David Canellis

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Liberland has fallen.



It’s a tale almost as old as Bitcoin itself. One day, you’re buying just a little bit of bitcoin. Stacking sats on Saturdays.&nbsp;



Suddenly, you mistakenly catch a glimpse of a video about stablecoin yield in your feed. The algorithm’s fault.&nbsp;



Then, a screenshot of generational memecoin gains. A string of governance airdrop tweets follow fast; farmers rich, KOLs richer. You? Fully FOMO&#8217;d.



Congratulations! You’ve been radicalized by the Web3 cabal.&nbsp;



All of your remaining bitcoin has been reallocated to the top 50 altcoins, weighted by their respective partnerships and memorandums of understandings. “E/acc” has been unironically added to your X handle. WAGMI.



<h2 class="wp-block-heading">On This Day — Liberland goes Bitcoin</h2>



It’s enough to make you retch. After checking in on Liberland, the libertarian Balkan micronation founded in 2015, I fear it has suffered a similar fate.



It’s not that Liberland was ever exactly sold as a Bitcoin maximalist paradise. Established under Terra nullius rules, Czech politician and activist Vít Jedlička initially <a href="https://www.nytimes.com/2015/08/16/magazine/the-making-of-a-president.html">positioned</a> the “three-square-mile teardrop of no man’s land” on the western bank of the Danube as a libertarian refuge for the entire world. A tiny sanctuary for “honest people,” free of big government, central banks and taxes. 



It’s easy to see how bitcoin once fit into that vision. Bitcoin was, and still is, symbolic of what’s possible under laissez-faire capitalism — proof that people can change the foundational structures of our world by taking matters into their own hands.



And while there’s no “legal tender” of Liberland, bitcoin was indeed to be accepted as money within its border, alongside practically all other currencies, even an official Liberland cryptocurrency “like bitcoin” somewhere down the line, as Jedlička himself red-flagged in initial media appearances.



Perhaps Jedlička and Satoshi shared a kindred audacity. Liberland sounds like just as much of an impossible dream as Bitcoin once did.



After arrests, court battles, attempted settlements, festivals and temporary exiles, the Free Republic of Liberland today <a href="https://liberland.org/">boasts</a> more than 1,100 registered citizens, more than 4,000 e-residents, and over 700,000 applicants on their waiting lists. But as one <a href="https://unherd.com/2023/07/inside-liberland-europes-bitcoin-micronation/">report</a> put it in 2023, very few Liberland citizens actually live there. Instead, there’s a “handful of activists moored downstream on a houseboat, under the close supervision of the Croatian police.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">This weekend, we celebrated the 10th anniversary of the Free Republic of Liberland — a sovereign state nestled between Croatia and Serbia on the west bank of the Danube River. It was an incredible experience! Congratulations to President Vit Jedlička (<a href="https://twitter.com/JedlickaVit?ref_src=twsrc%5Etfw">@jedlickavit</a>) on a decade of… <a href="https://t.co/XSEext3xMA">pic.twitter.com/XSEext3xMA</a>&mdash; Brock Pierce (@brockpierce) <a href="https://twitter.com/brockpierce/status/1912288756222009810?ref_src=twsrc%5Etfw">April 15, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">Liberland celebrated its 10th birthday this past weekend</figcaption></figure>



But whatever spiritual overlap there was between Bitcoin and Liberland (which had attracted many to its remote European floodplain in the first place), it’s all but gone from its public messaging.&nbsp;&nbsp;



One might’ve expected the ties between Liberland and Bitcoin to strengthen over the past decade. Especially so, considering bitcoin is up nearly 200x since early <a href="https://www.context.news/digital-divides/breakaway-balkans-micronation-dreams-of-crypto-future">reports</a> suggested that Liberland held much of its reserves in BTC. That would surely have made the microstate relatively wealthy if true.



(For what it’s worth, Liberland’s known bitcoin <a href="https://www.blockchain.com/explorer/addresses/btc/13H2VmPrmoucaEgCCoimCPmPU9a7CaMyuw">address</a> contains less than $2,000 worth of bitcoin right now but in total has seen 275 BTC inflows — $23 million at current prices. Liberland deposited its last bitcoin to crypto exchange Bitcoin Suisse in August 2020.)



Today, there is no “bitcoin” on Liberland’s official website, barring what seems to be a single mention about it being a preferred currency alongside Liberland’s own coin.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdQcNd74Xeypm1sIX7LqSpdyHijci9Sq7bzpeeKvv0Is5Ns5UVU5OutQiTbwsAI9I_ioOC_90rUoWtHn7LLilnwq0C-dEvTk4lwHRCrFFESqYgtme395GpOBRjoGyG_R4bkZicGkg?key=ZFawP0Bw9GgBkQFWfWYH0xr_" alt=""/></figure>



There’s blockchain governance, and then there’s blockchain government.



Instead, the worst of blockchain’s buzzwords now overrun Liberland.org: soulbound NFTs that represent citizenship, on-chain governance that enables “decentralized hyperdemocracy,” all powered by an “operational token similar to DOT or ETH,” which users can bridge to TRX, and a small number of other chains.



It took only 10 years for Liberland to go from an economy with Bitcoin at its base, as President Jedlička <a href="https://news.bitcoin.com/liberland-bitcoin-truly-base-economy/">said</a> in 2016, to an economy built around an inflationary governance token, Liberland Dollars, issued on a Polkadot fork called the Liberland Blockchain.&nbsp;



A secondary token, Liberland Merit, is meant to represent the ownership of the actual land.&nbsp; The site promises that one day, the tokens can be “converted into tokenized political power,” giving citizens additional avenues to vote.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Many friends have recently asked me about my involvement with <a href="https://twitter.com/Liberland_org?ref_src=twsrc%5Etfw">@Liberland_org</a> , and I am indeed very happy to see the community elect me as the Prime Minister of Liberland. My understanding of Liberland is as follows: Liberland is not just a country; it is a manifestation of a…&mdash; H.E. Justin Sun 🍌 (@justinsuntron) <a href="https://twitter.com/justinsuntron/status/1844664803945775256?ref_src=twsrc%5Etfw">October 11, 2024</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Liberland’s Congress recently elected Justin Sun prime minister for the <a href="https://protos.com/justin-sun-elected-prime-minister-of-liberland-for-a-second-time/">second</a> time running.



As it stands, Liberland is essentially a token economy experiment for a blockchain-powered nation that doesn’t really exist. Yet.



Still, the government <a href="https://docs.liberland.org/blockchain/tokenomics-primer">receives</a> vested token unlocks every month to fund itself and its initiatives (which include paying for token listings on crypto exchanges, marketing and incentives) in much the same way as VCs do from their portfolio Web3 companies. The coin has a $2.1 million market cap right now.



Just as there are no true Scotsmen, there is, of course, no one true representation of “Bitcoiner.” And no doubt, there are many among Liberland residents, believers, supporters and investors.&nbsp;



All that only makes the current iteration of Liberland, with all of its mumbo jumbo, that much more of a letdown. Luckily, it’s never too late to adopt the Bitcoin standard — although good luck ever getting the votes.



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Bitcoin

A decade in, Liberland needs the Bitcoin standard more than ever

This is a segment from the Supply Shock newsletter. To read full editions, <a href="https://blockworks.co/newsletter/supplyshock" target="_blank" rel="noreferrer noopener">subscribe</a>.



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The technological singularity, when men will merge with machines to shed all “limitations of our biological bodies and brain,” may only be 20 years away, says Ray Kurzweil.



Something to look forward to! Meanwhile, Bitcoin has already brought about something similar.&nbsp;



Fourteen years ago today, the price of bitcoin traded at under dollar parity for the last time ever — an event that we’ll call “the Coinvergence,” because “financial” and “economic” singularities were already taken.



<h2 class="wp-block-heading">On This Day — Dollar parity</h2>



To be clear, this was the second time that bitcoin had traded above $1.



Bitcoin spent about a week above a dollar in mid-February 2011 — around the same period that blogger Plato was planning the <a href="https://blockworks.co/news/plato-bitcoin-road-trip-price">first ever Bitcoin road trip</a> — before falling back to under $0.70 by early April.



While dollar parity didn’t immediately stick, the first time around led to Bitcoin’s second-ever Slashdot feature. “Online-Only Currency BitCoin Reaches Dollar Parity,” one user <a href="https://news.slashdot.org/story/11/02/10/189246/online-only-currency-bitcoin-reaches-dollar-parity">wrote</a>.&nbsp;



“In only two years, this open-source currency has gone from having no value at all to one with not only an open market of competing exchanges, but the ability to buy real goods and services like web hosting, gadgets, organic beauty products, and even alpaca socks.&#8221;



Of course, there isn’t anything particularly special about 1 BTC reaching $1. As one Bitcointalk poster <a href="https://bitcointalk.org/index.php?topic=2734.20">commented</a> in a “parity party” thread, “we humans like neat number,” even if it awarded bitcoin a modest market cap of under $6 million.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeOSE_o323cBnfTPXFdBsGkV0bmDLo7b7lvRUczO6ar5Kc7WOVWd_7fwZoxPwO3L0iPSSAc-ZNtnG8S3tyC700Wtfv0WMuEqTzQDPzidR5Lu4xH-XbPlN1LLKKo8DleCr3WC1PnfQ?key=m42APRgQYans0qnkgty-Ltkk" alt=""/><figcaption class="wp-element-caption">Preparations for bitcoin reaching dollar parity had been underway for months</figcaption></figure>



Dollar parity is, then, mostly symbolic. It was bitcoin’s first great event horizon: A dollar bought more than 1,300 BTC in late 2009, but only a year and a half later could buy just one. The US dollar had technically fallen by 99.9% against bitcoin in 24 months. Bullish.



What’s most impressive is that bitcoin never again saw under $1. At least, that’s not counting the flash crash on Mt. Gox in June 2011, when its BTC order book briefly <a href="https://blog.bitmex.com/the-june-2011-bitcoin-flash-crash/">collapsed</a> from over $17 to $0.01 amid a hacking incident. The exchange later rolled back trading histories to make users whole.



Kurzweil similarly <a href="https://web.archive.org/web/20140316213301/http://hfg-resources.googlecode.com/files/SingularityIsNear.pdf">describes</a> a point of no return with AI. Once artificial intelligence eclipses biological intelligence, an augmented human race will eventually saturate the entire universe with man-machine know-how — fulfilling our destiny to reorganize the very patterns of matter and energy to maximize computation forever and ever.



“We will determine our own fate, rather than have it determined by the current ‘dumb,’ simple, machinelike forces that rule celestial mechanics,” he wrote in his 2005 book.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdU5EpHt9JkXFWIvOKSfIjL-Lz_SWKW24dCJMSrlrlSmvUA1BuvdDYr8j6FS_7i2zFZQmc5KK5Ft154uGJBydK264J2lw7qi_fdc9so-ardhihkpc0TJJgrpiu7ATBQzmtP7CzlbA?key=m42APRgQYans0qnkgty-Ltkk" alt=""/><figcaption class="wp-element-caption">Source: TradingView</figcaption></figure>



By some point in 2045, Kurzweil’s technological singularity will have transformed “every institution and aspect of human life, from sexuality to spirituality.”&nbsp;



On the anniversary of the Coinvergence, it’s hard to say that Bitcoin hasn’t already done all that in some form. Bitcoiners indeed determined their own fate by rejecting the dumb forces that rule financial mechanics.&nbsp;



Now, what comes next is the real question: the technological singularity, or bitcoin’s closest big milestone of $1 million per coin?



We’ll need a new name for that one — how about the “Satoshilarity”?



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Crypto Singularity: How Bitcoin redefined value at $1

Pete Rizzo

This is a segment from the Supply Shock newsletter. To read full editions, <a href="https://blockworks.co/newsletter/supplyshock" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Coinbase brought bitcoin to Wall Street long before BlackRock and Fidelity.



Four years ago today, Coinbase went public at a $86 billion valuation — a figure that briefly jumped to $100 billion to rival Facebook’s debut in 2012.



And for all of the business savvy shown by CEO Brian Armstrong and his executive team, Coinbase’s story is one of harnessing Bitcoin’s natural inertia.&nbsp;



<h2 class="wp-block-heading">On This Day — Coinbase goes public</h2>



At the time of Coinbase’s public debut in April 2021, Armstrong had <a href="https://www.benzinga.com/markets/cryptocurrency/21/09/23131441/1-000-millionaires-were-created-when-coinbase-went-public-says-ceo-brian-armstrong">commented</a> that the listing had minted a thousand fresh millionaires overnight.&nbsp;



It had also made Armstrong $16 billion <a href="https://edition.cnn.com/2021/04/14/business/brian-armstrong-coinbase-ceo-billionaire/index.html">richer</a> by way of his 40 million Coinbase shares, and allowed early investors, employees and other backers to cash out billions of dollars of their own on day one.



They’d earned it: Armstrong had led the firm through the brimstone — regulatory crackdowns, fearmongering, climate hysteria and community infighting — for nine years leading up to Coinbase’s Nasdaq debut. They emerged on the other side, headfirst into a powerful bull market.&nbsp;



In a <a href="https://bitcoinhistorynl.beehiiv.com/p/bitcoin-in-1991?utm_source=bitcoinhistorynl.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=bitcoin-in-1991&amp;_bhlid=95cd01548d98a1736dec9b2524894079c46ad259">past edition</a> of Supply Shock, we looked back at Armstrong’s post on Hacker News from March 2012, in which he searched for a ride-or-die co-founder.



Coinbase was Bitbank back then, a PayPal-like app for sending and receiving bitcoin via email. Three months after the Hacker News post, Coinbase was Coinbase, and Armstrong had <a href="https://allthingsd.com/20120629/betting-on-bitcoin-coinbase-wants-to-be-the-paypal-of-the-internet-only-currency/">raised</a> $165,000 for the startup to get off the ground.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">10/ After meeting with more than 50 possible partners (it’s a lot like dating), I met <a href="https://twitter.com/FEhrsam?ref_src=twsrc%5Etfw">@FEhrsam</a> through Reddit and we set out to build Coinbase. <a href="https://t.co/7PVzUEFzYb">pic.twitter.com/7PVzUEFzYb</a>&mdash; Brian Armstrong (@brian_armstrong) <a href="https://twitter.com/brian_armstrong/status/1382432462677045248?ref_src=twsrc%5Etfw">April 14, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Swapping bitcoin for US dollars was the business model that stuck. It took less than a year for Coinbase to hit a key milestone: Users had <a href="https://venturebeat.com/business/coinbase-bitcoin/">exchanged</a> $1 million worth of bitcoin in a single 30-day period by February 2013. Coinbase revenues have been positively correlated with the price of bitcoin ever since.



Eventually, those exchange services morphed into the full-blown trading and financial suite Coinbase offers today.



So if Brian Armstrong was Ben-Hur and Coinbase was his chariot, then Bitcoin would be the <a href="https://www.pololine.com/articles/the-horses-of-ben-hur-and-the-most-epic-scene-in-movie-history/#:~:text=The%20four%20beautiful%20white%20horses,of%20the%20lovely%20mare%20Mira.">four white horses</a> of Ilderim. Bitcoin even set an all-time high as COIN went public — proof of their symbiotic relationship regardless of whatever <a href="https://www.coindesk.com/consensus-magazine/2023/05/17/the-blocksize-wars-revisited-how-bitcoins-civil-war-still-resonates-today">sides</a> were taken during the Block Size War.



Looking back, “PayPal for Bitcoin” was an elevator pitch with a clear expiration date. On a long enough timeline, all companies will become bitcoin companies — including PayPal itself, which began rolling out crypto functionality in the months leading up to Coinbase’s direct listing.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">2/ The Coinbase journey started when I read the Satoshi whitepaper while I was home for Thanksgiving in 2010. As I read it, I realized that crypto had the power to unlock a future where economic freedom was a reality for everyone.&mdash; Brian Armstrong (@brian_armstrong) <a href="https://twitter.com/brian_armstrong/status/1382428343291629569?ref_src=twsrc%5Etfw">April 14, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Coinbase is now working to run back its valuation, having somewhat diversified revenues away from bitcoin trading fees, and is currently worth about half its April 2021 mark.



At the same time, we’re now on track to see more crypto companies go public over the next year or two, starting with stablecoin issuer <a href="https://blockworks.co/news/circle-files-s1-ahead-of-ipo">Circle</a> and potentially trading platform <a href="https://www.etoro.com/news-and-analysis/press-releases/etoro-announces-confidential-submission-to-sec-of-draft-registration-statement-for-proposed-ipo/">eToro</a>.&nbsp;



There’s a clear difference, however. Bitcoin doesn’t represent the beating heart of those firms, at least not in the same way it was for Coinbase in its formative years.&nbsp;



— David



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<h2 class="wp-block-heading">A Historian’s View</h2>



“On a long enough timeline, all companies become Bitcoin companies,” David writes above. For Coinbase, however, it seems to be taking longer than usual.&nbsp;



Certainly, there are positive aspects of the company. Coinbase has managed to safeguard the industry’s bitcoin, and its reputation, for over a decade. Counter to the Ben-Hur analogy, I’d argue Coinbase is really the mini-van of the crypto industry — safe, reliable, the uncomfortable living room you sit in with extended family.



That said, the legacy of Coinbase (from a Bitcoiner’s view) arguably hangs in the balance.&nbsp;



Case in point, you can look at its anemic bitcoin investments. Coinbase HODLs <a href="https://bitcointreasuries.net/">fewer BTC than Tesla</a>, despite its 10-year market advantage. Then there’s its technical ambivalence to Bitcoin. Recall that Coinbase was among the first bitcoin exchanges to go crypto, prioritizing developments and listings on Ethereum — it’s invested untold millions into L2s, Solana, and other “competing L1s.” Yet, despite the fact that bitcoin remains a significant part of its business (driving 30% of all transaction <a href="https://s27.q4cdn.com/397450999/files/doc_financials/2024/q4/Q4-24-Shareholder-Letter.pdf">revenue</a> last year), the company’s product and development roadmap all but ignores it. Coinbase is perennially the last mover on upgrades like Lightning and Taproot. Coinbase at times seems like it’s trying to make amends, like when its head of custody made a surprise <a href="https://x.com/Pledditor/status/1911001856433660187">appearance at the OP_NEXT conference</a> this weekend. Other times, it simply pays lip service to bitcoin (it’s a running joke that Brian Armstrong only says “bitcoin” when forced).&nbsp;



On multiple fronts, it’s hard to argue that Coinbase’s legacy won’t be something similar to AOL, an early web success story that completely fades from internet relevance for failing to build its architecture in the same way that built the most value in the long run. (You can read the latest investor hand-wringing about <a href="https://cointelegraph.com/news/layer-2-reason-for-ethereum-declining-investment-appeal-crypto-venture-capitalist">the problems with L2s</a>.)



Like most of the other major exchanges, Coinbase is investing in scaling blockchains. We’ll see how many memecoins need to go to zero before it starts taking Bitcoin seriously again.



— Pete



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Coinbase has come a long way from ‘PayPal for Bitcoin’

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Bitcoin’s first Ponzi scheme was nothing special — but it was early.



After the 1906 inception of the international reply coupon, it took 14 years for Charles Ponzi to come along with his <a href="https://www.smithsonianmag.com/history/in-ponzi-we-trust-64016168/">legendary</a> scheme, which he peddled across Boston society to the tune of $20 million at the time ($319 million in today’s money).



Meanwhile, it only took Trendon Shavers, aka Pirateat40, less than three years to pull off something similar on the Bitcoin blockchain: Bitcoin Savings &amp; Trust.



<h2 class="wp-block-heading">On This Day – Bitcoin Savings &amp; Trust&nbsp;</h2>



Shavers originally launched the scheme as First Pirate Savings &amp; Trust in November 2011, having cultivated an online persona of a savvy over-the-counter bitcoin trader in IRC channels and on Bitcointalk.



Bitcoin had opened the year at $0.30, hit $30 in June, and had since settled at around $3. Shavers’ supposed OTC desk was now running dry, with requests for more coins only “getting larger and more frequent.”&nbsp;



“Over the last few months I have been selling BTC to a group of local people,” Shavers wrote in his launch <a href="https://pastebin.com/yH0jr6KY">post</a>. “Now this is a ‘don&#8217;t ask don&#8217;t tell&#8217; group of people, so I can&#8217;t tell you exactly where and to whom the coins ultimately end up with, but so far it&#8217;s been pretty painless.”



To help source liquidity, he devised two ways to inspire early adopters to send him their bitcoin, starting at a minimum of 50 BTC ($150 then, $4 million now).



<ul class="wp-block-list">
<li>The “on-demand” tier would pay a 3.5% fee for filling buy orders over what the desk has available.</li>



<li>The “storage” tier would pay 1% per day for bitcoin sent to First Pirate Savings &amp; Trust, with a promise that “you can withdraw your balance at any time.”</li>
</ul>



As was the case with the original Ponzi scheme, initial inflows were rather small, only $60,000 in total over the first two months.&nbsp;



But after rebranding it to “Bitcoin Savings &amp; Trust” on this day in 2012 (with a new website) Shavers’ wallets saw that much on an average day, despite repeated warnings of the community, including <a href="https://bitcoinmagazine.com/business/ponzi-schemes-the-danger-of-high-interest-savings-funds-1338461999">from</a> Vitalik Buterin.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcVSRh9xXbGUjnpZ8nUZKHr8BqN4bpwt-Pg2qCs4Lxmu6UsQVdHYSyYDygREXaEff6H2bBuJlPQw_wZd72pVBvWkvYT2QpZcpGMn00SGIy2jS1WEb0D6L8sWakXDRtnMLYPpBsN?key=xm2WtSBqbG4DoznrxKgR4WvZ" alt=""/><figcaption class="wp-element-caption">Bitcoin’s push to $15 was interrupted by Bitcoin Savings &amp; Trust’s sudden closure, but BTC quickly rebounded.</figcaption></figure>



Just like the real Charles Ponzi almost a century earlier, Shavers never really did any of what he said. To go back in time a bit: Ponzi had promised up to 100% returns to investors who’d backed his wacky plan to arbitrage postage stamps between Italy, where they were cheap in the wake of World War I, and the US, where they were still expensive.



Ponzi couldn’t actually redeem his stamps for cash, or ship enough of them from Europe in any case. Still, he easily paid out interest with the waves of fresh capital, splitting the difference with a mansion, luxury car and a honeymoon vacation. Ponzi was sentenced to five years in prison.



Similarly, Shavers was simply selling coins to cover rent, car payments, shopping and casino gambling. Both plans were over and done in under 12 months.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdgGVAZESOhrEeoQfAYeJIfmlI6CeFPdP09OBF4jHYJiBuHdeUSpfU1p3JVVvmEUWjVGEQ5CEWTlRCwyMnpsJRk96bvDPWwt0oa15wQW7p89qyeGzxOvLhBKmA57lbhKu5e7kDmrA?key=xm2WtSBqbG4DoznrxKgR4WvZ" alt=""/></figure>



Shavers’ username is a reference to a Jimmy Buffett song, “A Pirate Looks at 40,” which laments about a man born too late in history to get away with adventurous crimes.



The Feds calculated that Shavers, drawing from about 100 investors, had siphoned 193,000 BTC for himself, worth up to $1.5 million back then and $16 billion today (coincidentally similar to the BTC supposedly held by the US government). He was <a href="https://www.vice.com/en/article/lawyer-reveals-details-about-the-man-behind-bitcoins-45-million-ponzi-scheme/">fined</a> $40 million and sentenced to 18 months in prison.



Look onchain and you can still spot the robbing of Bob to pay Alice: On every other day, total flows for Shavers’ wallets would be divided fairly evenly between inflows and outflows. Coins in from new investors, coins out to older ones.



And you can still see almost 1.18 million BTC flowing through wallets linked to Bitcoin Savings &amp; Trust in its short history — the equivalent of around 10% of the entire circulating supply at the time.



At risk of searching for a silver lining in the fraud, there’s this: Whereas actual physical records of Charles Ponzi’s scheme are presumably long gone, we’ll at least forever have a perfect account of Bitcoin’s first-ever imitation.



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Bitcoin’s first Ponzi scheme would be worth $16B today

This is a segment from the Supply Shock newsletter. To read full editions, <a href="https://blockworks.co/newsletter/supplyshock" target="_blank" rel="noreferrer noopener">subscribe</a>.



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When it comes to whether bitcoin is (or was ever) a bubble, the late John McAfee <a href="https://x.com/officialmcafee/status/938938539282190337">said</a> it best. 



“Those of you in the old school who believe this is a bubble simply have not understood the new mathematics of the Blockchain, or you did not [care] enough to try.



“Bubbles are mathematically impossible in this new paradigm. So are corrections and all else.”



That was in early December 2017, when bitcoin traded at under $17,000. It peaked one week later, stopping just shy of $20,000 to cap off a nearly three-year bull market.



Four months passed, and bitcoin slipped by two-thirds to less than $7,000, marking the first act of a bear market that lasted only one year.&nbsp;



If only Bloomberg and Bank of America chief investment strategist Michael Hartnett had listened to McAfee.



On this date in 2018, <a href="https://www.bloomberg.com/news/articles/2018-04-09/bitcoin-seen-popping-like-the-greatest-bubbles-by-bofa">Bloomburg posted an article</a> called “Bitcoin, the Biggest Bubble in History, Is Popping.&#8221; In analysis cited the article, Hartnett’s team plotted bitcoin’s most recent bull market against well-known asset bubbles — the Wall Street crash that ended the Roaring Twenties, the South Sea Company and Mississippi bubbles in the 18th century, and the often-cited Dutch tulip craze a century earlier.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeYDx_tmaJE1uCWA6HV8er6ulG9wIriJCxr5AQDI1M_O10Sqp0gUHT-akgDAOxq6vwGBG6WO4bMlYODsj4K8GPGXh7RuwvEICquy1UUf8OMbfJzw-7pJee1HxdODymUavsOId2ODw?key=EWy5H33Q5JDD9iYKGCNA-ra2" alt=""/></figure>



But there are bubbles, and then there’s price discovery.



Dutch tulips had indeed exploded from a single guilder in early 1635 to 60 guilders two years later — a 5,900% rally — before collapsing by more than 99% in a matter of weeks.&nbsp;



Bitcoin, meanwhile, had managed 8,900% in the three years leading up to its December 2017 all-time high, starting at $224.



That’s more returns than the South Sea Company, Mississippi Company, and Roaring Twenties bubbles combined.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfXZkAKH0mY9GAxKLVU0Xj1P9LW97hNeR_CqkwN5BD4rlwQbIdMt4q6XvKBTiGQ3W4CxQHe3nLC9e82bFS5-UmmI0sQsVEVWfKxeeE1xaksRzNOigyV5ZoOSV1vpFEQJWi4fkxy?key=EWy5H33Q5JDD9iYKGCNA-ra2" alt=""/><figcaption class="wp-element-caption">The original BofA chart implied bitcoin was the “greatest asset price bubble” in history</figcaption></figure>



But where the South Sea and Mississippi Companies folded entirely after their individual markets tanked, and the Dow languished for nearly a decade through the Great Depression, bitcoin itself never suffered such a drastic fate.



Despite a string of bankruptcies for over-leveraged bitcoin miners — which helped to push bitcoin down by another 50% in the nine months following Hartnett’s note — bitcoin reversed course significantly over the next two quarters in what’s <a href="https://thedefiant.io/news/research-and-opinion/charting-history-s-rhyme-understanding-the-cyclicality-of-crypto-markets">considered</a> a short but legitimate bull market cycle.



Bitcoin returned to its December 2017 all-time high three years later almost to the day, whereas it took 15 years for the Nasdaq to do the same following the bursting of the dot-com bubble, and almost a decade longer for Japan’s Nikkei 225 after its own market mania in the late ‘80s.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe4Ile4r5R8p2iFXwBrK28GoWDoYEgtpU7oWwWhmd106Isv-pnSfq6cuj_DbioayNjPjhMUJ8vfvIe3rY_-e4pH_yHjW0d5ZjXZ7SEEeM2V-lYIvfgU0b4lIOp364ZKTwluSCPHUQ?key=EWy5H33Q5JDD9iYKGCNA-ra2" alt=""/><figcaption class="wp-element-caption">Take that, tulips!</figcaption></figure>



Bitcoin has been declared <a href="https://bitcoindeaths.com/">dead</a> 67 more times since Bloomberg’s article, and it’s up more than 1,000%.



Which, of course, makes the notion of a “bitcoin bubble” mathematically impossible, just like McAfee said. RIP.



— David Canellis



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<h2 class="wp-block-heading">Did You Know?</h2>



If Sir Isaac Newton — the famed mathematician who defined our modern laws of physics — was alive today, there’s a good chance you’d see him in the trenches.



Newton <a href="https://royalsocietypublishing.org/doi/10.1098/rsnr.2018.0018#:~:text=It%20is%20easy%20to%20imagine,of%20%C2%A320%20000%20or%20more">built</a> up a strong diversified portfolio of government bonds and stocks in the early 18th century, and he was even appointed as Master of the Royal Mint for more than 30 years due to his scientific achievements.



Despite this, Newton was still caught in a pump and dump for a stock he’d been holding for years — the South Sea Company.



The South Sea Company was a joint-stock government enterprise intended to stymie spiraling national debt by exploiting what were supposed to be massively lucrative trade routes with Spanish territories across South America.



Despite very low revenue at the time, hype in Britain quickly reached fever pitch and the stock went nearly 10x in the first six months of 1720.



But with no actual profits, it resembled a Ponzi scheme more than a bona fide company, while insiders manipulated the market for massive personal gain.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcUePvht7vsqUCTIruoe1mle9rhUwOo6nbTa2L8JsawjCkumjUMVNQUzHVcoZD8g7YvFhKepIXnXJXz3RaPpdQeYIyYMXWPJ2hRkO35hmJyJwyMJ39bhEM4k-H97VHLQVX0Db8j?key=EWy5H33Q5JDD9iYKGCNA-ra2" alt=""/></figure>



<a href="https://newtonandthemint.history.ox.ac.uk/global-financial-world/newton-and-the-south-sea-bubble#:~:text=It%20is%20likely%20that%20Newton,out%20arrangements%20for%20the%20Company">Legend</a> has it that Newton had, unfortunately, cashed out too early, FOMO&#8217;d back in at the top, and bought massively on the way down, losing today’s equivalent of $25 million in the crash.



“I can calculate the motion of heavenly bodies, but not the madness of people,” he supposedly said, and forbade anyone in earshot from mentioning “South Sea” ever again.



If only they’d heard of HODLing in the 1700s.



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BofA’s blunder: How bitcoin turned a ‘crash’ into a 1,000% surge

This is a segment from the Supply Shock newsletter. To read full editions, <a href="https://blockworks.co/newsletter/supplyshock" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Heartbleed was a <a href="https://blog.cloudflare.com/heartbleed-revisited/">tiny but critical flaw</a> in the “heartbeat” extension of OpenSSL, the widely-used open source cryptography library. OpenSSL powers both Secure Sockets Layer (SSL) and Transport Layer Security (TLS) encryptions meant to protect sensitive data when using websites and other online services.



OpenSSL’s heartbeat is a type of ping — a tiny message passed back and forth between the user’s machine and the server they’re connected to — which proves the connection is alive.&nbsp;



A missing check for the length of that message meant that whatever was sitting in the target’s RAM could be siphoned, in plaintext, without a trace: usernames, passwords, cookies, or even bitcoin private keys.



As cryptographer Matt Blaze <a href="https://x.com/mattblaze/status/453422425968218112">put</a> it, Heartbleed “leaks data beyond what it’s protecting. So [it’s] worse than no [cryptography] at all.”



Heartbleed actually went undiscovered for two years. Initial estimates <a href="https://arstechnica.com/information-technology/2014/04/critical-crypto-bug-in-openssl-opens-two-thirds-of-the-web-to-eavesdropping/">suggested</a> that two-thirds of the internet was relying on OpenSSL at the time (2014), but not all of it was running vulnerable versions. 



More specific <a href="https://www.netcraft.com/blog/half-a-million-widely-trusted-websites-vulnerable-to-heartbleed-bug/">calculations</a> pointed to half a million affected websites, equivalent to around 17% of all SSL web servers globally, including Instagram, Tumblr, Google, DropBox and GitHub, as well as routers, VPNs, some Android <a href="https://www.cnet.com/news/privacy/how-to-tell-if-your-android-device-is-vulnerable-to-heartbleed/">devices</a>, and perhaps most importantly for Bitcoiners, crypto platforms.



Anyone who ran software containing the Heartbleed bug, or otherwise interacted with sites or services which did, was technically at risk of attack, even if the exploit required them to be active at the time.



So, as admins around the world rushed to patch their systems (95 out of the top 100 sites on Alexa were <a href="https://jhalderm.com/pub/papers/heartbleed-imc14.pdf">patched</a> within 24 hours), the Bitcoin ecosystem ran its own crisis playbook.&nbsp;



Bitstamp <a href="https://siliconangle.com/2014/04/09/bitcoin-weekly-2014-april-9-the-heartbleed-bug-edition/">briefly</a> took itself offline, and Bitfinex suspended withdrawals as Coinbase and BitPay confirmed their stacks were free of the flaw. Cybersecurity researchers and industry figures urged users to change their credentials as soon as possible, while others independently compiled lists of sites and services still running the vulnerable versions of OpenSSL.



Bitcoin Core developers, meanwhile, pushed through an emergency patch within a day.&nbsp;



The consensus software itself did not rely on OpenSSL (network messages are unencrypted by default), but other parts of the client did — particularly relevant for those directly interacting with nodes and the now-depreciated BIP-70 payment requests, which enabled payments by clicking a “bitcoin:” link.&nbsp;



Amazingly, the most <a href="https://jhalderm.com/pub/papers/heartbleed-imc14.pdf">severe</a> known case of a bitcoin-related Heartbleed exploit was the matter of 28 BTC ($6,500 then, $2.5 million now) stolen from 12 customers of early lending platform BTCJam. The platform quickly <a href="https://web.archive.org/web/20140621110906/http://blog.btcjam.com/post/82158642922/official-btcjam-update">refunded</a> the lost coins.



That Heartbleed wasn’t worse for Bitcoin is down to the fast and effective response from the ecosystem as it was in 2014. Bitcoin Core developers would go on to shed the software’s dependencies on OpenSSL over the following years, and by June 2020 it was completely free of it.



We all know bitcoin is backed by Bitcoin. It’s valuable partly due to the energy that miners spend in pursuit of the protocol’s longevity, amplified by external demand for the coins they earn in return.



More critically, however, is that bitcoin is backed by those who’ve contributed to its evolution and safety — and they’ve become exceedingly efficient at it over the past decade and a half, even if they’re only human.



— David Canellis



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<h2 class="wp-block-heading">Rizzo’s take, the Bitcoin Historian</h2>



In an era where Bitcoin upgrades appear <a href="https://www.youtube.com/watch?v=GdgQ3IflBJ0">ever-gridlocked</a>, the Heartbleed bug may seem like a dusty relic of Bitcoin’s reckless past, a callback to a time when the project’s developers moved at the speed of more traditional software projects. (Think: “Move fast and break things.”) In other ways, the Heartbleed bug is a timeless reminder of the risks Bitcoin developers must consider on behalf of users, and how, despite our proclivity to dismiss their recognition as a special class of project contributor, they retain distinctive responsibilities and privileges.&nbsp;



I recall Jameson Lopp’s <a href="https://blog.lopp.net/against-quantum-recovery-of-bitcoin/">excellent new essay</a>, “Against Allowing Quantum Recovery of Bitcoin,” on how Bitcoin might respond to a potential quantum computing threat.



In many ways, the arrival of quantum computers and their deployment on the Bitcoin network would be reminiscent of the Heartbleed bug. Developers would have to act, and those actions will have an effect not just on users, but on the wider network.



Lopp’s work raises more questions than answers, but it’s a solid reminder that while some populist Bitcoin evangelists like Michael Saylor are touting the technology as ready for centuries in Washington DC, there remain scenarios where Bitcoin might need human maintenance, and that may invite new opportunities for human error.



— Rizzo



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