Winklevoss twins claim to have enormo $11m Bitcoin stash The Winklevoss twins are claiming that they own one per cent of all the Bitcoins in circulation - which, if true, would be one of the largest portfolios of the e-currency. Mark Zuckerberg's former arch-nemeses told the New York Times Dealbook that they hold nearly $11m worth of the digital money in the first publicly disclosed …
"The twins said they started buying Bitcoins last year when their cost was still in single digits and claimed to keep their digital cash safe from hackers by sticking it on small flash drives and putting the drives in safe deposit boxes at banks in three different cities."
I don't know much about this so I'll ask the question - so is your ACTUAL Bitcoin just a file with its own secure certificate or something similar to validate its bona fides? So it can be moved around like an MS Office document?
????
Your actual bitcoin is a record in a public ledger that says addess a2342134c32d23e23441a..... contains this much. The address is really a public key, AFAICT. Your 'wallet' file contains the private keys that unlock all this. This is what can be moved around.
Therefore what they mean is that they have put the bitcoin into public accounts, viewable by all, but put the wallet with its private keys into a safe deposit box.
Unlike some other schemes, there is no such thing as an offline transaction with bitcoin, everything is online and public.
$11m in the bank is just numbers on a hard disk too...
Don't get me wrong, you do have a point - the downside of acquiring large investments in bitcoin is that you have to take security and backup very seriously. The bigger downside right now is there's less in the way of legal protections - although there are online accounts to hold bitcoins that might seem analogous to banks, there's no legal protection, plus 3rd parties are riskier if they get hacked (since money can be stolen virtually, and again, unlike a bank, it will be your money being stolen, rather than the 3rd party's). Similarly I suspect that no contents insurance policy will cover any loss in bitcoins.
But it doesn't seem an unsolvable problem. Surely any geek already has a rigorous backup plan (and with that much money, you could sell a small amount to raise any required hardware cash), and is clued up on the use of encryption tools like Truecrypt?
And it seems a smart policy to spread investments around. If they have $11m in bitcoin, and little elsewhere, that does seem stupid. If they're just stupidly rich people, with bitcoin being one of many investments, that doesn't seem strange (even putting all your money into safe bank accounts has a risk, if it's all in one bank).
Stupid is right - they should at LEAST invest half of it in gold - which is on top of the investment pyramid of mistakes. Everyone who knows about investing would tell you that too. Metals and real estate - only the rich should apply. The rest of us with any brains would stay at the bottom of the pyramid, where sanity resides.
@SB - Yeah, all banks are the same... Personally I'm with the Co-op, who had sod all to do with the financial crisis. In the UK you get £100k of your money back if your bank collapses, so yes, most normal people are much better putting it in a bank than hoping that the unregulated world of bitcoins doesn't get hacked again.
The UK has never let a bank fail to my knowledge.
At least not recently.
I think they should be make people responsible for choosing one that isn't going to mess up (And take the consequences if they are wrong) at the moment banks can do what they like and people go for the ones with the best deals rewarding recklessness. This penalises the ones that are better (Nationwide / Co-op).
So they lucked out on somewhere in the region of 220 million, and decided to becom venture capitalists and buy some bitcoins? I must be strange as frankly if I lucked out on that kind of money (as opposed to having the skills to earn it) I would be on the beach with a few bottles of PG. I'm not sure I would be playing roulette with internet startups (as they have never ever been associated with bubbles) or bitcoins.
With $220m, I'm sure they have more than enough to both sit on a beach, and have $11m in bitcoins :)
It's not like people with that much money store it all at Barclay's in a normal bank account - there'd be loads of it in various investments. And what are you really saying - that anyone with that much money should instantly spend it all on on PG?
No but it would be an idea!
But seriously, what I was saying, and what you will find elsewhere (you alluded to it yourself when you mentioned Barclays) is that when you come into money via some level of chance rather than skill, what you do with your money should be guided by your skills. If you earned the money entirely via your own efforts then you will have a diverse portfolio, you will make decisions about investments in the areas you understand, but you will use other peoples talent to grow your money outside of those areas.
Say you are an amateur metal detectorist, you find a huge horde of gold and get your 50% of it. Now, do you take it upon yourself to go into the precious metals market, or do you buy yourself a new metal detector and invest the rest in funds managed by people who at least supposedly should understand the investments they make and have a proven long term track record of a decent ROI. My thoughts were just that they basically seem to have found themselves in a very good situation and seem to be taking very large risks (bitcoins and internet VC, yes you might find the next twitter or youtube or amazon but honestly the odds are stacked against you and even when you do hit it big how long will it last? AOL, Yahoo, Myspace even Hulu now is looking a little suspect). I guess there is the easy come, easy go mentality, but personally I'm not sure I would be taking as many risks using my own knowledge. VC is a tough field, even the best investors lose more times than they win (the key is that they make more when they win then the sum of their loses). It's their money and their call :)
seem to be taking very large risks (bitcoins and internet VC
Even if they lose their entire $11M Bitcoin investment, that's only 5% of their $220M net worth (assuming both of those figures are somewhere close to accurate). That's not a "very large risk", proportionally, and it's even less of a risk at those absolute amounts, because it's not threatening their income level. (In other words, 5% of net worth is a lot more valuable to you when you only have, say, $100, than when you have $100M.)
Now, their VC positions might be "very large risks" - I can't be bothered to research what their exposure might be there. But the Bitcoin position looks like a typical rich-investor lark. Maybe it will pay off; maybe it will turn out to be a loss; maybe it won't be significant either way. And sure, there are some opportunity costs tacked on if it doesn't pay off. And sure, I could probably come up with something else I'd rather spend my next idle $11M on (and though I'm not much of a drinker, I'm sure the wife and I would enjoy that beach you mention). But this is really just a human-interest story, not an investment one. It doesn't seem likely to make the Winkles significantly richer or poorer.
I'm thinking about creating Shitcoin - the worlds first currency made exclusively from recycled pavement excrement. I'm aiming to make using it a steady and reliable way to trade on the international markets. The only problem I can conceive is that if you put the actual coins in your mouth they can cause blindness!
Mine's the one that fluctuates wildly! Ooohh eeerrr!
http://siliconangle.com/blog/2011/08/01/third-largest-bitcoin-exchange-bitomat-lost-their-wallet-over-17000-bitcoins-missing/
That is just one of many stories about people losing access to their wallet.dat files through lack of backups, incompetence, or any other human failing...
That was just its historical name. It's now a deprecated acronym. If they want to shift from Magic cards to Bitcoin, that's their decision. But they provide a bridge between government currencies and Bitcoin, so it's nice to have it around (I do have some skin in Bitdoin, but as my initial investment was only around $50, losing it in the event of a crash would not be the end of the world for me). I'll play it for what it's worth.
But at the end of the day the base metals do at least have one big vested interest (i.e. a country) who wants to keep them useful.
Bitcoin just seems a little bit too much like a fad to me - it has no value other than people wanting to buy it and limited supply. If another "fad" e-currency turns up which has the same properties what's stopping people moving. Everyone says that the "value" in bitcoin is its limited supply, but it _isn't_ limited as far as anyone else could go and start another currency based on the exactly the same mathematics. They just haven't yet.
It's no worse than putting a few quid on the geegees, but serous investment for $11M - ha. No.
Well, compared to one big entity you have a bunch of little entities, each of which backs up the system (each client keeps a copy of the block chain--the BtC version of the public ledger--as well as performs verifications on other people's transactions). So as long as there are plenty of players in the game, the currency can still hold.
As for other e-currencies joining in, so what? Dollars, Pounds Sterling, Yen, and Euros all coexist and are cross-traded. Why can't more than two or more e-currencies co-exist?
I think a lot of people are buying into the Bitcoin boom on the assumption that since supply is finite, value must increase as it becomes more accepted and more in demand; the trouble with this is that while the supply of Bitcoins (TM) themselves is finite, there is theoretically infinite scope for copycat currencies to be floated - especially so with this sudden jump in valuation - so the scarcity value is really a myth... as for lack of government involvement, it's unfortunately just a matter of time if Bitcoins and the like really do become established as serious currency - in fact if they prove to be durable and secure, I'll be surprised if something like Bitcoins isn't adopted officially as a kind of money-laundering deterrent, because if I remember correctly each Bitcoin keeps some sort of information on ownership and transactions - a boon to the Revenuers... the unintended consequences of trying to develop a currency free of government oversight and inflationary tendencies might just be to hand the government the technology to destroy all remaining privacy in financial transactions.
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