 "Winner of Bitcoin auction plans to expand virtual currency's use")
When the government auctioned nearly 30,000 Bitcoins on Friday, many bidders were looking for a bargain, hoping to buy the virtual currency at a discount and flip it later for a short-term profit.
But the winner, the venture capitalist Tim Draper, is not seeking a quick hit. Instead, through a partnership with the Bitcoin exchange start-up Vaurum, Draper intends to make the coins available for use in emerging markets.
"With the help of Vaurum and this newly purchased Bitcoin, we expect to be able to create new services that can provide liquidity and confidence to markets that have been hamstrung by weak currencies," Draper said in a statement through Vaurum. "We want to enable people to hold and trade Bitcoin to secure themselves against weakening currencies."
The United States Marshals Service, which organised the auction of the coins seized from the now-defunct market Silk Road, confirmed on Wednesday that Draper won the auction. The Marshals Service announced on Tuesday that one bidder had won all the coins, but it did not identify the winner or disclose the winning bid.
Avish Bhama, the co-founder and chief executive of Vaurum, said the goal was not to dump the 30,000 coins on the open market. Rather, he said that he and Draper hoped to expand Bitcoin's use in areas of the world where access to the currency is difficult, including India, South America and parts of Asia. "This is a very long-term thesis that we have where we want to increase the supply and facilitate the usage of Bitcoin in emerging economies," Bhama said.
Draper was part of a group that invested $4 million in Vaurum in May. The company participated in a start-up accelerator programme, Boost VC, run by Draper's son Adam Draper.
The Marshals Service said on Monday that 45 registered bidders had taken part in the auction and that the agency had received 63 bids. A number of prominent names in the Bitcoin world, including Barry Silbert of SecondMarket, Pantera Bitcoin and Coinbase, submitted unsuccessful bids. Interest in the auction is the latest indication that Bitcoin is gaining popularity. When it first appeared online in 2009, Bitcoin, created by an anonymous computer programmer, or group of programmers, appealed mostly to an anti-establishment following that wanted to avoid the banking system and government regulation.
Like Draper, many entrepreneurs now see an opportunity, particularly in making financial transactions easier.
"The venture capital community very much believes that there is a future in the implementation of Bitcoin technology," said Gil Luria, an analyst at Wedbush Securities who has studied Bitcoin. "Having a stake in Bitcoin supports this vision of Bitcoin as helping create tools in emerging markets for consumers that don't have access to the traditional banking network."
The price of Bitcoin has climbed since the auction closed, reaching a high of about $655 on Tuesday, according to CoinDesk's Bitcoin Price Index. The price fell slightly on Wednesday, to about $645. At the start of the auction, the price was about $570. Bhama declined to disclose Draper's bid for the stash of coins, which is now worth about $19 million.
Draper could not be reached for further comment.
Experts are divided on what information about Draper's bid, if any, can be gleaned from the price increase. Losing bidders may be driving up the price because they know there is significant demand for the coins at a higher price. The increase could also be the result of interest in the auction itself, said David L Yermack, a professor at New York University's Stern School of Business.
"Just the fact that there was such broad demand would tend to push up the value of Bitcoin," he said.
For the Marshals Service, which is responsible for selling property taken from criminals like cars and yachts, the auction was unfamiliar territory and was not without missteps. A list of potential bidders was accidentally released on June 18 in an email from the agency. And apparent typographical errors in the initial instructions posted on the Marshals Service's website made it unclear when the registration deadlines were. Participants also said the auction process was vague, which experts said might have discouraged smaller parties from bidding.
Bidders had a 12-hour window to submit one sealed offer for the coins, which have been broken up into lots of 3,000.
Only about 20 per cent of the coins that were seized from Silk Road were auctioned on Friday, and the auction could provide a road map for the Marshals Service if it decides to sell the rest.
The Marshals Service said on Wednesday that it did not publicly discuss its internal auction processes.
Regardless, experts said the fact that one participant bid high enough to take home all the coins was evidence that the auction had been a success.
"They probably don't regret this one bit," Yermack said. "It's probably viewed as a stroke of good fortune."
But the winner, the venture capitalist Tim Draper, is not seeking a quick hit. Instead, through a partnership with the Bitcoin exchange start-up Vaurum, Draper intends to make the coins available for use in emerging markets.
"With the help of Vaurum and this newly purchased Bitcoin, we expect to be able to create new services that can provide liquidity and confidence to markets that have been hamstrung by weak currencies," Draper said in a statement through Vaurum. "We want to enable people to hold and trade Bitcoin to secure themselves against weakening currencies."
The United States Marshals Service, which organised the auction of the coins seized from the now-defunct market Silk Road, confirmed on Wednesday that Draper won the auction. The Marshals Service announced on Tuesday that one bidder had won all the coins, but it did not identify the winner or disclose the winning bid.
Avish Bhama, the co-founder and chief executive of Vaurum, said the goal was not to dump the 30,000 coins on the open market. Rather, he said that he and Draper hoped to expand Bitcoin's use in areas of the world where access to the currency is difficult, including India, South America and parts of Asia. "This is a very long-term thesis that we have where we want to increase the supply and facilitate the usage of Bitcoin in emerging economies," Bhama said.
Draper was part of a group that invested $4 million in Vaurum in May. The company participated in a start-up accelerator programme, Boost VC, run by Draper's son Adam Draper.
The Marshals Service said on Monday that 45 registered bidders had taken part in the auction and that the agency had received 63 bids. A number of prominent names in the Bitcoin world, including Barry Silbert of SecondMarket, Pantera Bitcoin and Coinbase, submitted unsuccessful bids. Interest in the auction is the latest indication that Bitcoin is gaining popularity. When it first appeared online in 2009, Bitcoin, created by an anonymous computer programmer, or group of programmers, appealed mostly to an anti-establishment following that wanted to avoid the banking system and government regulation.
Like Draper, many entrepreneurs now see an opportunity, particularly in making financial transactions easier.
"The venture capital community very much believes that there is a future in the implementation of Bitcoin technology," said Gil Luria, an analyst at Wedbush Securities who has studied Bitcoin. "Having a stake in Bitcoin supports this vision of Bitcoin as helping create tools in emerging markets for consumers that don't have access to the traditional banking network."
The price of Bitcoin has climbed since the auction closed, reaching a high of about $655 on Tuesday, according to CoinDesk's Bitcoin Price Index. The price fell slightly on Wednesday, to about $645. At the start of the auction, the price was about $570. Bhama declined to disclose Draper's bid for the stash of coins, which is now worth about $19 million.
Draper could not be reached for further comment.
Experts are divided on what information about Draper's bid, if any, can be gleaned from the price increase. Losing bidders may be driving up the price because they know there is significant demand for the coins at a higher price. The increase could also be the result of interest in the auction itself, said David L Yermack, a professor at New York University's Stern School of Business.
"Just the fact that there was such broad demand would tend to push up the value of Bitcoin," he said.
For the Marshals Service, which is responsible for selling property taken from criminals like cars and yachts, the auction was unfamiliar territory and was not without missteps. A list of potential bidders was accidentally released on June 18 in an email from the agency. And apparent typographical errors in the initial instructions posted on the Marshals Service's website made it unclear when the registration deadlines were. Participants also said the auction process was vague, which experts said might have discouraged smaller parties from bidding.
Bidders had a 12-hour window to submit one sealed offer for the coins, which have been broken up into lots of 3,000.
Only about 20 per cent of the coins that were seized from Silk Road were auctioned on Friday, and the auction could provide a road map for the Marshals Service if it decides to sell the rest.
The Marshals Service said on Wednesday that it did not publicly discuss its internal auction processes.
Regardless, experts said the fact that one participant bid high enough to take home all the coins was evidence that the auction had been a success.
"They probably don't regret this one bit," Yermack said. "It's probably viewed as a stroke of good fortune."
©2014 The New York Times News Service