But the 6-foot-5 Winklevii were unfazed by the latest tumult. Indeed, the brothers said they used the low prices to buy more. They argue that bitcoin will have much further to soar once a broader audience sees its virtues: a unit of exchange that can be moved around the world at the click of a button without requiring any payments to Western Union or American Express.
“People say it’s a Ponzi scheme, it’s a bubble,” said Cameron Winklevoss. “People really don’t want to take it seriously. At some point that narrative will shift to ‘virtual currencies are here to stay.’ We’re in the early days.”
Other champions of bitcoin also believe that it could mark a new chapter in the history of money.
11 MILLION BITCOINS
“Three eras of currency,” Chris Dixon, a partner at Andreesen Horowitz and well-known technology investor, recently wrote on a personal Web site. “Commodity based, e.g., gold; politically based, e.g., dollar; and math based, e.g., bitcoin.”
For those whose idea of money still involves greenbacks and metal coins, bitcoins do not exist in any explicit physical form. The creators wrote algorithms that allow only a finite number of bitcoins to be created — the count is currently around 11 million — with new coins “mined” by programmers who solve mathematical riddles.
The coins can then be bought and sold through upstart exchanges, and held in what are known as virtual wallets.
So far, few real companies accept bitcoins as payment, and the primary place they can be used is an online bazaar, known as Silk Road, where narcotics are the main wares for sale. But the currency’s believers see a future in which Starbucks and Amazon take bitcoins. For their part, the Winklevoss twins have used some of their bitcoin to pay for the services of a Ukrainian computer programmer who has worked on the site of their venture capital firm.
While bitcoin has amassed a cult following since its beginnings, it has set off a frenzy in recent weeks as the price spiked to $US260 per bitcoin early Wednesday after trading at $US35 at the beginning of March. Some of the credit for this surge is given to the banking crisis in Cyprus, which raised some questions about the viability of the euro currency.
“We have elected to put our money and faith in a mathematical framework that is free of politics and human error,” Tyler Winklevoss said.
Bitcoin is far from the first bet the brothers have made on an emerging technology. As students at Harvard College, the twins founded a social networking site, ConnectU, and enlisted their schoolmate, Mark Zuckerberg, to help them build the company. After Mr. Zuckerberg went off to start Facebook, the brothers sued him, accusing him of stealing their idea — a story that was dramatized in the movie “The Social Network.” The case was settled with the brothers being given $US20 million in cash and Facebook shares that are now worth over $US200 million.
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