Charlie Shrem - First Bitcoin Felon


Charlie ShremCharlie Shrem, former CEO of BitInstant, tells war stories about buying and selling bitcoins.


Interview with Charlie Shrem, the first bitcoin felon

Trace Mayer:  Welcome back to Bitcoin Knowledge Podcast.  We had a tremendous interview with Charlie Shrem, the first bitcoin felon.  We're going to be talking all about how to buy and sell bitcoins .  Charlie’s been one of our just extreme entrepreneurs in the bitcoin space.  He was CEO, Chief Compliance Officer of BitInstant.  Charlie, welcome to the show.

Charlie Shrem:  Thanks for having me.

Trace Mayer:  So, you know, just get -- kind of started off.  How did you get into bitcoin?  What are some of the businesses you've been involved in?  Just give us a little bit of background about yourself.

Charlie Shrem:  You know, I'm really envious of people that are coming to bitcoin space now because it's so much easier to buy and sell bitcoin.  There are so many more reputable companies that are not scams.  There are, you know, amazing OTC markets.  There are a lot of different, no matter where you are in the world, from Morocco to Monaco to Russia.  You could probably get bitcoin within one day at a very, very reasonable rate.

And it used to not be the case.  You know, when I got involved in bitcoin in 2000 -- I think it was like late 2010, early 2011.  There was, maybe one place to buy bitcoin and that was Mt. Gox.  There was no other way unless you knew someone who could send it to you for free.  Granted bitcoins were a lot cheaper, but still it was relative.  So, maybe it was like 7000 bitcoins for a dollar, but still at the same time it was hard to get unless someone would send it to you for free.

So, you know, I was browsing the bitcoin forums one day and I was trying to buy some bitcoin.  I had sent money to a new bitcoin exchange that was just opened – just had opened up for a week called Tradehill by Jared Kenna.  It was the first bitcoin exchange based out of America and I was excited because I didn’t have to wire money to Tokyo, to Japan for Mt. Gox.  And I had sent money to Jared, the CEO and just my luck.  When I sent him money, ING shutdown his bank accounts so my money was frozen.  And I was like ‘wow’.  Like, it took three days for the wire to get there.  Now my money is sitting freezing for a week.

Meanwhile, the price is going up, you know, it's going up and I’m like losing out really badly.  And I said if this thing really means -- if it's going to take off.  If bitcoin is going to take off.  People need to be able to buy and sell it as easy as you could buy a coffee at Starbucks on the corner.  I was browsing the forums one day and I came upon a post by my soon to be business partner Gareth Nelson and he said I have this idea and the idea is essentially to float people bitcoins and they pay us and we’ll wait the time delays for the wire transfers, etc.  And we’ll take a small fee for that.  And I say hey it sounds like – it seems like a cool idea.

And I decided to put up the money to do that and that's how we started BitInstant.  And BitInstant essentially allowed people to walk into places like 7-Eleven, CVS, the winery, banks, you know, Bank of America, Citi bank, Wells Fargo.  They deposit money into our accounts or into like 7-Eleven or Walmart or whatever.  And we then fund their bitcoin exchange accounts or give them bitcoin directly and then we wait the week or so until these banks would settle with us or 7-Eleven would settle with us and ends up being something that people really needed.

And we, at one point, we're doing a few million dollars a day and maybe thirty, fourty percent of all bitcoin transactions were being brought and sold through us and we were the primary retail method.  You know, what I was always saying was that exchanges should be the average person buying under $10,000 worth of bitcoin should not be going to exchange.  No one should be going to exchanges anymore at all but if someone buy under ten thousand should be buying at retail from Coinbase.  There's a new company Celery that is just opening up.

Trace Mayer:  Circle.

Charlie Shrem:  Circle, of course.  Circle has a bunch of problems.  I've have been having trouble of buying it --on it.

Trace Mayer:  Oh really.  Like I actually bought $5 worth and it worked just perfect.

Charlie Shrem:  The other day when the price went down to 297 I wanted to pick up.  It keep saying error, error, error, error, error and Coinbase is just ripping – bitcoin is ripping every -- because they weren't gauging but the promise was like two eighty to ninety seven or whatever.  Was it 300?  They were charging minimum three thirty.  I ended up buying it and the price is over three thirty now.  So I'm happy but I could have got it at three hundred if I have money on BitStamp.

Trace Mayer:  Not like that never happened to BitInstant either.

Charlie Shrem:  Yeah.  True story.  That -- that’s why we never locked in rates.  Because we just like -- we would have lost a ton of money if we locked in rates to people.

Trace Mayer:  Yeah.  I think people really underestimate just how hard it was to buy bitcoin in the early days.

Charlie Shrem:  It was impossible.

Trace Mayer:  I mean, ike, you know, I've been around this space for a long time and I mean, it was just.  You’re going to send money to some guy over the internet you don't even know.

Charlie Shrem:  It was so shady and we were venture funded.  We were at real office in New York City.  We had twenty something employees.  We are really growing and we were really done great things.  Until today we never scammed any person.  Occasionally, I’ll have someone email me saying like hey you know, I sent you money and you never sent it back to me and even as early as last week I sent someone a three hundred dollar check out of my own pocket.

He could be lying to me, but I want to make sure that no one could be calling me a scam around the internet and so we've always been right with our customers.  But there were issues where our volume is growing so much doing more than the exchanges that we couldn’t fill orders and the exchange API's were going down and we're like going crazy and we couldn't do anything.  We’re killing us online.

Trace Mayer:  Yeah.  I mean, there's really been just a ton of development in the space.  I mean, not just on the bitcoin protocol.

Charlie Shrem:  Only two years.

Trace Mayer:  And not just on wallets.  But, I mean, on all the support infrastructure.  We've got companies like BitPay, Circle, Coinbase.  We've got exchanges like Bitstamp and Kraken and itBit and like just all of this.

Charlie Shrem:  Like BTC was doing?

Trace Mayer:  And all of this is just math.  I mean, all this takes an entrepreneur like yourself to actually get in there and do something.

Charlie Shrem:  But it's so hard in American market.  A lot of these companies, they won't work with American customers.  Coinsetter, I think will work with American customers.  Lake worked with American customers.  They will.

Trace Mayer:  Well, I think this takes us just right into a perfect area.  You’ve had legal issues as we know.  I think it's what one count of unlicensed money transmitter.

Charlie Shrem:  Yeah. That’s what I pled guilty to.

Trace Mayer:  Is what you pledge guilty to.  I was there actually in the courtroom in Federal court.

Charlie Shrem:  It’s just that’s it.  Like we don’t have a money transmitter license and we tried very hard to get one over the years and we were very friendly with the government.  But, at the end of the day I am guilty of that crime.  We didn’t have a license and the law says you need to have a license in every state.

Trace Mayer:  And so we've got laws that are written what like forty years ago.  Before the internet even really came around.

Charlie Shrem:  These were built for like the check cashers who before the days of the internet you have someone scam other people by taking money.  You're saying I'm going to send you money in California and then never do it.  And because there was no laws around that and people are constantly getting scammed and defrauded.  And that's why those laws are created to protect the customers.  So if you were a New York company.  You wanted to service customers in California, you needed a California license.  And so those days are kind of didn't make sense.

But now the Internet it's such a different business model that all these businesses are working.  Are trying to do but these laws were based on this like old archaic system.  Instead of re-writing law they just keep like patchwork.  So, it's like if you're wiring in your house goes down you just keep putting on Band-Aids and tape and you just keep patch working on to instead of like fixing, rewiring the whole house.  Because these are the easier faster.

Trace Mayer:  Yeah.  And we won't talk about how they're doing the same thing with the actual information systems of the banks.  I mean, we recently had what was it?  I think Royal Bank of Scotland had all their ATM's go down one day.  We have JP Morgan like seventy six million customer account information getting breached.

Charlie Shrem:  I’ll never forget.  That’s crazy.

Trace Mayer:  Home Depot, Target, it’s just across the board.  I mean it’s just a bunch of duct tape holding this together, right?

Charlie Shrem:  Do you remember last year?  Many people don’t remember it but for -- there was like a 30 hour period when the whole Visa network in Canada went down.  So no one with a Visa debit or credit card can use their cards for – imagine being able to be -- all my card are Visa.  I don’t use MasterCard.  Imagine being completely cut off from your money for thirty hours.

Trace Mayer:  When was the last time that bitcoin network went down?

Charlie Shrem:  It never went down and it’s five years.

Trace Mayer:  What -- the bitcoin networks have been around five years and never went down ever.

Charlie Shrem:  Because it’s decentralized.  There is no one central location to actually go down.

Trace Mayer:  So, we've got massive amounts of commerce going through things like Visa and MasterCard and the banks.  And we've got ATM machines that will just like fail out of the blue.  And then we have entire countries like their VISA just doesn't work.  Does that pose any risk to the social order?  And yet when an entrepreneur comes in and wants to do some work in this innovative new field they get slapped with these unlicensed money transmitter charges.

Charlie Shrem:  Well, am challenging the status quo.  Who dare people that own Visa and MasterCard and these people are very close with the government and have super pacts and paid lobbying and do all this thing and to keep the laws like this.  It's very hard to change these laws because they protect.  Unfortunately, one of the biggest things that I am scared about with this new thing called the BitLicense.  So, the BitLicense is supposed to be this kind of like way for bitcoin companies to legally operate within New York and the rest of the country.  And everyone is hailing it is great success.

My problem is that one of things that I've been trying to push for is for a tier system.  Because yes, Coinbase, Circle, BitPay are going to say yes, this is amazing.  But these guys raise $30 million.  These guys are the ones who can afford to do it.  There’s no difference in PayPal, etc.  But the guys who are doing the real innovation in the space or the guys that are running the bitcoin protocol and now, we're running bitcoin companies out of their basements.

For example, a company like Block Cipher.  I don't think they raised a large amount of money, if any.  But Block Cipher has only one of the good API’s that actually offers a way for companies to accept bitcoin with zero confirmation double spending.  And that's one of the biggest problem that people say about bitcoin is that you have to wait ten minutes for confirmation.  So, now these guys are coming out and creating awesome software, but they can't afford to deal with the BitLicense.

And yes, the government came and said alright, software people and miners don't have to deal with the license, but we don’t know if that's true for every state and we don't know how far that goes and –

Trace Mayer:  Yeah.  And what they might change into in the future.

Charlie Shrem:  Yeah.  You just don’t know.  So it just takes innovation and says like, you know, what it’s to -- either too complicated to do it's, we’re not going to do or we’re going to leave the country and let's not service American customers.

So, I joke that like there's this like thing a lot of companies have on the bottom of their websites.  It’s like Made in New York.  Like if you’re a New York company you kind of proud of that.  Like there is a bunch of these trucks that drive around.  They have a logo and a lot are like new starts ups made in New York.  It's like people should have a thing that's like band in New York.  Sorry, we don't service New York customers.  We can't do it.

Trace Mayer:  Well, I -- actually last week I had invited you to the panel that I was on at the British Consulate.

Charlie Shrem:  Killed it.

Trace Mayer:  And, yeah, it was pretty good.  I’d have to admit.  But, you know, one of the questions was about the exchanges.  And I was like look, you know, the largest six exchanges is Bitstamp in the UK.  We've got BTCE, we got LakeBTC like.  But we don't have any exchanges in the US.  The US is not a player in the bitcoin exchange market.

Charlie Shrem:  No, it’s not.

Trace Mayer:  Largely, would you say because of these regulations?

Charlie Shrem:  It’s just too scary.  It’s too – it’s just there is no legal way to do it.  Because if you try to do it you can try to raise money.  No one’s going to give you money because you're an illegal company.

Trace Mayer:  Yeah, well.  I mean.

Charlie Shrem:  And there is the risk you go to jail too.  Especially the exchanges are harder.  Companies like Coinbase that are retail.  The government is not as worried about those guys for a bunch of reasons.  Because they are doing KYC.  But also because retail, when you’re selling bitcoin from your own wallet to a customer and then you're buying it from.  It's very easily trackable.

But when we have an exchange, you have one guy who says I want to sell ten bitcoin.  That can be bought by a thousand different buyers buying point .001 each.  So it's a very tangled and complicated and exchanges can be very good ways to launder money if they're not keeping logs and tracking all their costumes and everything which a lot of the exchanges do anyways.  But they are being pushed out of the market at the same time.

Trace Mayer:  Yeah.  And I won’t be surprised if we've just seen the beginning of some of the legal issues with bitcoin companies is in the US.

Charlie Shrem:  I heard this.  I heard that there may be arrests and things like that. but I don't know if it’s true.

Trace Mayer:  Yeah, I mean, we don't want to speculate too much on things.  But I mean, it just goes to show that when we're trying to build a solution to these big systemic problems, I mean, too big to fail.  We've got, you know, we give seven hundred billion dollars to banks when they're ATM shut off in the middle of the night a for a weekend and when the credit cards fail. Like that's a big, big problem.  They can -- I think in my opinion could pose a big risk to just the social order of things.  I mean, what happens if New York City, like all the Visa and MasterCard go down.

Charlie Shrem:  It’s a big problem.

Trace Mayer:  I mean, like what about getting food?

Charlie Shrem:  They’re so old and they don’t work.  Like last year in the middle of the night I needed to get money like 9 o’clock and I went to a Valley National Bank.  And I used the Credit union and I put my debit card on the machine and they just ate my card and nothing happened.  I was flipping out.  A bank that’s no one is working with the bank at 9 o’clock at night.  I called the 1800 number they say sorry.  What are we supposed to do?  We can’t make a machine spit your card.  So I was out of debit card till Monday.  That’s all my money right there I’ve access to.  I was flipping out.  I had to borrow money from people for like three days.  This was on a Friday night.

Trace Mayer:  Oh, just annoying.

Charlie Shrem:  It was worse.  What if there was a worst as a hurricane?

Trace Mayer:  Yeah.

Charlie Shrem:  What if there is a tornado or Hurricane Sandy came back?  How do I get food and shelter?  What am I supposed to do?

Trace Mayer:  And that’s the exact time when these systems that are not resilient, that are not decentralized.  That's when they actually do go down is when you need them the most.

Charlie Shrem:  They're the first things that are going to go down.  The ATM machines are not running on generators.  They’re not.  Just some banks are but you could go to 7-Eleven, but like what's going to happen when people run out of cash and they try to take more cash out.  This is crazy.

Trace Mayer:  Yeah.  So, you know, what?  Our next episodes are actually going to be with Marco Santori.  He is a New York attorney.  Advises lots of bitcoin companies.  So we're going to really dig into like the legal issues there.  But, you know, you talked about this OTC market.  This over the counter market and bitcoin is very much peer to peer.

Charlie Shrem:  Yes.

Trace Mayer:  So, like one of the easiest ways to get bitcoin is just from one of your friends.

Charlie Shrem:  Yeah.  Or some you know who want to sell.  That's like -- when you're part of the flourishing in New York community.  I have friend he say text me this is says Charlie, I need to get out of bitcoins.  Sell a coin or two.  What can I do? And I say sure I’ll buy them from you or another friend need to be, you know, gets pays in bitcoin needs some money can I buy it from you and I say can I sell it to.  And it’s just like a nice peer to peer and usually there are no fees involved in that.  Because it’s everyone's benefits.  One guy needs to sell, one guy needs to buy.  There's a price they agree on, usually a little bit higher than the exchanges sometimes or not it depends.  And that’s the best way to do to be honest because you know both buyer and seller.

Trace Mayer:  And that's really what was so troublesome in the early days was establishing the trust.  But as the network effects of bitcoin take root.  And you like I’d got tons of friends now.  Like if I ever needed a –

Charlie Shrem:  No matter where you go on the world there is usually a bitcoin community.  Got to Lancaster, Pennsylvania and you Google Lancaster bitcoin meetup, there's like 300 people in it.  In the middle of nowhere Pennsylvania and you just text one of the guys or your email and say hey, I want to sell some bitcoin, can you meet me and for sure I’m happy to meet another bitcoinner.

Trace Mayer:  Yeah.  And like I was reading one of the Reddit threads.  There was a kid traveling through Brazil.  And his backpack got stolen.

Charlie Shrem:  I remember that, yeah.

Trace Mayer:  And his wallet, like everything and he actually used the bitcoin through kind of the network to get some Reals in his hand so that he could actually go to the consulate.

Charlie Shrem:  That’s the network effect of bitcoin.

Trace Mayer:  Yeah.  I mean, that’s the network effect right there.  Like in my case, I've gone, like, I flew into a city outside the US and, you know, it was late and for whatever reason like the currency exchange booth wasn't open like normal.  But I was – I went immediately to a dinner with some of the bitcoin people and bam!, I was able to get the local currency.

Charlie Shrem:  It works easy.

Trace Mayer:  Super easy.  As long as I have Wi-Fi.

Charlie Shrem:  I was in Argentina.  When I was in Argentina, are you crazy.  I’m not going to use the ATMs over there.  The rate is astronomical.

Trace Mayer:  Well, not only that but you get hit with the official rate instead of the blue market rate.

Charlie Shrem:  Exactly.  You’re getting four pesos to the dollar.  When in reality, if you use a currency exchanges on the street, the black market guys.  They’re not really black, they’re very nice people.  It like eight peso.  It’s like almost double.

Trace Mayer:  Well, yeah.  Actually, because I was presenting at that same bitcoin conference in Buenos Aires.

Charlie Shrem:  Oh yeah.  We were in together, right?

Trace Mayer:  And my buddy Kevin like flew and in and I guess he has been in Argentina before.

Charlie Shrem:  Did he know what to do?

Trace Mayer:  But he got five hundred dollars out at the airport.

Charlie Shrem:  That's the worst move.

Trace Mayer:  You know, and then he gets to the conference and he was like oh yeah I got my cash at the ATM and I was like well that was really dumb.  And so --.

Charlie Shrem:  He lost a lot of money if he ever realized it.

Trace Mayer:  Well, we got him the same number of pesos for like two hundred and twenty dollars of – worth of bitcoins, you know.

Charlie Shrem:  It’s how it feels like crap after that Halloween.

Trace Mayer:  Well, it was a learning experience for him.

Charlie Shrem:  People asked me to break dollars with me so they can -- because people there want dollars.  They don’t want to trust their fiat.  But I was like you trust our fiat more?  It’s like sure, maybe ours is not going to fail as fast as yours, but I wouldn't want people be holding too much USD. Like sure cash is great, but I think bitcoin and gold and other things are much better investments to keep your money in.

Trace Mayer:  Well, you know, and that raises the bigger spector.

Charlie Shrem:  Diversifying is very important.

Trace Mayer:  You know, diversifying is very important.  With your legal issues, you know, they try to seize all your assets and everything.  And there is this big issue called civil forfeiture.

Charlie Shrem:  They can take any amount of money whenever they want for any reason.

Trace Mayer:  Yeah.  Not only that but in the Caylee case with the US Supreme Court.  They upheld that because you can actually get the warrant to seize with just a grand jury.  So, that means the defendant doesn't even get a chance to hear, right?

Charlie Shrem:  Yeah.  You walk in and said to Grand jury like look that we believe this person.  Can we take his money to check?  Okay, yeah, like they don't say no.

Trace Mayer:  So, the grand jury says okay, we can churn that up and then go and they can arrest you and seize all your assets.  And even if that prevents you from hiring the counsel of your choice the US Supreme Court just upheld in Caylee that that's fine and passes constitutional muster.  Even though there's absolutely no real due process you don't get to challenge, you have no right.

Charlie Shrem:  It’s impossible.  You can't afford a real lawyer.

Trace Mayer:  You get no notice, no right to appeal, no ability to be heard before your assets get seized and so this civil forfeiture issue.  Oh, and we'll probably going to have an entire episode on civil forfeiture.  But I think it's important to hit on this here because it's becoming the largest source of funding for many of these police departments because that's how they actually get their budget is how much money they seize.

Charlie Shrem:  And they sell it.

Trace Mayer:  They sell all the stuff too.

Trace Mayer:  Yeah.

Charlie Shrem:  Property, like with the Silk Road case.

Trace Mayer:  And so, you know, having some bitcoin whether you lose your backpack when you're traveling, whether you're --.

Charlie Shrem:  Safe.

Trace Mayer:  You’re -- you're a victim of identity theft and for whatever reason law enforcement.  Like, you know, you're completely innocent victim of identity theft but bam! Like, the law enforcement is able to convince a grand jury and it's not like innocent people have never been targeted before, right.

Charlie Shrem:  Yeah.

Trace Mayer:  But it would sure be nice to have some assets that --.

Charlie Shrem:  For a rainy day.

Trace Mayer:  That are there for a rainy day like whether the bank fails with the ATM, whether the Visa is not working, whether your backpack is stolen.

Charlie Shrem:  Forfeiture or something.

Trace Mayer:  Civil forfeiture and you're a victim of identity theft.

Charlie Shrem:  Even a few thousand dollars, just something to have there.

Trace Mayer:  And the network.  That these network effects like this network of being able to convert those bitcoins into whatever currency in we might be able to use.

Charlie Shrem:  Or product.  Why even go to a currency?  You just say I’ll give you bitcoin if you can buy -- you know, give me a cell phone.  You go to a foreign country and someone will buy you a prepaid cell phone and give it to you for bitcoin.

Trace Mayer:  Or you buy your groceries.

Charlie Shrem:  Food and groceries, yeah, whatever.

Trace Mayer:  You know, we got BitPay and Coinbase like running with the merchants and Bitnet’s just raised $14.5 million recently.  A bunch of former VC guys.  So, there are increasingly more ways to convert those bitcoins into useable currency.  So, just to kind of like what would be the note to end on?  Like for people that -- for people that want to buy and sell bitcoins that are brand new to it.  Well, first of course they need to get their wallets, right?

Charlie Shrem:  Right.  I say like do it the most comfortable way possible.  Like go to Coinbase, go to Circle.  It’s easy.

Trace Mayer:  Or one of your friends.

Charlie Shrem:  Or one of your friends.  Make sure it's a friend who's going to sit and explain to you what you're investing in.  Like don't just say kind of buy bitcoin, go to dinner with that friend for an hour, try to understand what bitcoin is.  Set up a wallet with them.  Make sure you secure your wallet.  Because one of the good things about Coinbase and Circles is that one, they’re insured but two is that it’s two factor authentication.  It's pretty safe relatively.

I mean there are two types of wallets.  There are custodial wallets like these guys were holding on to their coins which aren’t necessarily bad.  It's a necessary evil you can say.  But there's also ways of holding the coins to yourself in your own secured wallets.  But that's like the next level.  That’s like an intermediate, you know, so.

Trace Mayer:  And this is really a new technology, right?

Charlie Shrem:  Very new.

Trace Mayer:  Like, I mean.

Charlie Shrem:  It’s like what email was.

Trace Mayer:  Yeah.  It’s like email back in the day was like what people would argue what the @ symbol mean like.  Does it mean at or to or what's going on here and then it’s like, they had TV shows about how to work email and email used to be like we studied for like I think it was like -- before AOL, there is another one CompuServe.  When CompuServe, like setting up an e-mail address was CompuServe.  It was like a whole hassle and like --.

Trace Mayer:  Or a Genie.

Charlie Shrem:  Genie or even like anything was the hardest thing to do.  And just like bitcoins, they're just going to take maybe ten years.  My grandmother will be able to see the utility of bitcoin. But in the meantime we can build up crazy innovation like AOL, no one’s – every people make fun of it.  People say AOL haha, it’s so funny.  Who has an AOL email address.  People don't give AOL benefit for being that first mover in the space.

Trace Mayer:  They laid a great foundation for a lot of people to really learn the new tech.  And just because you --.

Charlie Shrem:  Everyone used AOL back in the day.  I used AOL, everyone used it.

Trace Mayer:  And just because you used bitcoin one way when you just come into it, you know, you can continue learning and growing and expanding your toolset and your skills.  And then you’ll be using bitcoin a completely different way.  Which I'd like to close with one of the stories which actually involves BitInstant.

I had a friend that I went to law school with and her husband wanted to buy some bitcoins and we've been over like just chatting and everything and so, you know, I got him set up with one of the online wallets.  And then we're trucking off, going down.  That I think it is Wells Fargo and depositing the cash to buy the bitcoins with BitInstant.  And next thing, you know, like bam, he gets a text message.  The bitcoins are his wallet.  Like just within like ten minutes, you know.

Charlie Shrem:  It feels like a guy in a motorcycles told me like I got back on my motorcycle *00:24:45.

Trace Mayer:  Yeah.  I have my bitcoin.  So he got -- he had his bitcoin.  They were all working, right?  And I’d spent, you know, maybe 30, 45 minutes teaching him how to do that.  And I'm sure that if somebody wants to buy bitcoins just fine your geeky or your nerdy friend and like they’ll show you have a to do some basics with the wallet.  Well, or go to one of the bitcoin meet up groups like is a good option.

Charlie Shrem:  Well.

Trace Mayer:  You know, eight months later I get ping from my buddy on Skype and he's like all my bitcoins are gone.

Charlie Shrem:  What happened?

Trace Mayer:  And we don't -- we actually don't know what happened, but somehow his online wallet got compromised and he said I know I should have put them in Armory that I've just been procrastinating it and I was like well, sorry.  He had a one hundred and eighty thousand dollars of bitcoin.

Charlie Shrem:  Oh, my god.

Trace Mayer:  Which today it'd actually be a couple million dollars.

Charlie Shrem:  Oh, my god.  I hate these stories.

Trace Mayer:  And -- but he owned up to himself and his story's actually -- he said, you know, when I had a hundred dollars of bitcoin.  I put a hundred dollars of thought into securing them and when I had a $180,000 dollars of bitcoins.

Charlie Shrem:  He put a hundred and eighty thousand dollars of thought into --.

Trace Mayer:  I was still only putting $100 of thought into security them.

Charlie Shrem:  This is your – it's like gold.  If someone handles a million dollar worth of gold.  They’re going to spent ten grand, you know, securing that gold or whatever it is.

Trace Mayer:  Well, I think it's important for people to understand like, you don't have to learn how to secure $180,000 of bitcoin if you're only going to buy $20 worth or $100 worth.  But, you know, once you buy $20 or $100 worth and you start getting comfortable with the tag and you want to put more money into it that's when you need to go back in a vault and like just in time learning you develop greater skills and abilities to secure the larger amounts of money.

So I think that my buddy's story has been, you know, it's very enlightening, a very good parable for other people.  I hope other people don’t lose their bitcoins like he did.  And ironically, he's back.  He’s back in bitcoin.  He’s the most paranoid bitcoin right now.  I mean.

Charlie Shrem:  Well, he should be.

Trace Mayer:  Like he got a new laptop and he actually like had them remove the wireless card.  So that, I mean, that thing is like -- that thing is a rock and he --.

Charlie Shrem:  It’s a lesson learned.

Trace Mayer:  But he's, you know, he's putting a lot more thought into securing his bitcoin because it’s got more value and so it's, you know, it can be very much a learning curve I think for people.  Do you have any other suggestions for people that are just wanting to get started in the space?

Charlie Shrem:  You don’t have to start with so much.  You know, start with a little bit and build your way up.  You don’t need to jump in so heavy.  You don’t have to jump to the deep end right away.  You just dabble a little bit and make sure you’re comfortable.  At the end of the day you’re going to sleep and you’re worried about losing all your money then you have too much money in there.  True story.

Trace Mayer:  Yeah.  So --.

Charlie Shrem:  Have a good time, learn technology.  It’s fun.

TRACE MAYER:  It is fun, you know, it's fun to like figure out how to make it work and you meet new people and you had something in common and like you can go to the Meetup groups and yeah, all of the stuff it -- when we learn these new skills, that’s --.

Charlie Shrem:  It’s a social revolution.

Trace Mayer:  It is in a lot of ways.   You know, when it comes time to dissolve the monetary bands which bind us together, we have to, you know, we're either going to have repression or regeneration.  And the old system is failing.  It's held together by duct tape.  I mean, have there not been enough wake up calls like ATM's, Visas.

Charlie Shrem:  Hacks, everything.

Trace Mayer:  Hacks, identity theft.

Charlie Shrem:  We need to get people a better solution.  It’s what going to happen.  People know that there's a viable, better solution out there.  Which there is but it's not mature enough yet.  And people start to question and people don’t want to use those old bands any more.

Trace Mayer:  Yeah.  I mean, why use the – why continue using the newspapers and like the pagers and like physical books, etc when we got these potential solutions.  So thank you so much for being with us, Charlie.

Charlie Shrem:  Thanks for having me.

Written by Charlie Shrem on October 25, 2014.