Untold Stories: Stephen Pair On Founding The Oldest Crypto Payment Company

Join Charlie and BitPay Founder and CEO Stephen Pair, who gave up a brilliant career with IBM to found BitPay, the oldest crypto payment company. They share their unique perspectives on

  • Satoshi

  • The gorgeous simplicity of the white paper and how it gave rise to Bitcoin

  • Using existing technology and coding language

They tackle the role of banks in crypto and the pros and cons of mining Bitcoin versus buying it. Stephen also talks about the thinking behind BitPay, building the platform and the launch, a time when he was happy for a handful of transactions a day. Today, BitPay moves a massive and growing volume of Bitcoin because companies get real value from using the payment system.

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Charlie Shrem
Hey everyone, this is Charlie Shrem and you're listening to Untold Stories. This is a show where we dive deep into the lives and personal histories of some of crypto's most influential leaders and find out how the crypto movement truly came to be. Let's dive in.

I'm coming to you from beautiful Amsterdam here and I recorded such an amazing show today with Yoni Assia. Yoni is the CEO of eToro, which also happens to be one of our amazing sponsors. And it's really great to have sponsors because of my mission for the show. So we'll hear about that in just a moment.

But basically, the episode with Yoni talks about how eToro came onto the scene over a decade ago, and they weren't just doing anything related to crypto, they developed this whole social investment strategy where all traders and people interested in learning how to trade not crypto, but things like stocks, commodities, bonds, equities cannot only trade in a very transparent way, with great fees. This is a company that's competing with each E-Trade, Ameritrade, Merrill Lynch. They're doing over a trillion dollars in volume.

And so what their concept was, there's a lot of ambiguity around trading, all different types of assets. And again, this is this is pre crypto. And there's all this ambiguity about trading. So they said, let's create a hole in strategy where we allow customers to talk to each other and follow each other's trades. So if I'm trading and I have a really good portfolio, it allows you to check my portfolio, see what the past strategy was, and essentially follow that. And I thought that was really cool.

And then in 2012, I saw the CEO of eToro Yoni who I interviewed on today's episode, tweeting about Bitcoin. Now for a CEO of a major company to be tweeting about Bitcoin in 2012 is a huge fucking deal. And so I always kept the company in the back of my mind, and eventually they transitioned into crypto. And so I'm talking to Yoni, about that, about how he deals with regulators, about what made him want to trailblaze and be a part of this new economy.

I'm happy to say that eToro has millions and millions of traders that are buying and selling crypto on the platform around the world. You think Coinbase was first to the scene? No, they weren't eToro was first to the scene. This is a fantastic episode, Yoni talks about his life growing up in Israel, studying in college, serving in the military, and what life was like and how he saw the world and the financial crisis in 2008 really, really changed how he saw the global economy. Thank you guys enjoy the show.

I'm so honored that Untold Stories is sponsored by eToro. eToro is the smartest crypto trading platform and one of the largest in the world with over a trillion dollars in trading volume per year. What I really love about eToro is that the CEO has been around the Bitcoin space since 2012. So they really, really put their money where their mouths are. US customers, myself included, we can trade the most popular crypto assets. In fact, almost all the ones that you want to trade with low but transparent fees, so you actually know what you're paying for everything. That's really, really, really important.

So if you're not ready to trade yet, you can practice building your portfolio with the eToro $100,000 virtual trading feature. So you can create this whole portfolio without trading with any real money to see how you'll do and you could learn all the different ins and outs without using any real money yet. And then once you're comfortable, you could enter the market and start buying and selling crypto for real. Best of all, one of my favorite features is that you can connect with 11 million other eToro traders in the world, myself included, and we can talk trading, charts and all things crypto.

So listen, head on over to etoro.com links are in the show notes and build your crypto portfolio the smart way. This episode of Untold Stories is sponsored by Scott Offord, the creator of crypto mining. Scott was my first sponsor for Untold Stories and really called me up and said, "Charlie, love what you're doing. I really want to sponsor your show and further the education." Scott Offord is the super czar of crypto mining. He's a broker of ASIC Mining Gear helps people buy and sell their miners. So if you want to buy mining tools, if you want to buy miners, if you have any questions on how it works, if you want to sell your miners or even just broker them, Scott is the guy to call.

Not only that, but he created a free Bitcoin mining profitability calculator at cryptomining.tools. That's the website and it's also has an interactive ASIC hardware comparison chart. What that means is he has all these different fields where you could enter data like the cost of your miners, the cost of your electricity and it takes in things to comparison, like the impact of the Bitcoin block reward halving and it gives you things like how many days until your return on investment? Is it even profitable for you to be mining? All these other type of information, which products to get? It's your one stop shop for learning how to actually mine for Bitcoin, or any of the other all coins that have mining built in.

Give Scott a call, send him a message. You can follow him on Telegram and at Twitter at Offord Scott that's O-F-F-O-R-D S-C-O-T-T. Of course the links are in the show notes. Untold Stories wouldn't be here without the amazing production company BlockWorks Group. A few months ago I approached BlockWorks Group and he said, "Hey guys, I want to do a show Untold Stories, can we make it happen?" And these guys are the only event and podcast production company that I trust.

Really, the show is powered by them and it wouldn't be here today without the amazing work of the BlockWorks Group team. So for access to all the premier digital asset conferences, and to check out their other podcasts in their network that they produce, check them out at blockworksgroup.io. That's blockworksgroup.io. I promise you will not be disappointed.

I don't even know where to start this episode. Steven, welcome to the show.

Stephen Pair
Thanks for having me, Charlie.

Charlie Shrem
I was walking my dog this morning and I was saying, I always think about how do I introduce the show? What do I talk about? How do I introduce the guests? You and I have known each other since at least 2012, 2011. You are just to give the listeners telly because they're like who's Steven. Guys Stephen Pair Pair is the founder and CEO of BitPay. You all know the company. I think I can say this BitPay is the oldest and longest running crypto company out there. Is that accurate?

Stephen Pair
Yeah, I believe we are.

Charlie Shrem
I was just going over some stats about the company because we worked together, I know you for so long and I have to say that I was reading a stat and it said that in 2012, you had 1100 active merchants. Is that accurate?

Stephen Pair
Yeah. If you came across that stat, yeah. We had probably 1100 accounts that were created at that time.

Charlie Shrem
Hey, even 11 accounts in 2012 is amazing. Because, as you know, and I think it seems accurate. Actually am at my nightclub EVR, I was one of your accounts too. We were the first bar to accept Bitcoin and we did it using BitPay, and people would come in and buy like, thousands of dollars worth of champagne and they'd use Bitcoin. And so I want to get into the founding of the company, and more of the why. But there's a question that I never asked you.

You graduated from the Georgia Institute of Technology, computer science, you were a senior software engineer at IBM and then you went to found a Bitcoin company in 2011 when Bitcoin wasn't even a thing. It wasn't even shooting up. Why give up this is amazing career where you could be the who knows like a CEO of IBM today to start this company with one of your buddies Tony from from college?

Stephen Pair
Well, that story goes back to the early 1990s. Shortly after college, I got very fascinated with DigiCash and just really there was something about the idea of taking money and doing it completely digitally. That was, I don't know, it was one of those as a computer scientist, it was one of those things that just kind of grabbed my attention and I was a big fan of PGP as well and cryptography in the day and sort of was following Phil Zimmerman and that whole saga.

But I became a big fan of DigiCash. And, for those that don't know DigiCash was probably the world's first cryptographic payment system. Well, it was a cryptographic payment system, it was centralized. And so when DigiCash went bankrupt, that payment system went away with it and that got a lot of a lot of people thinking about how do you create a true internet protocol for payments. Through the late 90s and early 2000s, I just, as a kind of hobby or sideline, I was just looking for projects that are making progress on that problem. And I got to say, by the time Bitcoin came out, I'd almost given up on seeing anything like that happen.

Charlie Shrem
I think most people did. That's why on the mailing list people were so pessimistic or jaded and didn't believe really Satoshi.

Stephen Pair
Yeah, exactly. And so I was looking for projects, there were things like Second Life Linden Dollars that were not really interesting from a computer science perspective, but we're getting some adoption. And then there was something called Ripple and not the Ripple that we know today. I played around with that for a little bit, but then in late 2010, I finally got around to reading the Satoshi White Paper. I actually heard about Bitcoin shortly after it was launched. I think it was on Slashdot and kind of dismissed it at the time.

And then I finally studied the Satoshi White Paper and realized what mining was all about and how this all kind of worked. And I was very fortunate that I had thought about this problem a long time and saw potential. I didn't say yeah, this is going to take over the world or anything, but I saw enough potential there and I was also at the time ready to get back into a startup environment.

So while I was at IBM, I was there through a couple of acquisitions. Started with a small company that got acquired by a bigger company then got acquired by IBM. I just really wanted to get back into a startup environment that's where I had the most fun in my career. And so I had been looking for ideas for business for a while. None of those ideas were compelling enough for me to leave IBM until I read that Satoshi White Paper even before BitPay, I started thinking about or playing around with a couple different business ideas around Bitcoin but then I started talking to Tony. And just he and I going back and forth on it over the period of a couple of months we decided to launch BitPay.

And that was in that was around May of 2011. And then we started writing the code for BitPay and then we launched the first version of BitPay right after the 4th of July in 2011.

Charlie Shrem
You're going to hit your centennial in a year from now.

Stephen Pair
Yeah.

Charlie Shrem
How does that feel?

Stephen Pair
It's amazing. You've to-

Charlie Shrem
Any company hitting their 10 year anniversary is amazing, but like a Bitcoin company hitting their 10 year anniversary it's like getting million miles status on an airline.

Stephen Pair
Yeah, we'll definitely have an event of some kind, maybe another Bitcoin bowl.

Charlie Shrem
That would be amazing. The last one you sponsored you sponsored the St. Pete Bitcoin Bowl. I was living in Pennsylvania. I didn't even know anything about this region. And now I live like an hour south of St. Pete, which is crazy.

Stephen Pair
Yeah, that's good.

Charlie Shrem
So when you're reading the Bitcoin White Paper. And the way you read it and the way I read it were kind of from two different eyes. The way I read it was like, I didn't never thought about money. I was studying economics, but I didn't really think about like digital money or I didn't really know about any of the footnotes. So Satoshi had cited a bunch of other projects DigiCash like you mentioned, PGP, Hashcash, B-money, all the ones I named. So someone like you reading the White Paper, and tell me if this is true.

I feel like you're reading it and this is what other people have told me. I feel like you're reading an insane yourself, Satoshi figured out a way to combine all of the things that worked of all the other digital monies that didn't work, kind of combined them all together, and then take PGP and then have this ability to do literally a chain of blocks, the blockchain concept. And so the Bitcoin is really a culmination, if you will, of all these other failed projects.

Stephen Pair
Yeah, I would say that's true. The overarching thing for me though was he had solved this decentralized issuance problem or solved this problem of how do you create a payment network that doesn't require a centralized company, a third party to process all the transactions. And that was the overarching sort of thing for me, that was the big problem that a lot of computer scientists couldn't really figure out. And here it was just kind of laid out in a few pages, and the simplicity of that White Paper. Oftentimes the best solutions in computer science are the simplest ones. Here you can read this and if you thought about this problem, it was almost by the time you're done reading it was almost obvious-

Charlie Shrem
It's like business team general's problem?

Stephen Pair
Yeah. It was it was almost so obvious you have to stop and think it can't possibly be this simple. But yet it was and-

Charlie Shrem
What was it that was so simple?

Stephen Pair
Well, the whole thing. The fact that in what is it? 10 pages in that White Paper-

Charlie Shrem
Yeah, the whole White Papers like nine or 10 pages, it's insane.

Stephen Pair
Yeah. And it worked. And by the time I read it, it was already working. So you could go look at the blockchain and you could observe that it was in fact working and then one of the first things that I did was I started not refactoring the code base, Satoshi I don't think was a professional computer science or software developer, because the way he organized the source code was very, atypical of a C++ project. And so one of the first things-

Charlie Shrem
Interesting.

Stephen Pair
I did was like rewrite or reorganize the entire code base. And it's funny, I did that and I didn't change any of the behavior. I just wanted to clean it up make it more approachable to a typical C++ developer, and kind of presented that to the community and Jeff Garza ironically shot me down. He's like, we're not doing that. It was like too big of a change. But I was very careful not to change any of the actual behavior and just kind of clean up and reorganize. Like a lot of the code was up in the header files if you know anything about C++ development, it's kind of not ideal.So anyway.

Charlie Shrem
I wasn't going to ask who you think Satoshi is because it's kind of a stupid question, and I won't, but just to give some insight into what you just said, because that really, that's interesting. I had never really heard that before. So a lot of people claim that Satoshi is this brilliant computer scientist not saying that he's not. But then how do you think he came up with this whole ... If what you said is true, well, of course, it's true. But how do you think he even came up with this whole concept of Bitcoin? Or was it more of a group of people and then they just tasked this one person with writing the actual Satoshi code?

Stephen Pair
It could have been a group of people, it could have been an individual, I think there are probably thousands of computer scientists on the planet that could have built Bitcoin and probably would have had Satoshi not done it. It was a matter of time until somebody did it. Also one interesting thing about Bitcoin was it didn't do anything that wasn't, it didn't incorporate any technologies that weren't already proven. So it used SHA-256, it used a lot of known proven algorithms and mathematics and didn't try to invent something new that was untested.

Charlie Shrem
So he wasn't reinventing the wheel, but he was able to bring all these different technologies together and solve this Byzantine generals problem with how do you not trust anyone but I have this trusted system. And I literally, when I get up on stage I take a whiteboard and I draw in markers, the little walled city and I draw generals around the city and I try to explain to people what the Byzantine generals problem actually is, and why it's so important that it was solved here.

So you found out about Bitcoin and you were friends with Tony and chatting and then so you said to yourself that I want to eventually start something in the space. Was it going to be a company company or did you say I'm just going to start like a side hustle or do something for fun?

Stephen Pair
No. I wanted to be a company company. I've been at IBM, I guess six or seven years, and actually on the same product through three different companies owning that product. I was ready for, like I said earlier, I was ready to get back into a startup environment, ready to do something different and had been trying to think of different business ideas or startup ideas. And then read the White Paper guy, was captivated by it and felt like I wanted to do something around Bitcoin and I saw the potential there. So, right away, I started mining, I was like going and buying up all the graphics cards around Atlanta and had set up a whole mining rig in my basement and kind of did this after hours after my wife went to sleep, and I didn't want her to think I was crazy. And in fact, I brought-

Charlie Shrem
I think all our wives think we're crazy.

Stephen Pair
Well, maybe she thinks I'm crazy. I just didn't want to scare her. So I was building this equipment and this mining stuff in the basement. And it was funny when one time she came down there and she was like, "Why is it so hot down here?" I eventually let her in on it and talked about what I was doing and brought some other friends over and showed them what I was doing. I think I got a lot of looks of people that I think did think I was crazy.

Charlie Shrem
Oh, because you are investing real money into this. It's not like you're talking about it for fun. You were like, buying graphics cards. It wasn't cheap. So people are kind of looking at you like you're crazy. Why is he spending money on this weird computer code thing?

Stephen Pair
Yeah. No, I had a whole rack in the basement stacked with computers. I had duct work I was running to try and get the hot air out of the basement. I had air conditioning systems. It was fun though. It was the first time in my life that when a computer broke down, and I had to pull it out of the rack and repair it. I felt this sense of urgency to get it back into service and mining again, it was kind of fun.

Charlie Shrem
Because you're out of time.

Stephen Pair
Yeah, exactly. It was earning money.

Charlie Shrem
You were a probably significant part of the Bitcoin network back then.

Stephen Pair
I wasn't as big as like [inaudible 00
20
59] or some of those people but it was fun. In hindsight I would have been better off just taking the money I invested in that mining hardware and just buying Bitcoin with it.

Charlie Shrem
You think that's true over the course of time with mining? Do you think it's whenever you say, all right, I want to start mining or at any point in time of Bitcoin's history, even when the price was five cents or 1,000 dollars. Do you think that's true with mining that at any time that you want to go mining, you could just instead use that money to buy bitcoin and hold it?

Stephen Pair
Well, it can't be true for everybody otherwise, we would have no miners, right? So-

Charlie Shrem
That's what I'm getting at what incentivizes the miners, then as a business? Why would they want to do it?

Stephen Pair
Well, I think in mining it seem to me you're always best when the price was rising, but not rising too quickly. Today it's a commodity business and you have to really put big spreadsheets together and think about the cost of electricity, think about capital equipment costs. You probably also need to have a good way to source the the equipment needed to mine and it's a scale business so it's not really something you can just get into like you used to and just expect to be profitable. But yeah I don't know is that true over the course of history you're better off just buying Bitcoin? Maybe, but buying Bitcoin is taking exposure to a volatile asset, it's an investment in Bitcoin.

In fact what I used to do is I thought about the mining business and the investment business separately. So as soon as I mined a Bitcoin those would get sold to the investment business so I could clearly think about the profitability of the-

Charlie Shrem
Interesting. Smart.

Stephen Pair
-mining business separate from the investing in Bitcoin business.

Charlie Shrem
Most miners I meet are like diehard Bitcoin, they're not people who ... and it's changed. It's not 100% anymore. But even today, I'll meet someone who's invested a significant amount of money in mining, and they are someone who has enough money to carry the operating costs of the operation without having to sell the Bitcoin, because they believe that in a year or two, three years from now, the big one that they're earning will be worth significantly more.

Stephen Pair
Yeah. So for those people-

Charlie Shrem
And it's a tax write off.

Stephen Pair
Why wouldn't you just buy bitcoin instead of mining, right?

Charlie Shrem
Because it's a tax write off. That's what they explained to me. Essentially when you're spending money and operation, it's an operation that's just constantly losing money. And if you're someone who owes a lot of money in taxes, you start a business that basically is constantly losing hundreds of thousands of dollars a month, you get to write off all your past taxes on it and then once you sell your Bitcoin, it's when you can actually pay taxes on the Bitcoin that you sold. And it kind of makes sense.

Stephen Pair
Well, yeah, except that at some point if you run a business at a loss, for long enough, the IRS tells you that's not a business. That's a hobby.

Charlie Shrem
That's a good point. Someone else told me that too. And I think that's why clarity is still being seeped, let's just call it 10 years later, even though we're like at nine years or whatever. 10 years later we're still seeking clarity. But tell me about like some of the meetings that you had with regulators or with banks. Was it hard for you to get a bank account a BitPay early on? That's what your businesses is, is it's a bridge for people to go in and out of the crypto space, especially merchants. I still use the BitPay Visa card I used it last night actually. So was it hard dealing with regulators and with banks early on?

Stephen Pair
I don't know if hard is the right word. It's a process. Certainly we spend a lot of time on it and a lot of that time is just education. They want to understand and learn how to think about all of this. So yeah, we've talked to regulators in all the States and internationally at the federal level. Getting bank accounts, there are banks out there that are perfectly willing to-

Charlie Shrem
Now they are.

Stephen Pair
-lean forward. Well, even back then. If you had your ducks in a row or could demonstrate that you're thinking about this seriously and incredibly and you're taking the regulations seriously, and doing what you needed to do, then I won't say it was easy to get bank accounts, but it was doable. Even to this day you'll have banks some banks want to lean forward and want to be involved in this space and then other banks think they want to at one moment in time and then change their mind and decide they don't want this type of business.

Charlie Shrem
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As a mining equipment broker Scott Offord wants to make sure his clients are well informed and making data backed business decisions. Scott created the only free online tool for calculating profitability and days to ROI for miners. It's a better way to compare the efficiency of various models of ASIC miners and to see how the price of the miner and the efficiency impacts your mining profitability. So check it out at cryptomining.tools and find Scott on Telegram and Twitter at O-F-F-O-R-D S-C-O-T-T. That's O-F-F-O-R-D- S-C-O-T-T.

So tell me more about the founding of the company how you guys grew so quickly? What type of staff were you having to hire first? What kind of hurdles did you have to go through? Because you weren't just growing your startup, you are paving, trailblazing this industry at the same time you were having to basically invent things, invent roles, probably right?

Stephen Pair
Yeah. So Tony and I started talking, I brought Tony in, I didn't bring him in, but I told him about Bitcoin, probably in like February of 2011, or something. He and I at the time had reconnected over Facebook. We had fallen out of touch over the years since college. And this is in the aftermath of 2008. And so he and I were at the time doing a bit of options trading, I was doing it more as a hobby, and just for fun. So we would talk a lot about that and then I told him about this thing called Bitcoin and he actually had a similar reaction at first that I did, which, he kind of dismissed it.

I think his first reaction was to tell me that I should sell my Bitcoin before the government shuts it down. He was dismissive of it at first and then after I kept talking to him about it he started thinking more about it, it started to sound more and more appealing and like there's opportunity. And so we started talking about businesses we could start around it. Early on and probably one of the things I would change is that we decided that the exchange business was already a crowded space and likely to become commoditized very soon. And this is you're talking 2011 here and even in 2011 you had Mt. Gox and Tradehill was starting to start up.

And so it seemed like there are already a lot of exchanges. Even in Atlanta, there was an exchange called CampBX. So we felt like that was going to be a crowded-

Charlie Shrem
They were based in Atlanta?

Stephen Pair
Yeah. Mm-hmm (affirmative).

Charlie Shrem
I remember CampBX. Yeah.

Stephen Pair
So we felt like that was crowded. And we also felt like we wanted to build something that would let people use Bitcoin for what it was designed to be used as, as a payment system. And we wanted to deliver something that was of real substantive value to businesses, not just a vehicle for people to speculate and trade. And so that's how we settled on the idea for BitPay, which a very simple idea, let's just build an API that a company can talk to and accept a Bitcoin payment and make that API work as similarly as possible to the way they're used to working with the credit card system, and sort of like an adapter for them.

And then let's get really high quality businesses on our platform, learn from them and then iterate and improve the platform. And that actually was the business model in 2011 and it's still the business model today. That's kind of how we got to a point of what kind of business we wanted to start. So then we started building the platform, I guess, May of 2011. We launched it shortly after July 4 of 2011. We had it ready to go before the July 4th weekend, but we felt like we wanted to enjoy the holiday before we got started.

And, yeah, we launched it. And in those days, we were happy to get five or 10 transactions a day. Tony, and I also in those early days, we didn't actually sell Bitcoins on the exchanges. What we did was we just came up with an agreement that he and I would each buy 50% of all the bitcoins that came in from the business. And that worked out well until a little bit later, we signed up Butterfly Labs who had announced that they're coming-

Charlie Shrem
I'm still waiting for my miners by the way.

Stephen Pair
So that was an interesting story. So Butterfly Labs was going to pre sell ASICs. And so they just announced that they were coming out with ASICs chips and they had already done FPGs and had some success with that. And so they announced they were coming out with ASICs and they were going to pre sell them and the order in which you paid was going to be the order in which those ASICs were shipped.

And they also took wire transfers for payments, we weren't their only payment option. They decided to start selling on a Saturday. Now wire transfers don't work on a Saturday. So what happened was they started selling and 100% of their order flow came to us and we had people buying those ASICs to get in line and be the first one to shipped. And so I remember that was on a Saturday, I happen to be on vacation with the family in Florida. And all of a sudden we have like, we're seeing all these Bitcoins roll in and-

Charlie Shrem
How many bitcoins do you remember?

Stephen Pair
I think at one point the wallet was up to like 25,000 bitcoins and-

Charlie Shrem
Okay. 25,000 Bitcoins. What was the Bitcoin price?

Stephen Pair
Gosh, I don't know.

Charlie Shrem
A few dollars.

Stephen Pair
Yeah, I think it was like six or seven dollars at that point. So we had all these Bitcoins rolling in and at that point was when he and I decided, okay, we can no longer afford to buy 50% of the Bitcoins each and so we're going to have to sell these on the exchanges.

Charlie Shrem
Wow. Just to go back what you said earlier, you guys were buying the Bitcoins from the company or your own just personal stash instead of selling them on the exchange.

Stephen Pair
That's right.

Charlie Shrem
Brilliant.

Stephen Pair
And it was a great way to dollar cost average.

Charlie Shrem
True.

Stephen Pair
So anyway, that day, I think our liabilities to butterfly Labs are growing to like quarter of a million dollars, half a million dollars. It was getting a little scary and we were like wondering are we going to be able to actually sell these things on the exchange?

Charlie Shrem
How do you do that? At the time there was Mt.Cox, CampBX and a few other small ones. But that's a significant amount of Bitcoin.

Stephen Pair
It is, and it took us a week or two to clear all those sales. A fortunate thing was that the price actually went up and I think in those days, depending on what was going on, how much activity was going on and what the price was doing, we could almost stop selling Bitcoin for a given day and we would see the price of Bitcoin rise. So we did manage that and we sold the coins. Funny thing about it too was that a lot of people that bought miners, they would then call us up and say I want to buy my Bitcoin back from you on Monday when I can send wired transfer. So they were sending us Bitcoin to buy the ASIC and then calling us up to buy their Bitcoin back to they just bought the ASIC with. So anyways-

Charlie Shrem
That's insane.

Stephen Pair
Yeah.

Charlie Shrem
And then this the story ended up becoming a crazy story and that there aren't a lot of details about what happened. But I feel like a lot of the early Bitcoin companies my company included we're just trying to figure it out as we go like you guys buying the bitcoins and then having to go on and exchange. Who else were some of your first merchants?

Stephen Pair
Gosh, I think one of the earliest ones was the Bees Brothers out in Utah.

Charlie Shrem
Oh yeah, Bees Brothers. I haven't heard that in like six years.

Stephen Pair
And then we later we got the Alpaca Socks.

Charlie Shrem
The Alpaca Socks from Matthew, right?

Stephen Pair
Yeah. Was it Matthew, right?

Charlie Shrem
Matthew was made fun of about the socks but I'm not sure if he was the one that sold them.

Stephen Pair
There's somebody named Matt Wright? The reason I remember that name is he started Bitcoin Magazine. And he was in Korea or something. I don't know if you remember he put out that weird Christmas video.

Charlie Shrem
I remember Matt Wright. Matt Wright is like a pariah. He's probably going to listen to this and come after me. But I don't know what ended up happening to him. But I remember yeah, he was based in Korea and he disappeared years later. What had happened was he made a bet with a bunch of people over something.

Stephen Pair
Oh, yeah. I remember that.

Charlie Shrem
And I think the bet was that Butterfly Labs would deliver the miners or something, something to that. I'm not sure if it was Butterfly Labs, it was someone. Maybe it was [inaudible 00
35
40] I think it was [inaudible 00
35
41]. He made a bet with a lot of people that something would happen and it didn't happen and so he owed a lot of Bitcoin. So he disappeared and this was like 2014. So he was one of the founders of Bitcoin Magazine, which Vitalik wrote for and then ended up Vitalik. So back then metallic was just this kid who was writing for Bitcoin Magazine ended up going on to found Ethereum which is crazy.

Stephen Pair
Yeah, and then we bought the magazine, Tony and I and then a few other-

Charlie Shrem
Oh yeah, I remember.

Stephen Pair
-bought the magazine. It was losing money and it was a good sales tool for us to go into a company and here's this physical magazine that you can read all about Bitcoin and what was going on.

Charlie Shrem
I bought the back cover from you.

Stephen Pair
Yeah. We bought it and had it for a few years and then sold it to be BBC Media a number of years later. It kind of had served its purpose-

Charlie Shrem
Sure.

Stephen Pair
Never made any money but-

Charlie Shrem
It still is probably losing money.

Stephen Pair
Well, I don't know you'd have to ask-

Charlie Shrem
They own a lot of media companies in this space which is good and-

Stephen Pair
Well, we sold them Bitcoin magazine but they continued to do Why Bitcoin which I always wondered why they did that because Bitcoin Magazine was such a great brand and Why Bitcoin was well, why do Why Bitcoin when you can have Bitcoin Magazine. But then they've they've recently resurrected it so it's good.

Charlie Shrem
When I was talking to Mike Caldwell about this on our episode a few weeks ago, but I was like, Mike when you released the Casascius coin, the fact that I could physically hold you know this symbolic thing or this Bitcoin in my hand was such a big deal for me because that was like a light bulb moment that this Bitcoin thing was really real. And I had the same effect when I was able to go into a Barnes & Noble and actually buy Bitcoin Magazine. I'll say like, "Hey mom and dad look what I just bought." Like this Bitcoin thing is not just this thing that I know about in your basement. But this is a real thing like we have our own magazine. My parents thought I was crazy, but it didn't matter.

Stephen Pair
I thought those Casascius coins they're great, but I thought it was like sort of antithetical like we're supposed to be doing this all in the virtual world, not in the physical world. And everybody was like, these are going to be worth a lot of money one day and I thought that's crazy. And sure enough they were.

Charlie Shrem
If Mike hadn't been shut down by the government, like he was sent a FinCEN letter, I don't think the collectors value would be as high. And so that whole story of it is ... because he'll never be able to like remake anymore. But when I asked him the same question, I was like, "Isn't this kind of anti Bitcoin in a way?" And he said yeah, and actually he wasn't happy with the security of the coin because people were trusting him with their private key when you're buying the coin, and when he came out with the coin, Bitcoin was only worth a few dollars, right?

So it wasn't significant money. He did the coin in order to give the coins out that he bought like Christmas gifts. It was meant to be that, like for them to have it taste. It was never meant to be like a bear bar like an actual transfer in value. And he did go a little way with it, like he created these 1000 Bitcoin gold bars, but he only made a few of them they weren't meant to actually do. But then you had some like crazy merchants over the years and I read an article in 2017 you guys were almost doing up to like a ... it was on your blog up to a billion dollars, which is such a crazy number of volume to be doing in a year like 2017.

But then you had some crazy merchants like I remember when you got the deal in Las Vegas and you'd the Sacramento Kings. Why the Sacramento Kings.

Stephen Pair
I'm not as familiar how that happened, how Sacramento Kings came about. But the D was great and owner of the D was very supportive of what we're trying to do. And for them it was a great way to draw in new customers. And yeah when we got to Money 20/20 in Las Vegas, we'd have an event at the D and it was a great way to just showcase you know the possibilities.

And the Bitcoin Bowl was that way too. The Bitcoin Bowl took a lot of our time and kind of consumed us for a little while there but it was a very interesting experiment in the sense that you had all these restaurants in St. Petersburg that we went and signed up and you could go around the town and just you know use Bitcoin like it was a normal universally accepted currency and sort of experience what that was like and it was very cool.

Charlie Shrem
Back then, and I want you to try to tell me, because I know you're not as involved in having the merchants come onto the system early on you were more so but at what point in time over the past 10 years did it go from where merchants would be actually excited to integrate Bitcoin because of getting new customers but also some of them must have gotten like that Bitcoin bug and actually like fall in love with this thing. Whereas maybe now more and I could be totally wrong, but more so now I feel like it's just because it's a good business decision.

Stephen Pair
Yeah. And that's what makes me most excited about it now is people are actually using it, companies are using it because they get real value out of it and it's not because they're fans of the technology or they want to make a big marketing headline. But yeah, I would say in the early days, you had the enthusiast companies, the Alpaca Socks seller, or the Bees, Brothers type companies to small mom and pops. And then somewhere along the way, one big, notable merchant that we signed up was WordPress.

And WordPress actually, interestingly enough, they say signed up not because they wanted to make a marketing splash but because they actually found a real value in it. They at the time and this is wordpress.com the hosting site, they said that we can host WordPress here in the US and we can charge people money for it here in the US and a few other geographies but a large part of the world we have no ability to collect a payment.

And we also because we want WordPress to grow we're just giving it away for free in those geographies and what they found interesting in BitPay and  Bitcoin was the fact that they can now reach all of these underserved markets and be able to have a payment system for them whereas before there was no option. And so that was really cool and very [inaudible 00
42
51]. That was actually that was actually a catalyst for the Barry Silbert coming in and investing in our seed round.

Charlie Shrem
Why is that?

Stephen Pair
I think as soon as we had a household name like WordPress suddenly get interested in this payment method and it was for actual real value reasons and not because they were fans of the technology or whatnot. Then all of a sudden this became a real-

Charlie Shrem
Thing.

Stephen Pair
Yeah, exactly a real potential investment.

Charlie Shrem
There were very few investors back then we had a lot of overlap in our investments too. Barry Silbert, Abedestin was also an investor and Roger Ver Roger. Roger was easiest person to raise money from, he called me on Skype one day. He said, "Sounds great. After five minutes. Tell me where to send the money." And that was it. The paperwork came later.

Stephen Pair
Yeah. And Roger introduced us to Barry.

Charlie Shrem
Who are some of the more controversial merchants that you had?

Stephen Pair
Well, we already talked about Butterfly Labs. Of course, we didn't know at the time that they would have had such difficulty getting those ASICs shipped. They did ship but a good bit later. I don't know if it was a year or two years after they originally promised them and then eventually they just had ... and the quality of what they shipped was not great. And then they just had ... they were pre selling a lot of stuff and then not delivering so that was one.

Other controversial I'm trying to remember. Gosh, I don't know maybe you'd remember some of them better than I. I've started taking notes by the way over the years and people always asked me what are the interesting stories and whatnot.

Charlie Shrem
Yeah, tell me some stories. What do your notes say?

Stephen Pair
Oh, I've got a ton of stuff on here. Stuff we will only scratch the surface here in this call I'm sure. But gosh, looking through here.

Charlie Shrem
The other topic I want to ask you about but we can do it after was, you were very involved in the 2000 Bitcoin hard fork.

Stephen Pair
Yeah.

Charlie Shrem
The story of that I feel like it's whitewash. We need to learn from our mistakes, but to ignore what happened today is not really a good idea. So I want to get your take on that, but we can do that first or we can do that after that?

Stephen Pair
We can do that first.

Charlie Shrem
Okay, cool. So in 2013 Bitcoin upgraded ... so there was only one like Bitcoin software at the time that majority of people used and they followed ConsenSys. And from what I remember and I'm not a ... I dabble I'm a script kiddie. But from what I remember, the Bitcoin software was migrating to a new database. I forgot we were going from level database to Berkeley database.

Stephen Pair
Yeah. Level DB.

Charlie Shrem
Okay. And basically it caused ConsenSys to go out of work. So essentially people that have upgraded to version .8 were mining on a completely different chain. Okay, so for all intensive purposes, this was a hard fork. An unintentional hard fork.

Stephen Pair
Yeah, that's in my notes here too. That was an exciting interesting time.

Charlie Shrem
I was at a bar mitzvah when I got the message. I had to run home like Superman.

Stephen Pair
No. So this happened and all of a sudden it was popping up on IRC. And so in those days, we used sort of Bitcoin talk and IRC was used a lot. Tony and I were actually awake and looking at this as it happened and just watching IRC, I wasn't actually participating in the discussion, but just kind of watching trying to figure out what the heck was going on. And as that was happening, the price of Bitcoin was plummeting. And so here we're trying to run this business and process payments and all this kind of stuff and the price is just the bottom is like falling out of it.

It was also, it was amazing to see all the people in IRC trying to get to the bottom of what was going on. And one amazing thing about it was in the period of maybe an hour to an hour and a half people had diagnosed what was wrong figured out what the bug was and then also reached a consensus about a path forward. Some miners were going to lose money because they went off on one branch of that fork.

Essentially what happened was the database was changed in Bitcoin and that led to some nodes accepting some blocks and other nodes like crashing and not accepting during the validation period, certain blocks and that caused one version of the software to go off on one branch and other version to go off on a different branch. But as soon as they had diagnose that problem and so the prices, we were watching the price, I'm on the phone with Tony watching IRC, and I said, "They figured it out. This is not going to be that bad." And then we just started buying Bitcoin at that bought at that bottom and actually the price then started rallying and recovering.

But also remember it because Barry called us up and said, "Is this the end of Bitcoin?" So, here you have an investor in BitPay and people kind of very seriously wondering was at the end of the experiment.

Charlie Shrem
Well, that was great. Let's all pack it up and go home.

Stephen Pair
Yeah. So exciting times.

Charlie Shrem
What other stories do you have in your notes? I'm curious now.

Stephen Pair
Gosh, when Gavin met with the CIA, I don't know if you remember that one.

Charlie Shrem
I remember when Gavin met with the CIA, he had told everyone a lot of people blame that for why Satoshi left?

Stephen Pair
Yeah, maybe. I don't know what the exact timing was there. But it was very shortly after I came into bitcoin that Satoshi left. So it was like I think the toward the end of 2010 or early 2011 was when he kind of disappeared.

Charlie Shrem
Mike Caldwell told me that he had missed Satoshi by one day.

Stephen Pair
Oh, really?

Charlie Shrem
Mike if you look at when the last comment for Satoshi came and then when Mike joined the Bitcoin forum, it was literally 24 hours.

Stephen Pair
Maybe he's Satoshi.

Charlie Shrem
That's what I said to him. He said, "If I'm the Satoshi we have a lot of problems."

Stephen Pair
The MyBitcoin hack. That was another big one.

Charlie Shrem
I need to have, I actually emailed Bruce Wagner-

Stephen Pair
Oh, really.

Charlie Shrem
To come on the show. So I don't know ... it hasn't been ... I think a lot of people think or I shouldn't say I think, it's thought okay, let's put it correct, it's believed that Bruce Wagner was behind the MyBitcoin hack. But who knows? I'm not going to sit here making accusations. I'm trying to get him on the show.

Stephen Pair
Yeah, MyBitcoin was like, even in those days, everybody was like, this is just a disaster about to happen. It was like anybody who understood Bitcoin how it worked is like why would you ever put your bitcoins on a website that you don't know who the who's running it and this is crazy, and it's just, it was almost like a train wreck in slow motion kind of thing.

Charlie Shrem
We used to use Instawallet for our poker games. And we were playing poker one day and there was like 10 Bitcoin in the pot. And that's when Instawallet actually had that big hack too. Yeah. And so I think it was like Vorh's little brother who won the pot. And we're like, sorry, the Bitcoins are gone.

Stephen Pair
That's right. I'd forgotten about Instawallet. By the way one story a lot of people may not know is that Eric designed our first logo.

Charlie Shrem
Oh, did he?

Stephen Pair
Yeah.

Charlie Shrem
Well, I think I knew that but I hadn't remembered, that's crazy.

Stephen Pair
I think we paid him 60 or 70 dollars worth of Bitcoin which is  how many bitcoins that time but-

Charlie Shrem
30 or 40 Bitcoin.

Stephen Pair
Right. And we went with him. We met him in person for the first time at the 2011 conference. So he had designed our logo and we-

Charlie Shrem
Was that the New York Bruce Wagner conference?

Stephen Pair
Yeah, it was.

Charlie Shrem
Who else was at that conference?

Stephen Pair
Well, obviously, Gavin was he had just joined what was that company called? That's no longer ... TrueCoin?

Charlie Shrem
TrueCoin. Yeah.

Stephen Pair
That was the sort of the big announcement that he had joined them. Let's see, there was Jeff Garza because I remember him giving a presentation on what Bitcoin was. Gosh, there were like 50 or 60 of us it wasn't that big conference.

Charlie Shrem
That was it. That was the first gathering in the history of Bitcoin. I met Bruce Wagner a few months later at his office and I was on his TV show, his new show.

Stephen Pair
We went on and that show. What was that network he was trying to create? Only one TV or something.

Charlie Shrem
It was OneTV. Oh, man, I wonder where he is today? I didn't mean this to turn into a nostalgia episode. But that's crazy. Tell me more about how BitPay eventually evolved. You have probably dozens of ... how many staff do you have now?

Stephen Pair
About 85 or so.

Charlie Shrem
Wow. And still in Atlanta?

Stephen Pair
Mm-hmm (affirmative). Headquartered in Atlanta, we have an office in Amsterdam and also one in Argentina. And then a few sales folks that are scattered around.

Charlie Shrem
I feel like a lot of people like worked or did work for BitPay at one point in the course of history.

Stephen Pair
Yeah. It's pretty cool to see a lot of former BitPay employees out there either starting companies or having notable roles at other companies.

Charlie Shrem
Mo Levine worked for you for a while?

Stephen Pair
Yeah.

Charlie Shrem
Eric did some work for you in the logo. Was Roger involved at any point?

Stephen Pair
Roger never worked for BitPay.

Charlie Shrem
But he helped out.

Stephen Pair
Yeah, he was very helpful in a lot of different ways over the years. Put us in touch with Barry in the early days when we did our seed round. One of the things we did right was, this is my fourth startup. So it wasn't like I was new to startup companies, and second one as a co-founder. And so, we did a lot of the right things in the early formation of BitPay that made it an investable company. And we felt like, I felt like the technology and what it could do was at sufficient potential that it was very likely that the VC world would get interested in the space in time. So you're still talking 2011 it's like very early on. And at that time, Silicon Valley and all VCs out there hadn't had no interest and didn't know what Bitcoin was never heard of it.

But I felt like at some point they would and and when they started wanting to make investments, if we were not an investable company, then some other company would be, and our competitor would be, and we would be in trouble. And so we had to make sure that we were from the very early formation of BitPay an investable company, and ready to take that investment when it came.

And sure enough, obviously, the venture world came in and started making investments in the time I think it was late, maybe early 2013 or late 2012 when they really got interested in the space. You could probably count on one hand the companies that were investable. That was one of the things that we did right in early days of BitPay.

Charlie Shrem
It's not exciting to me, but that's what threw me off a little bit because here we are, we're a bunch of like, kids in the sense of the word that we were immature and our guests are libertarians or whatever. And here you come along, and you and Tony are like the adults in the room. The ones who will be taken seriously and your company like lasted so long. It's insane. You got to think about that saying yourself like wow, we we are the oldest, longest running operational Bitcoin company.

Stephen Pair
Yeah, it's pretty cool.

Charlie Shrem
You must have it. You have to have a 10 year event.

Stephen Pair
Yeah, we-

Charlie Shrem
Like I'll fly to Atlanta for that.

Stephen Pair
Yeah, we definitely will. For me you mentioned the libertarian, the anarchists for me Bitcoin was never ... I sometimes describe myself as an apolitical person. For me it was the technology and what it could do, the potential there that it had. I was never a big fan of the the politics side of Bitcoin, for me that represented a threat almost to Bitcoin. You take something that's going to be controversial in of itself and mix it with other controversial stuff and that's just going to give people excuses or reasons to shut it down.

And so all the silk road stuff that was going on to me that was a danger for Bitcoin and a big risk. I would have liked to see the community just really focus on what Bitcoin can do and not bring all these other political agendas into the mix.

Charlie Shrem
You're right. And so, there are two types of people that got involved in those years. They were the ones that were excited about the technology and then there were the libertarian anarchist types. And there was me, and I didn't fit into either. I'm not a computer scientist, and I was never a libertarian. In fact, Eric and Roger used to make fun of me that I was a status. Well, I didn't know that I never that I loved the government.

Stephen Pair
I never knew this about you, Charlie.

Charlie Shrem
Well, I never cared. I came from a conservative, religious Jewish background, like we are all about the government. My parents voted, like we'd have family outings to go vote. I remember going to the voting booth since I was 10 years old, going with my parents, very into that. And so this whole Bitcoin world, and I think back sometimes and I asked myself, why did I get involved in 2011? What was it about the space? and I guess for me, and this is what my therapist says. He says, I need to do something that no one else is doing in order to be different because that sense of individuality is so important to me. And I got involved by mistake.

But then I asked myself what's the future? I talked to a lot of the early Bitcoiners on the show and just privately. Guys at Jered Kenna. Jared's burn out like he's just not involved in crypto anymore.

Stephen Pair
Yeah. I like Jered I was always-

Charlie Shrem
Yeah, he's a great guy. Lives so close here down in ... I actually can't say where he lives. .

Stephen Pair
I thought he's still-

Charlie Shrem
He lives in Alaska, actually. Never mind.

Stephen Pair
Last I knew he was in Colombia.

Charlie Shrem
He's in Colombia. No one knows where he is. I can't say where he lives. He doesn't want me to say, but he's burnt out. He just doesn't want to and I understand.

Stephen Pair
Look at all he went through with Tradehill and the second iteration of Tradehill. It's tough.

Charlie Shrem
So actually, so the episode came out two months ago but last week, and I just spoke to him last week, because last week, he won a legal battle. Because what happened was when Tradehill shut down, he returned everyone's money. But there were people that came back years later saying, "Oh, you owe me this money." So someone brought a lawsuit this year, like five years later, saying that Jered owes him 2000 Bitcoin, but the guy couldn't substantiate it. Like there was no proof. But this guy had a lot of money that I guess, I don't know the details of the battle but Jered won because the judge was saying that you can't come back five years later saying, oh, this guy owes you the money but I can't prove it.

But that's what he went through. So he's burnout and I don't blame him. I feel that sometimes. There were periods that I didn't know if I was going to stay in the space or what I was going to do. You ever get those feelings?

Stephen Pair
Oh, yeah. There are many times where BitPay almost ceased to exist. There's-

Charlie Shrem
The whole scaling debate. You must have just been so frustrated.

Stephen Pair
Yeah, that was interesting because and kind of stupid on my part, I should have seen what was going to happen there. At the time, we felt like the community's about to fracture, it's about split and maybe we could be helpful to get these miners who are refusing to deploy Segway and get them to give a little ground and get some of the developers who weren't interested in a hard fork and block size increase, kind of get them on the same page. And maybe we can be helpful in working something out and we can all stay together for at least a little while longer. And of course, we stepped right into the middle of a big war effectively and in hindsight, we should have just stayed miles away-

Charlie Shrem
Quiet. But it was hard to stay quiet. Everyone said something back then. That scaling debate was so crazy. I don't even want to talk about it. So what's the future of the space? Where do you see yourself? You see BitPay still around in 10 years?

Stephen Pair
Oh gosh, I hope so. I have fun coming to work every day. And I really still enjoy what we do here I think we got a great team of people that I get to work with. Sometimes I say, it's like having a Bitcoin meetup every every day here in the office. And I'm excited. I think there are, as I look forward, what I've come to appreciate is that, really, this is a new kind of database. If you look at the Bitcoin database, you look at all the other blockchains that are out there. It's a new type of database. Each of these databases has its native token that incentivizes the security of that database.

When I look at Bitcoin, specifically, I see the most secure of those databases and there are a lot of applications even beyond payments for them, which is probably more than anything what makes me sort of bullish on Bitcoin itself. And then I think we need to figure out how to apply these databases to other use cases beyond money and payments. I think you can look at any kind of centralized database, take a Facebook, a Twitter, a GitHub, and I think they're eventually going to be replaced by blockchains of some kind.

Now we've got a lot lot to figure out about the security model of those blockchains and whatnot. But I think it's a matter of time there's tons of opportunity for investment for new disruptive applications of this technology. So, it's a fun space to be in and I enjoy-

Charlie Shrem
I'm really excited for the future. Steve, how can people follow you on Twitter and follow what's going on with you and what's going on with the company?

Stephen Pair
Well, they can follow BitPay's Twitter. I don't tweet very much anymore.

Charlie Shrem
That's smart of you.

Stephen Pair
At some point, I was kind of active on social media. I was never really active and posting a few things. Thoughts on medium and whatnot. I don't do too much of that myself anymore mainly because I just wasting time with it. But yeah, BitPay has our BitPay Twitter that you can follow and stay up to date as far as what we're doing.

Charlie Shrem
Excellent. Stephen Pair, thank you so much for coming on the show. I really appreciate it and I can't wait to release the episode.

Stephen Pair
Alright. Thanks, Charlie and great to talk to you again.

Charlie Shrem
And let me know about a 10 year event.

Stephen Pair
We will.

Charlie Shrem
Hey, everyone, thanks for listening. This episode of Untold Stories is sponsored by Scott Offord the creator of crypto mining. Scott's a broker of ASCI mining gear and helps people buy and sell their miners. He created a Bitcoin mining profitability calculator and an interactive ASCI hardware comparison chart that you can find at cryptomining.tools. It's the only free online tool for calculating profitability and days to ROI that includes the impact of the Bitcoin block reward halving.

The calculator lets you put in your estimated uptime to give you a more realistic profit projections. So check it out and find Scott on Telegram and Twitter at O-F-F-O-R-D S-C-O-T-T. New episode go live every Tuesday at 7AM EST. Links to our Apple and Spotify channels are in the show notes. You can also follow me on Twitter, Charlie Shrem to continue the conversation. See you next week.