Thread by @pete_rizzo_

In 2010, a Chinese teen bought #Bitcoin for $10

He went on to build the 1st crypto margin exchange

The Incredible Story of how he lost 99,000 BTC worth $6 billion today ✨

1/ This is Chinese coder Zhao Tong.

He was 16 when he bought #Bitcoin. He was fascinated by the idea money could now be sent globally.

He told all his friends about it because it was "cool."

2/ Buying #Bitcoin in 2011 was difficult. It required time and intermediaries.

The largest exchange – Mt. Gox – was routinely offline.

It had even had a flash crash soon after Zhao bought, which caused the $BTC price to drop to $0.01

3/ A self-taught coder, Zhao built Bitcoinica in 4 days.

It wasn't just another #Bitcoin exchange. It allowed for margin trading, so traders and miners could speculate on the future price.

Users could bet as much as 50 $BTC instantly

4/ Within days, Bitcoinica’s volume soared.

Bitcoinica traded as much as $40 million a month, 2nd to only Mt. Gox.

As for Zhao, he earned $10,000, or about 2,000 $BTC in just the first 2 weeks.

5/ Bitcoinica was met with some resistance.

Some worried about Zhao’s age, others his experience.

They were concerned about what steps the exchange was taking to secure their increasingly valuable #BTC.

6/ Bitcoinica continued to trade hundreds of thousands of #Bitcoin each month.

But when he was approached by investors in late 2011, Zhao quickly sold the company.

He was still in school and too busy with exams. Here he is back then with his other teenage classmates.

7/ Wendon Group, the new owners, had questions about Zhao’s work.

So, they sought help from veteran #Bitcoin developers who could give the exchange the audit it deserved.

Among them was Amir Taaki, an outspoken hacktivist who loved WikiLeaks and 3-D printed guns.

8/ Wendon Group wanted to prove to Zhao and Amir that it meant business – and it invested big.

It even paid $1 million for the industry’s most sought after domain: . Bitcoin.com

9/ Before the ink was dry, Bitcoinica was hacked.

In March 2012, it lost 43,000 #Bitcoin.

The loss set off a firestorm that was immortalized on the cover of the 2nd-Ever @BitcoinMagazine

10/ Things went from bad to worse.

Later that March, Bitcoinica’s servers were attacked TWO MORE TIMES. The thieves stole 48,000 #Bitcoin

This was before hardware wallets or multisig: all the hacker had to do was reset a few passwords.

11/ Who was to blame? Zhao? Wendon Group? Amir?

Users didn’t care – they just wanted their #Bitcoin

Some like @rogerkver lost over 24,000 BTC 🤯

12/ Today, exactly what happened remains a mystery.

Here's what Zhao said about the situation.

His takeaway? #Bitcoin users and businesses needed to take their personal security seriously.

13/ Zhao’s reputation was crushed. His name was turned into one of the 1st viral #Bitcoin memes.

Among OGs, the phrase “Zhao Tonged” is still used to describe investors who have been robbed and cheated.

14/ Zhao’s last act was to take 1,000 #Bitcoin and invest it in a rare solid gold Casascius coin.

In fact, he owns 1 of only 3 of these rare collectibles, which today are valued at over $60 million.

Then, he left the industry…

15/ Exchange hacks continue to this day.

That’s why serious #Bitcoin investors are recommended to use hardware wallets or multi-sig custody.

These types of set-ups reduce your risk to exchange hacks. Here's @Nneuman explaining how it works:

16/ It’s estimated more than 1 million #Bitcoin, or $65 billion, have been lost in exchange hacks.

By total $BTC lost, Bitcoinica is the 3rd largest ever

17/ Today, Bitcoinica remains a $6 billion reminder.

Take your custody seriously. Use multi-sig security.

Don’t get Zhou Tong’ed ~