Fireside With Mt. Gox's Mark Karpeles l KBW2024

hello Soul okay it's late in the day but we do have a uh fantastic fireside chat uh here and um for the first time really on a stage within the fireside chat in many years um Mount Go's founder Mark carelis hello uh thank you thank you so uh Marcus I mentioned when we uh had lunch today and went over sort of what we're going to talk about um you're the only person from the original Bitcoin Foundation that I hadn't Met 10 years ago obviously probably because it was you were in Japan and then shortly after in 2013 all the controversies happened so I'm going to spend in this 20 minutes about five minutes talking about how you got into Bitcoin your path is uh as an entrepreneur because you're back now as an entrepreneur and um five minutes on sort of the rise and fall of Mount Cox the most famous Exchange in the world um arguably the most important in in its history um five minutes on sort of how the Japanese bankruptcy process has has worked its way through and five minutes on uh the three new things that you've taken on uh since sort of uh coming coming out into uh sort of your new career so let's start with um your early days and how you got into Bitcoin from being a programmer and I thought it was fascinating when you said that you sort of uh discovered it in uh through a client of yours at your payment company yes exactly um back in 2010 I was running a web hosting company in Japan so I just arrived in Japan the previous year I was still uh trying to get something done and this customer of mine which was a French person living in Peru uh has some trouble paying online because he's in Peru his card is French so typically uh with regular payment methods raises flags and he asked me if it could be possible to use Bitcoin uh for payments and that was the first time I heard of Bitcoin I looked into it I immediately liked the idea behind Bitcoin uh how the blockchain worked and the a month later I was able to accept Bitcoin payments actually and of course timing is everything June 2010 that's when the difficulty level was still and that was before the Bitcoin pizza and GPU mining started upping the difficulty so you started Mining and started with one machine saw how easy it was to get 50 Bitcoin and then put more and of course you had a hosting company so you ultimately racked up 200,000 Bitcoin in a short period of Time Yeah so basically at the very very beginning uh Bitcoin was fairly easy to mine and the the first Bitcoin I mind actually I mind on my desktop computer so I looked into Bitcoin I installed the Bitcoin client I saw it worked uh I mean it looks fine and in the menu you had this option to enable mining so I yeah might try it and the next day I had 50 Bitcoins so that seemed maybe a little bit too easy but at the same time uh people were willing to but money to get Bitcoin so I thought why not and yeah I've got dozens of servers doing nothing I might as well do some C you mining uh and that's what I did and obviously if you did nothing else than you had the 200,000 Bitcoin today you'd be one of the richest people in the world um I guess that's a reason to huddle um by the way I I I have a book coming out um called Bitcoin super cycle uh Simon and Schuster Distributing it uh Amazon Bitcoin super cycle uh I've got it at my Twitter Michael turpen TP i n reason I mentioned that is because you're in it several times because throughout the history I I show the whole history of Bitcoin before I talk about the Cycles the predictability of the four-year cycles and with every cycle you've had an impact I mean you got into it and started monox before the first having and um you know tell me about how you first met Jeb MCB and how that partnership uh developed to where you were then ultimately buying him out of the of the partnership yeah uh I actually never met Jed in person uh only through IC and the Bitcoin for so back in uh 2010 actually when I started accepting Bitcoins on my web hosting system and uh the Bitcoin Community Sy was very small like the Bitcoin Forum was maybe 200 300 users uh I was the only company uh say company it's a very small company but I was the only company working in Bitcoin uh the other people were like uh is are private people like this guy selling alapaka socks or things like that Roger of course was selling memory products and things like that one of those early 200 yeah I didn't see him on the Bitcoin from back then but maybe uh I think he saw this but not publicly well and again he uh obviously famously um bought 250,000 uh Bitcoin when he read the white paper and couldn't believe it was true and spent three days trying to dis prove it to the point that he he checked him s into the hospital from exhaustion then got out and bought 250,000 Bitcoin on your uh exchange for a dollar a piece and it that was the first kind of big crash that happened after that so talk about the early days I think that was 2011 fascinating to me was the timing of you taking over the ownership that was March of uh 2011 yes exactly and so it was mildly profitable and then when you took it over um it had a hack that happened right in the middle that made it not solvent at that point uh yes basically between the time I signed the contract and I got the actual access to the servers uh 880,000 Bitcoins were stolen uh that became the very famous one feex uh address uh where there are still 80,000 Bitcoin sleeping and so did you have a provision to just sort of unwind the deal when you found out that that much Bitcoin was missing I know it was this much dollar value but obviously W up fast uh no with the experience I have I would have simply just backed out of the deal because uh this was a large event that changed materially what I was about to receive uh at the time I didn't have the experience I was I think 24 or something like that but way too young and I didn't have any lawyers or anyone looking at the the contract side so you figured you could make it up a trading profits but then Bitcoin went up up up up up yeah I mean I at the time the amount was fairly small it was uh 80,000 Bitcoins with a Bitcoin dollar valuation that made this about $100,000 uh that should have been something that could be un backf easily or obtain from a show um an investor uh the only thing is from that point between March and June Bitcoin rais very quickly and reach $30 per Bitcoin which is a lot at the time and 2011 then you that ended up being the massive runup in Bitcoin from pennies to like $30 after the Gizmodo story came out about Silk Road you know what I find fascinating um is you know having now met you in person I mean my vision back during the days of you was sort of this almost like cartoonish character that the media had portrayed you were you're sort of like the Mike Myers kind of character with like you know sitting away in a Japanese tea house petting your cat trying to take over the world and um you know I mean it seems like you're a programmer who basically bought into an exchange and was immediately confronted with a with a with a hack with the first of many and um now You' mentioned that that address actually you believe was controlled or at least should have been controlled by uh by Jeb sorry which the address where the hack happened that was controlled or should have been controlled by job I mean I'm I remember you had mentioned that you you were trying to figure out exactly where because Bitcoin is traceable you would think in those days you could trace where I want to yes I mean we know where those Bitcoin went went to this one F ex address uh we don't know who has control of this address uh and I if it's not moved there's nobody ready to know and it's not moved since the entire time not once okay uh go on the day those Bitcoin moov mov it's going to be news uh this true yeah so um so let's Flash Forward a little bit to say um 20 2012 is a little bit of a boring year I mean other than having but uh um 2013 all of a sudden is when you end up having started the year at around $11 ended it at like 1236 and you at the time had grown to be the largest exchange by far in the world I think at one point you were 90% And for most of that year were 75% Plus what was that like uh it was quite crazy actually I remember 2013 uh at some point we had more than 100,000 new customers in month uh at the time we had to verify every single customer so that means uh that many IDs to check um that was a worklow that just not manageable back then uh of course A lot happened to uh we had funes by the US government uh the SEC Ro I think Russ was also arrested in 13 so it's been a year that been like a roller coaster from the beginning to the end and then I guess the big Scandal of that year that ultimately led to the bankruptcy was uh the Willie bot which also was you know given a role perhaps in the entire price run of a Bitcoin which I think the the having had Supply demand had a lot to do with that globally but you certainly that that was something that was you know talked about a lot and then um tell us a little about the the 80,000 Bitcoin that uh Craig Wright had laid claim to and you said not so much yes uh so actually those 80,000 Bitcoins uh Craig wri claimed as the bitco one one if exits that were stolen in 2011 uh those were clearly stolen from M it's not a sale or anything and there's different no um no trust to claims to rate claims unless he's the one who stoes those Bitcoins back then and and so 10 years of Japanese Bankruptcy Court which is just mindboggling to to Americans and Europeans how long that that has been um there was still never enough chainalysis that was able to go and identify where those coins want to uh for those 80,000 Bitcoins we don't know but for the Bitcoins stolen after that from uh we were able to track those on the blockchain it took two years and that's what actually led to the arrest of Alexander vinck uh in 2017 okay so now we're going to Pivot a little bit to the um to the actual bankruptcy process which started in 2014 and literally is just being resolved 10 years later now yes and um tell us about um excuse me the update on that what it's it's it's already being distributed and uh how long will that process take uh the distribution I think is mostly done for the initial part uh I think like bit go customers are still waiting um but considering the uh scale of the bankruptcy and the number of customers I do I would say things are going fairly smoothly uh compared to what it could have been uh apart from this there's still one lawsuit that's in progress with coin lab in the US uh this one will probably take some more time so the bankruptcy itself will continue um probably into next year and maybe more so but yeah I think most uh at least the majority of the customers who upate to get a payment have received that payment already okay now um one thing that really surprised me when we were chatting this afternoon was um you put all 200,000 of your Bitcoin into Mount GX and now BAS basically the bankruptcy custodians are like you ran the place you probably should be the last one to get it so you may never get one of them yes uh we not get a single penny actually from so I guess the question back the question exchanges are supposed to be for exchanging why did you take all these mined Bitcoin and put them online on an exchange when you had the keys to start with uh because at the time I believe was the safest place uh to put those Bitcoins it's where I put the most Synergy and built uh key encryption and various process to protect the Bitcoins so very expensive lesson yes okay so um we're now going to go and pivoted today and uh you know you had a 10e kind of uh I wouldn't say break because you were certainly in the news every part of that 10 years through the bankruptcy process I was looking to see there any water here but I guess not um so this week you kind of came out with like you know sort of like a triple announcement number one you've got a new wallet number two you're like part of a team that's working we won't cover this too much because you covered it this morning on a panel um for Jos which is this decentralized why don't you give just a sentence or two on there for the people who didn't attend this morning on Jos yeah I mean Jos is very simple a cyber nation which means it's a nation that runs um in the digital space the idea is to close the frontier between the traditional world world we're in and uh the financial uh crypto World while at the same time creating a framework uh for online Nations which uh I believe are probably going to get required more and more especially for irland Nations as uh they risk losing the territory and so this is sort of The Next Step beond what you see like at palao who's an exhibitor here or at um uh Estonia with virtual passports you're literally talking about a virtual citizenship that then has friendly Nations who will accept but no own no land is own as purely digital like Bitcoin yes it's purely uh in the virtual world and the main aspect of chosen which makes it different from all other similar projects is that it's the only country I mean cyber nation that has an actual recognition from other existing Nations now this is certainly a logical thing for you to work on at this point um I think the surprising announcement was hearing that you're going and I know you're not the CEO you're not the one who's like you know kind of like at the front but certainly with your reputation you're going to be the name who's mainly you know's mainly uh um held accountable for the results um why should anybody trust mark carpella with an exchange well uh this time I mean there's different things one thing is there's been a lot of lessons learned with that I going to be applied and uh elps is aiming to be the most uh transparent and secure exchange out there so the idea is not only to implement the latest security and process that can be done but also to show how it's done and to have external AUD edting and also as much as possible give access to anyone to look and confirm how things work and so you're looking to do a centralized exchange and the wallet is going to be more decentralized and they're going to work hand inand in some way for people who are in the right generation the wallet uh will probably allow access to the exchange uh in an easier way uh the idea for the wallet is to make easy for anyone to access uh crypto to start into crypto because uh as I see today wallets like metamask and so on uh requiring to write on a paper uh seed phrase are not user friendly so my ID of a userfriendly wallet is something that works in the same way people are used to that is uh you create your wallet you put your phone number password things work you don't have to think about and this Simplicity which is what we need for it to be as I call it Grandma friendly um is not going to um make it less secure it's not going to make obviously I know about hackers as many people know I had been hacked for $24 million on alt coins and back in 2018 so um and that was basically because somebody bribed a phone company employee and they were able to you know wean their way through a bunch of shrink W sorry I didn't lose any Bitcoin I didn't lose any ethereum but I did lose an altcoin that uh just happened to like go up to massive amounts of value that day and should have been mine not the thieves now actually uh the new wet is more secure than wet like uh metamask for example because what's happening is if you use metamask on your mobile phone your private key is stored it's protected with only one uh factor which is either a password you've set or your face ID uh what we have here is a system when you key is split in three parts uh one part is managed by ellipse which we only all signature with with uh SMS verification and the other two parts are one in your phone secure element which is protected by your biometric uh verification which can be face ID um digital verication depend on what your settings are and the last part is protected by your password just like what metamask does uh and is so back tapped into your your iCloud uh backup so okay and obviously the biometric is not required in case somebody chops your finger off or the person dies or whatever they need both your phone your finger and uh maybe your face okay so yeah that's would be uh and um we've got about a minute left here so um the future of the exchange you're now looking for um regulatory approval in Europe under MAA and in by um under Vera um where do you see um I mean as we discussed at at lunch you're pretty much starting over again as a programmer and entrepreneur where do you see yourself in five years well into five years uh I see myself with a global exchange and uh probably uh leading the world of crypto into a direction where it's safer and uh easier to use thank you very much Mark carpalis thank you okay [Applause]