Crypto Chinese Investor: The Tale of a Teenage Bitcoin Enthusiast
Once upon a time, in a land far away, there was a young Chinese teenager named Zhao Tong. Little did he know that his journey with Bitcoin would lead him to become a crypto icon and create one of the earliest and most prominent crypto exchanges.
Zhao’s fascination with Bitcoin began a decade ago when he discovered its potential for cross-border transactions without the need for intermediaries. However, back then, buying Bitcoin was not an easy task due to the scarcity of crypto exchanges. The few that existed, like the now-defunct Mt. Gox, faced frequent outages and security issues.
Unfortunately, Zhao’s first Bitcoin purchase coincided with the infamous Mt. Gox flash crash, causing the price to plummet to $0.01 per token. This meant that Zhao lost what could have been a staggering $6 billion worth of Bitcoin in today’s value.
Despite this setback, Zhao’s determination did not waver. Being a self-taught coder, he decided to build his own Bitcoin exchange called Bitcoinica in just four days. But Bitcoinica was not just any ordinary exchange; it introduced a groundbreaking feature called margin trading, allowing traders and miners to speculate on future prices. Users could instantly bet up to 50 BTC.
Within a matter of days, Bitcoinica’s trading volume skyrocketed, reaching as high as $40 million per month, making it the second-largest exchange after Mt. Gox. Zhao himself earned $10,000, equivalent to about 2,000 BTC, in just the first two weeks.
However, despite its success, Bitcoinica faced scrutiny from skeptics concerned about Zhao’s age and experience. Questions regarding the exchange’s security measures were raised. Nevertheless, Bitcoinica continued to trade hundreds of thousands of Bitcoin each month.
In late 2011, investors approached Zhao, and he decided to sell the company as he was still a student and had exams to focus on. The new owners, Wendon Group, had their own concerns and sought assistance from experienced Bitcoin developers to audit the exchange. One such developer was Amir Taaki, a prominent hacktivist known for supporting WikiLeaks and 3D-printed guns.
Wendon Group showed their commitment to Zhao and Amir by making substantial investments, including the purchase of the highly sought-after domain Bitcoin.com for $1 million.
However, disaster struck shortly after the ownership transition. Bitcoinica fell victim to multiple hacks, losing a total of 91,000 BTC in March 2012. The news of the hacks even made it to the cover of the second-ever Bitcoin Magazine.
To this day, the exact details and culprits behind the hacks remain a mystery. Zhao, however, emphasized the importance of personal security for Bitcoin users and businesses, urging everyone to take their security seriously.
Unfortunately, Zhao’s reputation was tarnished, and his name became synonymous with being cheated and robbed in the Bitcoin community. The phrase “Zhao Tonged” is now used to describe investors who have fallen victim to such scams.
As a final act, Zhao decided to invest 1,000 BTC in a rare solid gold Casascius coin, one of only three in existence. This valuable collectible is now worth over $60 million. After this, Zhao quietly left the industry.
Today, exchange hacks remain a prevalent issue in the crypto world. Serious Bitcoin investors are advised to use hardware wallets or multisig custody to minimize the risk of such hacks. It is estimated that over 1 million BTC, equivalent to $65 billion, has been lost in exchange hacks, with Bitcoinica being one of the largest losses in history.
Bitcoinica serves as a $6 billion reminder of the importance of taking custody and security seriously in the crypto world. So remember, protect your assets, use multisig security, and don’t get “Zhao Tonged.”
