Should I Do It? 30,000 Bitcoins and One Big Auction
Adam Draper is the founder and managing director of San Mateo-based venture capital firm Boost VC, one of bitcoin and blockchain's earliest and most active incubators. To date, Boost VC has backed more than bitcoin 50 companies at the seed level or above.
In this entry in CoinDesk's "Bitcoin Milestones" series, Draper gives an overview of 1st July, 2014, the day his father Tim Draper purchased nearly 30,000 bitcoins in the US government's first-ever bitcoin auction.
"So, should I do it?"
It's 1st July, 2014, and I'm driving to work. I was turning onto El Camino when I got the call from my dad.
"I'm about to press the button to send in my bid," he said.
The week would prove an interesting one in history. Justin Trudeau was sworn in as Canada's prime minister, Chris Stapleton raked in CMAs and it also happened to be the week the US Marshals Service auctioned off 30,000 bitcoins.
Up to that point our industry had a torrid history of scandal and skepticism.
The general masses had only heard that large sums of money had been stolen from bitcoin exchanges or that everyone buys illegal drugs with bitcoin. In fact, the reason that the US Marshals office had the bitcoin was because Ross Ulbricht (aka 'Dread Pirate Roberts') had been captured and proclaimed the leader of the Silk Road, a startup focused on the illegal sale of goods online.
For a while, it was the eBay of buying drugs, guns and hitmen, and the currency used in this anonymous marketplace was the ever-reliable bitcoin.
That's the stigma that stuck to the technology (and that still sticks to this day), and it was everywhere at the time.
I remember being on a panel with my dad [Tim Draper] and grandpa [Bill Draper] in early 2015, in front of hundreds of people. It was the first time we had done a panel where we each talked about our lives as venture capitalists.
When it was my turn to speak, the only thing I said was "bitcoin", and as I started to explain why, my grandpa turned and cracked a joke:
"Well Adam, don't be the first Draper to go to jail."
Even my grandfather, the most prescient man I have ever known, had a tilted perspective of the bitcoin world. (He also obviously didn't know about my trip to Tijuana, Mexico, in college either).
The sale of the US Marshal bitcoin had the potential to be a major shift in public sentiment depending on the outcome.
This was a government-funded institution that had confiscated digital currency and was auctioning it off in return for cash. This was the government recognizing the validity of bitcoin and using it to generate its own revenue.
If it was only used, or had value for illegal goods, the US Marshals Service wouldn't touch it, no government agency would take a stack of confiscated cocaine and publicly auction it off to the highest bidder.
"So, should I do it? I'm about to press the button."
I took a breath and responded:
"If I had the money, I would. This technology is changing the world."
He said "OK", and hung up.
Looking back, I probably should have hesitated.
I didn't know it at the time, but he was bidding millions to win the whole amount. I assumed he was only bidding for a portion...
The next day I walked into my office, and my co-founder Brayton Williams said, "Did you hear? All the bitcoin in the auction went to a single person."
I thought to myself, "Dad… what did you do?!"
I went upstairs (we work in the same building in San Mateo) and I walked in on an incredible moment. The Vaurum team was in the room, Avish Bhama and Sean Lavine, my dad and my brother were all there. I sat down on the couch looking out to my dad's desk and the open window, he was on the phone with someone.
"Hey you made it just in time! We are transferring the bitcoin into my wallet!" he said, my dad’s infinite enthusiasm even more palpable than normal.
I remember looking around and having a feeling of history come over me. I had been working in the digital currency world for 18 months at this point, and I knew that when the history of bitcoin was written, this moment was going to be one of those moments that was spoken about and potentially debated.
That's why what happened next is comical...
So, my dad was on the phone with the US Marshals, who were going to send this super advanced new type of currency over the internet to my dad's wallet. But because it was millions of dollars at stake, they were verbally confirming and reconfirming the wallet addresses.
"Lowercase Z, seven, capital X, four, five…."
"Wait… Lowercase C? or Z?"
"Z as in Zebra."
It was analogous to the 'easy' user experience that bitcoin has always had a problem with. They repeated this process four times before they decided that they were sure the address was correct.
"OK confirmed," my dad said. You could hear the voice on the other end say, "OK, sent."
And nothing happened. Everyone justified this. They said, 'Well it takes 10 minutes for a confirmation on the blockchain to happen...' Ten minutes went by… nothing.
There were 30,000 bitcoin going somewhere, but it didn’t feel like they were going to the wallet address it was supposed to go to.
Twenty minutes pass. Nothing.
Everyone was getting nervous.
Thirty minutes pass. Nothing.
I left the room just as everyone started to get a little worried.
Sure, it was a historic moment, but I was already a half hour late for my next meeting...
Flash forward, and it took an hour to confirm. AN HOUR!!! (It turns out that the US Marshal didn't give the miners a fee for the transaction, so it wasn't a priority on the network).
But the transaction did go through, and my dad and the US Marshals Service successfully completed a bitcoin transaction that got put into the record books.
And the headlines read: "Venture Capitalist Steve Draper Wins Bitcoin Auction." The first article I read called my dad 'Steve'. Hilarious.
"Tim Draper Wins Silk Road Auction" was the common title used.
Now, think about what just happened. The US government successfully sold 30,000 bitcoins. Not only that, but a professional investor had won all of them, and not a random professional investor, but a third-generation venture capitalist who had earned respect by being one of the best VCs ever for backing startups like Skype, Baidu and Hotmail.
That is what the world read that day in The Wall Street Journal, Forbes and The New York Times.
The bitcoin community needed a catalyst to change perception, and I believe my dad created it.
Images via Adam Draper
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