Month: June 2014

The Bitcoin Economy’s ‘Backbone’ Is Bitstamp, An Exchange Run By Two Young Slovenians

On Friday, the U.S. Marshals are auctioning off nearly 30,000 bitcoin seized from the online drug bazaar Silk Road. With Bitcoin worth close to $600 on most exchanges, that’s $17 million worth of Bitcoin on the table. Seen in a certain light, it’s bizarre that the feds are auctioning digital dollars. If they seized foreign currency in an IRL bust, they’d simply convert it to dollars and send it to the Department of Treasury. But they don’t have that option in this case. Regardless of the effect of trying to cash out $17 million worth of Bitcoin in one fell swoop when daily trading volume is just $14 million, the Marshals don’t have a U.S.-federally-approved exchange to use. The few U.S. exchanges out there are only legal in some states. When it comes to turning significant amounts of Bitcoin into U.S. dollars, all the action is in Europe. The top three BTC-USD exchanges are Bitstamp, Bitfinex and BTC-e, based in Slovenia & the U.K., France (maybe?) and Bulgaria (probably?), respectively; they collectively see daily trading volume of 10,000 Bitcoin, or $6 million USD.

The exchanges have historically been regarded as mysterious and, well, weird. Slovenia? Yet even after Tokyo-based Mt. Gox’s crash-and-burn, serious Bitcoin businesses and traders can’t stay away from foreign exchanges; they still need digital money changers and the European exchanges are the main USD players. The three European exchanges have historically been press-shy. Bitfinex’s founder keeps his remarks to Reddit. The BTC-e crew has stayed anonymous while rumors swirl that they are actually based in Russia, where Bitcoin is illegal. But the two twenty-something founders behind Bitstamp, Nejc Kodrič and Damian Merlak, are increasingly opening up. They’ve attended Bitcoin events, collected a “best virtual currency startup” award at a European tech conference, and spent an hour with me on Skype talking about what it was like to discover Bitcoin and suddenly become two of the…


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