medici, the basic premise of the modern-day banking system hasn’t changed all that much. The Medici family invented the double-entry accounting method whereby the debits and credits of nostro and vostro accounts–‘ours’ and ‘yours’–were gathered in one place and the bank acted as the intermediary. The Medici, one of the most powerful familial financial institutions of the fifteenth century, would, like today’s bankers, hold deposits and make loans to everyone from the Pope to merchants, while charging significant interest rates. In 1494, Fra Luca Bartolomeo de Pacioli, a Franciscan monk, mathematician, magician and friend of Leonardo da Vinci, published the first description of the ‘Italian method’ of double-entry accounting. He described the use of ledgers, and how every transaction should be recorded twice, first as a credit and then as a debit, and then how all transactions can be reconciled to measure the overall financial health of a business. The monk, considered the ‘Father of Accounting’, warned that a person should not go to sleep at night until the debits equalled the credits. The universal system was nothing short of revolutionary, enabling capitalism to flourish.[7](#7__Double_Entry__Jane_Gleeson_Wh)
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> Fast forward to 2008. In the midst of the global financial crisis, disillusionment about the traditional financial system was deep and pervasive. Could banks and governments be trusted to run our financial system? Was there another way to mediate transactions, a way that would remove the generous cut the banks took as middlemen in the process? As millions of people were losing their homes, jobs and livelihoods, a mysterious person (or persons), who went by the moniker Satoshi Nakamoto, was busy figuring out a solution to liberate money from the control of governments and banks.
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> It all started in October 2008 when Satoshi, who claimed to be a thirty-seven-year-old Japanese man, published a 500-word paper in flawless English on an obscure cryptography mailing list. The paper was called ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ and it outlined the current pitfalls with traditional fiat currencies[\*](#__The_euro__the_US_dollar_and_ma), emphasizing one issue in particular. ‘The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust,’ Satoshi wrote.[8](#8__See__Bitcoin__A_Peer_to_Peer) ‘Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts…’[9](#9__See__Bitcoin_open_source_impl) The paper’s main intention, however, was to present an alternative solution–the design of a new digital currency called bitcoin. Developed with high hopes, it would solve many of the trust issues Satoshi flagged, but, in a familiar story, it would also give birth to some of its own as time went on.
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> On the evening of 3 January 2009, Satoshi pressed a button and released the first fifty bitcoins, the so-called ‘Genesis block’, to the world. No physical coins or notes were produced–just 31,000 lines of code. A week later, a man called Hal Finney, who recently passed away at fifty-eight years old, was the recipient of the first ten bitcoins sent by Satoshi.
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> Like the massive fei stones on the island of Yap, bitcoins do not physically move around when they are being exchanged. The ‘coins’ themselves are simply a digital token that can move from one user’s address to another, thereby transferring ownership of the ‘coin’. The senders and receivers of the bitcoin do not need to know or trust one another. They are identified only by wallet IDs (known as public keys) that are not tied to real-world identities. Every transaction is recorded but it is encrypted into a random string of numbers and digits (like 12c6TSU4Tq3p4xzziKzL5BrJKLXFTX), making it very difficult, although not impossible, to trace back to its owners. No wonder it’s the currency beloved by marketplaces on the darknet for all things illegal, and by criminals laundering money.
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> It is widely believed, however, that the first ‘real’ thing bought with bitcoin was not drugs but pizza. On 22 May 2010, a computer programmer living in Florida by the name of Laszlo Hanyecz convinced someone to accept 10,000 bitcoins for two large pizzas from Papa John’s. ‘It wasn’t like bitcoins had any value back then, so the idea of trading them for a pizza was incredibly cool,’ Hanyecz told the New York Times.[10](#10__See__Disruptions__Betting_on)
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> Times have changed. Based on the current exchange rate in July 2017, one bitcoin is worth approximately $2,320 (£1,801). So at current bitcoin rate, Hanyecz paid more than $9 million for a pizza. These days, you can use bitcoin to pay for your plane tickets from Expedia, buy your gifts from 1-800-FLOWERS or purchase your car.
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> The price of bitcoin has been a rollercoaster of volatility. Its value is based on the volume and velocity of bitcoin payments running through the ledger today and on speculative future use of the digital currency. Events such as the FBI seizure of darknet outfit Silk Road or the implosion of the bitcoin exchange Mt Gox (an acronym for ‘Magic: The Gathering Online Exchange’) have eroded people’s faith in the security and anonymity of the system. The value crashes–but then it rises again, especially during a currency crisis such as in India and Venezuela in January 2017.[11](#11__For_the_bitcoin_price_surge) As history has shown us time and time again, chaos and uncertainty make people open to alternative systems, including cryptocurrency. Once again, however, questions of trust lie at the heart of any new system.
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> Satoshi was not the first person to attempt to create a form of digital cash that could disrupt the central power of Wall Street. Since the 1990s, cypherpunks[\*](#__Cypherpunk_is_an_activist_who) have tried and failed with the likes of B-Money, invented by a man called Wei Dai. He also wrote a paper in 1998 describing his invention as an ‘anonymous, distributed electronic cash system’.[12](#12__Wei_Dai___b_money___http___w) Other attempts to create an online currency that enables people to directly exchange value have included David Chaum’s ecash, Stefan Brands’s electronic cash system and Nick Szabo’s bit gold.[13](#13___Back_to_the_Future__Adam_Ba) The real issue lies in the double-spending problem. If I have, say, a £5 note in my purse, I can’t give two people the same note. Same goes for a bar of gold–once I give it to you, it’s clearly in your possession. But if a currency is just digital information, what stops me from copying the line of code and ‘spending’ it as many times as I want? It’s like a digital photograph of my children that I email to my parents–they have a copy but I also have a copy. It’s the equivalent of being able to print your own money. So how do you solve this problem? Satoshi figured out an ingenious way through what he called the blockchain.
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> ![image](file:///C:/Users/zj112/AppData/Local/Temp/msohtmlclip1/01/clip_image002.jpg)
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> The blockchain is an enormous shared digital ledger, open for anyone with internet access. To see it for yourself, just go to <https://blockchain.info>. Every single bitcoin transaction that has ever happened since it began in 2009, approximately 190 million transactions, is publicly recorded and time-stamped on the blockchain.[14](#14__For_the_number_of_bitcoin_tr) Ticking over in real time, it tracks every time an asset moves from one place in the register to somewhere else, building over time. The distributed ledger is replicated on more than 5,500 computers around the world–known as bitcoin nodes–creating an immutable record.[15](#15__For_the_number_of_bitcoin_no) In other words, everyone in the network can maintain a copy of the shared ledger but all those copies remain the same.
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> A record on the ledger cannot be changed, falsified or erased–it has a permanent memory. ‘A distributed ledger is a database that is shared between multiple users, with every contributor to the network having their own identical copy of the database,’ writes Andrew O’Hagan in ‘The Satoshi Affair’, a brilliant account of the mysterious genius. ‘Any and all additions or alterations to the ledger are mirrored in every copy as soon as they’re made.’[16](#16__See__The_Satoshi_Affair___Lo)
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> So, why is the blockchain so significant when it comes to trust? Well, for the first time in the history of humanity, there is the potential to create a permanent public record of who owns what, which no single person or third party controls or underwrites, and where we can all reliably agree on the correctness of what is written.
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> The true identity and whereabouts of bitcoin’s inventor, Satoshi, is still the subject of hot debate. In May 2016, Craig Steven Wright, a forty-five-year-old Australian, came forward claiming he was the inventor. Wright has never 100 per cent proved, however, that he is in possession of cryptographic keys for the first Genesis block that only Satoshi can have, and his claim has since been called into doubt by many in the bitcoin community. Others believe Satoshi is Nick Szabo, a reclusive American of Hungarian descent, but he fervently denies the suggestion. Others still, including me, think Satoshi was an identity created by a group of brilliant mathematicians and computer scientists who came up with an astonishingly clever code.
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> There were several problems Satoshi had to crack to make bitcoin work. The first was to get the bitcoin out there in the first place. The inventor couldn’t ‘own’ all the currency because it would give him too much power and that was against its decentralized ideology. So whom do you give the money to? A handful of geeks, panicked Cypriots in a currency crisis or perhaps celebrity web figures such as Tim Berners-Lee? The fairest way, Satoshi decided, was to award bitcoin, as an incentive, to the people who do the work communally to maintain the ledger around the world. These people are known as miners, some of whom dedicate their lives to the job of being virtual witnesses in order to keep the engine of the network running. Without the miners, the blockchain engine stops.
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> It was early in 2011 when an article about bitcoin popped up in Yifu Guo’s RSS news feed. At the time, the young Chinese immigrant was a digital media student in his early twenties at New York University (NYU). ‘I remember thinking that this was the stupidest thing ever. It would never work,’ Guo said in an interview with Motherboard. ‘But what kept my attention was that it was open source and, after a few days of thought and further research, I concluded that this was legit.’[17](#17__See__Engineering_the_Bitcoin) Guo, as we’ll see, would go on to become one of bitcoin’s most successful entrepreneurs.
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> The article in Guo’s feed described how every bitcoin transaction, however small, contains a difficult mathematical puzzle (known as a proof-of-work calculation) that has to be solved through trial and error. The puzzle works as evidence of the transaction’s legitimacy. Essentially, transaction-clearing responsibilities, which are traditionally managed by centralized banks, are now distributed into the hands of many miners and thousands of computers in the bitcoin network. Trust is shared out.
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> Let’s say I want to pay David Forster, a young farmer and owner of Grass Hill Alpacas in Massachusetts and one of the first merchants in the world to accept bitcoins as payment, for some wool socks. Forster needs to be sure that the bitcoins in my electronic wallet are genuine. That’s where the massive peer-to-peer network of miners comes in. When one of the computers has proof that the transaction is legit, the payment information–the amount, time and wallet address–is added to the blockchain in ten-minute bundles of transactions, known as blocks. (For instance, the last block added to the blockchain on 2017-04-12 06:19:53 contained 1,322 different transactions totalling 7,583 bitcoin sent.) My payment to Forster is confirmed. The block stores a long and seemingly random sequence of letters and numbers known as a hash, e.g. 0000000000000000017f62231a5206f8333c9f8730c96f605cf44ddf03e8af93. Each block contains the hash of the prior block, linking the blocks together. Hence the name.
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> ![image](file:///C:/Users/zj112/AppData/Local/Temp/msohtmlclip1/01/clip_image004.jpg)
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> ‘They are in a race against all the other miners to have the privilege of being the canonical record of that transaction,’ says Gavin Andresen, the chief scientist of the non-profit Bitcoin Foundation and regarded by many as the ‘chief’ bitcoin developer. ‘If they win that race, then there is a special transaction at the beginning of each block which rewards them with bitcoins.’[18](#18__See__In_the_beginning_Truste) Bitcoin places trust in mathematics: ‘In proof we trust.’ Guo decided to join the computational race and become a miner.
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> Mining is like a cryptographic game or lottery, where the winner is the first computer to find the key to open a digital padlock that solves the puzzle. But like the lottery, the difficulty of winning increases the more miners play it. Why is this so? Satoshi set into the software a finite ceiling on the number of bitcoins that will ever be released. For obscure reasons, he set the upper limit at 21 million, estimated to be in circulation by 2140. The rewards given to miners for solving problems were also predetermined to halve roughly every four years, to slow down the coin circulation. Initially, miners like Guo received fifty bitcoins as the reward for mining a block of transaction data. It then cut in half to twenty-five. The last event commonly referred to as ‘the halving’ took place on 9 July 2016, taking the reward down to the current 12.5 bitcoins. The miners accepted the reward cut because they know the measure is part of the Satoshi plan, written into the code, to keep a lid on inflation.
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> Satoshi did another smart thing. The system is set to adjust the difficulty of the maths problems depending on how fast they are being solved, the goal being to slow the miners down and slow the release of bitcoins. But there were two things Satoshi couldn’t solve with mathematical thinking–market forces and human greed. (For that matter, Satoshi’s own wealth is now estimated at around a million bitcoins or, currently, a billion dollars.)
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> Guo, like other early digital diggers, was initially enthusiastic about the utopian ideology behind bitcoin; it was almost like discovering a new religion. Guo kept most of the bitcoins he mined but sold a few for ‘real money’ to help pay his rent and bills. The savvy student was also one of the first to realize that bitcoin could be the internet’s equivalent of the nineteenth-century gold rushes. And whoever had the fastest computers would ‘discover’ the most money first.
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> In January 2013, Guo quit university and founded a company called Avalon, with fellow classmate Ng Zhang. It was one of the first companies to sell bitcoin-specific mining computers that used an ASIC (application-specific integrated circuit) chip to help boost computation horsepower. The first batch of Avalon processors sold out within fifteen minutes, at $1,200 a pop, to miners around the world. Recently, one exuberant customer paid $20,000 for one of Guo’s machines on eBay. Is it worth it? Only time will tell; it all depends on the appreciation of the currency. Guo, on the other hand, has gone from struggling geek to a very rich man, joining the bitcoin millionaires club.
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> When he and others first started mining in 2011, it was much easier than it is today–technically, any maths geek armed with an ordinary laptop could download the software. Today, that is simply not possible. As Guo suspected, the hunger for those limited bitcoins would turn mining into a giant, highly competitive enterprise.
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> Entering the enormous helicopter hangar in Boden, in northern Sweden, you might think you have walked into a server warehouse of, say, Amazon. The space is large enough to hold at least a dozen helicopters. Except that it’s not packed with aviation equipment. The walls hold rows and rows of processors and custom-built computers, more than 45,000 of them continuously working to solve mathematical algorithms.[19](#19__See__The_magic_of_mining___T) All around is the loud, constant whirring from the industrial fans attached to each of the super computers to stop them from overheating. The place is KnC Mine, one of the largest bitcoin mining rigs in the world.
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> Despite the libertarian ideology behind bitcoin, mining is coming up against the inevitable push and pull of being industrialized. ‘Ever faster, energy-hungry ASIC machines would come on the market, spurring a relentless arms race among miners chasing the finite supply of newly issued bitcoins…’ write Paul Vigna and Michael Casey in their book The Age of Cryptocurrency. ‘The only way to win that race and stay profitable was by creating giant, data-centre-based mining farms.’[20](#20__See_The_Age_of_Cryptocurrenc)
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> Bitcoin mines don’t just need hardcore processing power. They need cheap electricity, lots of it. One miner’s electric bill was so high police raided his house suspecting he was growing pot. ‘We thought it was a major grow operation… but this guy had some kind of business involving computers. I don’t know how many computer servers we found in his home,’ said a baffled DEA agent.
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> As is often the case, a movement with ambitions to return power to individuals, accelerated out of the garage of early enthusiasts, is becoming monopolized by centralized power. By the start of 2014, bitcoin mining had evolved into a worldwide industry, with one country becoming the dominant player. Where do you find cheap electricity and cheap labour? Why, China, of course.
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> Along the lush green banks of the Min Jiang, a tributary of the upper Yangtze River, can be found one of the oldest surviving water management systems in the world. Built around 2,300 years ago by a man called Li Bing and a team of tens of thousands, it was designed to irrigate farmland and control flooding. The irrigation system made the Sichuan province one of the most productive agricultural regions in China and it is now a protected heritage site referred to as the ‘Treasure of Sichuan’.[21](#21___Sichuan_a_Paradise_of_Food)
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> Today, more than twenty dams are completed or under construction along the very same river, making it the centre for cheap hydroelectric power.[22](#22__For_the_number_of_dams_on_th) Remote towns along the banks, especially around the area of Kangding, are being transformed into data centres, much bigger than any in the West. It is becoming the hub of a hidden bitcoin economy that never sleeps.
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> The mining machines whirring away all day and night use enough megawatts of electricity to power a small city. The people looking after the hardware often live and work inside the facilities, returning home to their families only four or five days of the month. The buildings tend to be unmarked and kept a secret. ‘People don’t really know where these mines are,’ says Zhu Rei, the young CEO of an unidentified mine somewhere in the Sichuan province. ‘Competition is really intense in China and the number of people getting into bitcoin mining is rising rapidly. So the bottom line is, when you are lucky enough to be in a place like this, where the cost of electricity is so low, well, you keep it to yourself.’[23](#23__Zhu_Rei_is_interviewed_in_Ep)
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> Some of the most lucrative mines such as DiscusFish and Antpool are generating thousands of bitcoins a month. ‘I’ve always feared that mining will concentrate in a few countries,’ Yifu Guo told The Economist.[24](#24__See__The_magic_of_mining___T) Consider this: it is estimated that 70 per cent of the transactions on the bitcoin network are going through just four Chinese companies, mining powerhouses.[25](#25__See__How_China_took_center_s)
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> On 28 April 2011, Satoshi mysteriously vanished. In one of the last emails he sent to Gavin Andresen, he wrote, ‘I’ve moved on to other things. It’s in good hands with Gavin and everyone.’ The legendary anonymous founder never explained why he moved on or what he is working on now, or why he ‘probably won’t be around in the future’. Does it mean Satoshi knows something we don’t?
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> Especially in the light of its metamorphosis into a giant business opportunity, just how much faith can people place in the bitcoin system?
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> ‘It’s completely decentralized, with no central server or trusted parties, because everything is based on crypto proof instead of trust,’[26](#26__See__Bitcoin_open_source_imp) Satoshi wrote of the system in his 2009 essay. Rather than trusting third-party institutions such as banks, with bitcoin we can now place our confidence in mathematics. That’s all well and good, but for most people, cryptographic algorithms, hash functions and industrialized mining operations remain a massive trust leap, especially when all of it was designed by an anonymous creator (Satoshi) who has now disappeared.
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> The incentive for hacking the system is high: the bounty would be bitcoins worth billions. Still, it wouldn’t be easy. Technically, to hack it you would need to gain control of more than half of the bitcoin network computing capacity at any given moment. Or to put it another way, you would need to deceive more than 51 per cent of computers in the network at the same time. It is estimated that the bitcoin network has 360,000 times more processing power than all the Google server farms in the world put together. Therefore, in tech jargon, a ‘51 per cent attack’ would be an expensive and formidable challenge, yet nonetheless theoretically possible–and in fact there has been at least one attempt that went close before it was shut down. The previously mentioned DiscusFish, also known as F2Pool, single-handedly mined 26.3 per cent of all blocks between 24 May and 24 June 2016.
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> What would happen if a handful of the largest mining pools in China worked in concert? The processing clout could give them veto power over changes to the bitcoin software. A scary thought. What happens, for example, if they decided to forbid all US blocks of transactions from being added to the system?
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> How do we trust that Satoshi won’t suddenly re-emerge and plunder it all? What is to prevent another digital currency trumping bitcoin, making the original coins obsolete and worthless? How do you trust that your bitcoins are stored in a secure location and won’t be subject to hacks, theft and scams? It has already happened several times before. Mt Gox was the largest exchange for bitcoins in existence. It was located in Japan and run by a Frenchman called Mark Robert Karpelès. On 28 February 2014, it filed for bankruptcy and suddenly closed down after a major theft–850,000 bitcoins worth nearly $500 million had mysteriously vanished from its accounts. Other theft incidents have included Bitfloor, Ozcoin and Bitfinex. Then, of course, there was the seizure by the FBI of around 144,000 bitcoins that were in the possession of Ross Ulbricht and the coffers of Silk Road. In a remarkable twist, the FBI ended up auctioning the bitcoins they had seized, recognizing their value, and also that the currency was legit.
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> If your bitcoins are stolen, there is no traditional legal recourse. In fact, nobody–not even a bitcoin expert–can help you, because the bitcoin transactions are anonymous. The other issue is that if you lose your cryptographic private key–a string of numbers that opens your digital wallet–your bitcoins are gone for ever. It happened to James Howells, an IT worker from Wales. He famously lost 7,500 bitcoins in 2013. On a fateful clear-out day, he accidentally put an old hard drive he had kept in a drawer for three years into the bin. Howells had forgotten it contained his private key. Today, those bitcoins would be worth more than £13 million but instead they are in a landfill site somewhere buried deep under mud and rubbish.[27](#27__See__Missing__hard_drive_con)
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> What’s more, how do we know that governments won’t ban the cryptocurrency or make it illegal? Bolivia did. So did Vietnam in February 2014.[28](#28__For_the_list_of_countries_th) And the Central Bank of Bangladesh, citing concerns over lack of ‘a central payment system’, issued a punishment of up to twelve years in prison for anyone trading in bitcoin and other digital currencies. The problems of bitcoin are not technological; they are ultimately trust issues.
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> ‘The people who think that somehow bitcoin is going to bring in some kind of libertarian paradise where we won’t have “know your customer” rules and we won’t have rules of transfer, that won’t happen. The people who think bitcoin is our salvation… are wrong,’ says Larry Summers, former US Secretary of the Treasury and a professor at Harvard University. ‘But is the blockchain technology going to be fundamental to reducing frictions? I think the answer is going to be overwhelmingly yes.’[29](#29__Larry_Summers_interviewed_in) In other words, digital currency is just the beginning. The truly revolutionary invention is the blockchain, the vast underlying trust architecture.
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> The Economist, in its 31 October–6 November 2016 edition, featured a cover story called ‘The Trust Machine: How the technology behind Bitcoin could change the world’. The article eloquently described the blockchain as the ‘great chain of being sure about things’. The need for a trustworthy record is vital for all kinds of transactions, which means the blockchain technology itself is far more necessary than a cryptocurrency. A distributed public ledger offers the possibility of a reliable record for any asset transfer–whether it’s currencies, a contract, stock, equity or bond, deeds, property title, the rights of a song, even your identity. ‘It offers a way for people who do not know or trust each other to create a record of who owns what that will compel the assent of everyone concerned,’ the Economist article explains. ‘The real innovation is not the digital coins themselves, but the trust machine that mints them.’[30](#30__See__The_great_chain_of_bein)
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> In December 1974, Vinton Cerf and Robert Kahn designed the revolutionary Transmission Control Protocol/Internet Protocol (TCP/IP). It was, of course, the foundation for the internet that would change the way we communicate and do business. Many enthusiasts believe that 31 October 2008 marks a similar historic moment: the day the blockchain was ushered in as the next generation of the internet, as a new network of trust–which promises much more than digital coins.
