Here's What the Hell Happened In Bitcoin In 2015

This was Bitcoin's wildest year yet.

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Dec 23 2015, 2:00pm

Image: Flickr/Jonathan Waller

Bitcoin season seven—on the web since 2008!—is drawing to a close, and it's clear that the writers have started to run out of ideas. Earlier seasons of the series had their fair share of drama, like in season six when the gigantic Mt. Gox exchange imploded, taking millions of dollars worth of Bitcoin with it, but even that doesn't compare to the show's recent "wacky" phase, where it seems like anything goes.

Without a doubt, 2015 was the craziest year yet for Bitcoin, the virtual currency that, in the last six years, has gone from a niche hobby for people who've read Neuromancer to being on the cover of Bloomberg Businessweek.

This year, the stakes got higher, the hunt for Bitcoin's anonymous creator intensified, and the resulting drama threatened to tear the cryptocurrency community apart. Welcome to the big show, folks.

GIF via Giphy

CRYPTO-DRUG DEALERS GOT THEIR ROBESPIERRE

In 2015, libertarian keyboard warriors and Russell Brand alike got their very own Robespierre: Ross Ulbricht, a 31-year-old college-educated libertarian who was sentenced to life in prison for operating the Silk Road dark web market under the pseudonym "Dread Pirate Roberts."

For a while, Silk Road was the go-to location on the dark web for buyers and sellers of drugs, with Bitcoin as their currency of choice. After Ulbricht's 2013 arrest and 2015 sentencing, his supporters, united under the banner "Free Ross," were up in arms over what they saw as a harsh sentence, and dealers picked up the slack by starting new markets to fill the void left by Silk Road.

But the saga didn't end there. That would be far too neat and tidy for Bitcoin. There were also two corrupt DEA agents, who were both recently sentenced to prison for doing everything from stealing bitcoins to setting someone up for a hit. And yes, there could still be more crooked cops on the Silk Road case.

Ulbricht wasn't alone in running Silk Road, either. This was also the year the feds tracked down "Variety Jones", Ulbricht's right hand man, also known as Roger Clarke. They've since charged him with numerous offences, including narcotics trafficking, and Motherboard's own Joseph Cox kept tabs on the whole thing all the while.

THERE WAS BASICALLY A CIVIL WAR OVER A CODE CHANGE

It all started in December of 2014, when longtime Bitcoin developer Gavin Andresen proposed a change to Bitcoin's code. The change was intended to help the network handle its anticipated growth by, essentially, increasing the size of the "blocks" of data that get uploaded to the blockchain, the publicly viewable ledger at the heart of Bitcoin.

"That makes sense," you might say—except the proposed change turned into a total shit show and everyone got mad and said mean things about each other for much of 2015. Even core developers started picking sides. Prominent developer Mike Hearn aligned with Andresen, while others, such as core developerPeter Todd, took a decidedly more contrarian position.

Now, nearly a year later, pretty much everyone agrees that something needs to be done to prepare BItcoin for a huge influx of users, if they ever come, but not everyone thinks Andresen's idea is the solution. So, that's something.

Watch more from Motherboard: Life Inside a Chinese Bitcoin Mine

PEOPLE KEPT TRYING TO BREAK BITCOIN

In a war of words, sometimes the best weapon is a little bit of action. Amidst all the hysteria about the network not being able to handle the load of more users, something strange started happening. In June, a Bitcoin exchange called Coinwallet.eu began spamming the Bitcoin network with so many junk transactions that the system slowed to a crawl.

Coinwallet.eu referred to these tests as "stress tests," but others preferred "spam attack." Coinwallet.eu, which apparently was willing to piss away the thousands of dollars in Bitcoin, did this several times in 2015 to prove a point: Bitcoin's code needs to be updated to handle more traffic.

Other mysterious parties began spamming the Bitcoin network in 2015, as well. During one July attack by unknown parties, cleaning up the mess required creating the largest Bitcoin transaction of all time.

One spammer, who claimed to be Russian and went by the name "Alister Maclin," also claimed responsibility for one of the more damaging spam attacks in October. Why? In an interview with Motherboard, the spammer told me he really just doesn't think Bitcoin is a very good idea at all.

TOO MANY SATOSHIS

The first lesson in Bitcoin 101 is that nobody knows who actually wrote the original Bitcoin white paper that was circulated among cryptographers in 2008. The anonymous author goes by the pseudonym "Satoshi Nakamoto," and lots of people have tried to find out who he, she, or they, are, with very little success.

Last year saw Newsweek point the finger at some random guy named Dorian Nakamoto. Although nobody can be totally sure, Dorian denied any involvement, and it almost certainly wasn't him. This year, two new high-profile entrants made it into the ever-growing pantheon of people who are probably not Satoshi Nakamoto: a cryptocurrency engineer named Nick Szabo and an Australian entrepreneur named craig Steven Wright.

The New York Times implicated Szabo in May for the following reasons: he engineered a predecessor to Bitcoin called "bit gold," and he denies being Satoshi Nakamoto—which is just what the real Satoshi Nakamoto would do. As for Wright, Wired and Gizmodo ran parallel investigations that named him as the likely person behind Nakamoto based on evidence provided to them by someone claiming to be a hacker. Very little of this evidence was verified and some of it was likely faked, as Motherboard reported.

Nice try everyone, better luck next year.

BUREAUCRACY MET CRYPTOCURRENCY

Much to the chagrin of Bitcoin's largely libertarian-leaning community, some governments began taking steps to regulate Bitcoin. In New York State, much-maligned BitLicense legislation began forcing Bitcoin businesses to get a license to operate in September of 2015. The law was summarily suplexed by the head of MIT's Digital Currency Initiative, Brian Forde, along with other prominent members of the community.

Outside of the US, the province of Quebec in Canada followed suit with a similar law, although a report by the Canadian Senate recommended that the government take a very hands-off approach to Bitcoin—at least for now. Europe has also announced plans to regulate Bitcoin amid fears that ISIS is using it to fund their operations, despite a near-total lack of evidence that they actually are.

LOTS OF PEOPLE GOT IN TROUBLE WITH THE LAW

Ross Ulbricht wasn't the only character in Bitcoin to run afoul of the law this year. And while the others perhaps don't have Ulbricht's star power or roguish good looks, they're worthy of their own mention on this list.

First, there's Mark Karpeles, the Bitcoin entrepreneur who ran the now-defunct Bitcoin exchange Mt. Gox. Mt. Gox's fall is one of the more infamous episodes in Bitcoin's history. When it unexpectedly folded in early 2014, due to a devastating hack, according to Karpeles, it took $473 million worth of Bitcoin with it. Karpeles was arrested by Japanese police several times in 2015, until he was finally charged with embezzling $2.6 million from the failed exchange.

Next, we have Josh Garza, the founder of much-derided and federally investigated mining hardware company GAW Miners. After a few of his other shady Bitcoin operating imploded in 2015, he was formally charged by the Securities and Exchange Commission for running a multi-million dollar ponzi scheme. It wasn't shocking in the least to anyone who was paying attention, and allowed me to make the joke "Pyramids of Garza."

Finally, there's Shiny Flakes, a pseudonymous 20-year-old nerd from Germany who ended up running one of the dark web's most successful Bitcoin-for-drugs operations. In March, police in Leipzig raided his bedroom and arrested him, taking 4.1 million euros worth in cocaine, LSD, ketamine, weed, and more, with them. He was sentenced to seven years in prison. Besides Ulbricht himself, Shiny Flakes was probably the highest-profile Bitcoin-related sentencing of 2015, at least when it comes to slinging drugs over the Tor network.

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And this concludes your recap of Bitcoin, season seven. It was a wild ride, and some of it didn't even make any sense. But that's okay, because season eight, coming in 2016, promises to be even better.