Tyler and Cameron Winklevoss, the twin brothers most famous for their legal feud with Mark Zuckerberg over the founding of Facebook, publicly announced their conversion to the Bitcoin cause when they unveiled an $11m investment in the digital currency in April.
Now, less than three months on, they have turned missionaries with a plan to drag Bitcoins out of the dark corners of the internet to the stock market, where ordinary investors might one day put their money behind the nascent currency.
Their pitch involves an increasingly popular species of investment product called exchange-traded funds (ETFs). Such funds track the value of a basket of assets – currencies, say, or certain commodities – and allow investors to share in the profits (or losses) accrued by the movements of those assets by buying shares in the funds. The twins, who became known as the Winklevii following their portrayal in the film The Social Network, want to apply the concept to Bitcoins. In a proposal filed with the Securities and Exchange Commission, the US market regulator, they have outlined plans for a fund that would hold and track the value of Bitcoins.
Ordinary investors could buy shares in this fund and play the Bitcoin market without having to deal with the digital exchanges where the currency is usually traded. If the SEC says yes, the brothers want to sell around $20m (£13m) worth of shares – each representing a fraction of a Bitcoin – in the fund. The proposal marks the highest-profile bid yet to bring legitimacy to a technological innovation derided as nothing more than a fantasy propagated by shadowy hackers – or worse, an internet-era Ponzi scheme.
The currency is the brainchild of a hacker or group of hackers called Satoshi Nakamoto. Although the idea dates back to 2008, the first Bitcoins didn't appear until the year after, when Nakamoto released the programming code behind the Bitcoin network.
The network is the backbone of the currency. It logs every Bitcoin transaction in order to guard against duplication – and crucially, it is not managed or overseen by any government or international regulator. Instead, Bitcoin users deal with one another directly. Owning Bitcoins involves either buying them on an exchange – a number have popped up in recent years, with the most prominent being the Japan-based Mt.Gox, which allows users to trade real world currencies for digital money – or, in what can be seen as a major flaw in the system, mining them by cracking a complex mathematical code. In this, Bitcoins are more like commodities than a currency. The Bank of England can in theory issue as many pounds as it wants; Bitcoins are finite and will top out at around 21 million (assuming the underlying programming code is not altered). About 90 per cent of the total haul is expected to be in circulation by the end of the decade.
Holding Bitcoins is a matter of opening a digital wallet – software that users can install on their computers or mobile devices. The wallet is hooked up to the network and the value of a user's personal stash goes up and down depending on transactions on online exchanges like Mt.Gox.
After remaining in the shadows for a number of years, the currency came to public prominence earlier this year when Bitcoins went from being worth under $15 apiece to more than $250 – before their value collapsed. Currently, a Bitcoin is worth around $91, according to figures from Mt.Gox last night. A number of Bitcoin heists have also generated headlines: last year, Bitcoins worth $250,000 were stolen from the Bitfloor exchange by hackers.
The Winklevii have very quickly become the currency's best-known backers. Although Bitcoin transactions are logged, the identities of most of its users remain a mystery, provoking suspicion among outsiders. The brothers argued in their SEC proposal that the network does not guarantee anonymity and that various methods might be used to trace the identity of users, some of whom are known to visit an anonymous online market, Silk Road, for illegal drugs and other contraband. The twins, both former Olympic rowers, revealed their own investment in the currency earlier this year after spending months accumulating Bitcoins (their $11m hoard is now likely to be worth a lot less).
At the time, Cameron Winklevoss portrayed himself and his brother as pioneers. "People say it's a Ponzi scheme – it's a bubble. People really don't want to take it seriously," he told The New York Times. "At some point, that narrative will shift to 'virtual currencies are here to stay'."
The firm behind the proposed Bitcoin fund, the Winklevoss Bitcoin Trust, did not respond to a request for comment yesterday. Their gambit to take the currency to a wider audience is the latest in a series of technology investments since their legal battle with Mr Zuckerberg resulted in a cash-and-shares settlement reported to be worth well over $200m.
Before turning to Bitcoins, the Winklevoss Capital investment firm backed Hukkster, the retail start-up that alerts users when their chosen online products go on sale, and SumZero, an online community of investment professionals that was set up by Divya Narendra, who co-founded the ConnectU social network with the Winklevoss twins at Harvard, and who was portrayed in The Social Network by Max Minghella. For the Bitcoin venture, they have called on the services of Kathleen Moriarty, a prominent New York lawyer.
The risks, however, are manifold –not least that Bitcoins might well end up falling foul of governments around the world. As the SEC filing notes: "One or more countries may take regulatory actions in the future."
Brothers in arms: The legal face-off
The Winklevii's dispute with Facebook has its origins in a 2003 meeting at Harvard.
The twins asked Mark Zuckerberg to help them with coding work for a social-networking site they were setting up called Harvard Connection (later ConnectU).
However, in 2004 Mr Zuckerberg released TheFacebook. The twins claimed Mr Zuckerberg had stolen their idea, something which he has denied.
BitcoIn: In numbers
21m Maximum number of Bitcoins that can be created.
$500,000 Reported value of Bitcoins stolen in a 2011 heist.
$91 Value of one Bitcoin on the Mt.Gox exchange yesterday afternoon.