Bitcoin’s Revolution Is Only Just Beginning

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

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.

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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.

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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.