On a damp Thursday night in July, a half-dozen men gather on the steps of San Francisco’s Yerba Buena Gardens, just across from St. Patrick Church on Mission Street. They dress down, mostly wearing the jeans and t-shirts uniform of Bay Area programmers. As the sun sets, they’re trading currency in the fog, selling silver and cash for Bitcoins and other crypto-currencies. Every now and then a new trader wanders by, asking, “Buttonwood?”
Welcome to the quickest, most private way to buy the internet’s most successful digital currency: in-person and face-to-face.
Buttonwood meetups started in New York a few months ago and fanned out to San Francisco and Los Angeles. Buttonwood is an allusion to the May 17, 1792 agreement, struck under a buttonwood tree at 68 Wall Street, that set down the rules for what became the New York Stock Exchange. The Yerba Buena Bitcoiners see themselves as the modern descendants of these 18th century traders. Like them, they conduct their business in the open and face-to-face.
They also think they’re onto something big. They’re Bitcoin’s true believers, and they’re excited to be in on the ground floor. “It’s like a new country formed, and they need everything,” says John Light, the Bitcoin entrepreneur who organized the San Francisco Buttonwood meetup.
He packed up and moved to the Bay Area from the Washington suburb of Springfield, Virginia, in January, hoping to cash in on the Bitcoin excitement. For him, the event is a return to Bitcoin’s roots. “For me it was really about decentralizing the exchange process and giving people an easy way to buy and sell Bitcoins.”
A few minutes after I arrive, Zach Copley is looking for a buyer for his two American Eagle silver coins, worth about $27 each on eBay. Everyone is chatting and compulsively checking market updates on their mobile phones. Copley, a bearded 44-year-old “crypto currency enthusiast” with an orange shirt depicting a bomber dropping Bitcoins, asks Light if he’ll take them for $56. Light thinks they’re worth only $44. After some haggling, Light types Copley’s Bitcoin address into his mobile phone and transfers just over half a Bitcoin ($50) to Copley’s digital wallet.
These aren’t big value transactions, but the Buttonwood crew aren’t big-time traders. They’re the enthusiasts and the curious, dipping their toes in the world of crypto currencies. They want to meet other like-minded people and trade. Copley tells me he’d rather do everything online, but he’s had his online payments reversed by the banks. Meeting face-to-face and leaving with cash (or Bitcoins) in hand is safer. “The easiest and most profitable are the online [trades], however, they’re also the most risky,” he says.
It’s a little unexpected: The world’s pre-eminent digital currency is most safely traded face-to-face. But the Bitcoin phenomenon is itself unexpected. Bitcoins were conceived in 2009, in the warm ashes of the world financial meltdown. But they were proposed in a white paper and caught on without the backing of any central authority. In fact, the currency was a reaction against the too-big-to-fail banks that had inflated, and then abruptly paralyzed, the world’s economy.
A mathematical genius (some say it had to have been a group of people) under the pseudonym Satoshi Nakamoto first proposed the Bitcoin peer-to-peer network as a way of conducting online transactions without relying on financial institutions and all of their baggage — defaults, clawed-back transactions, service charges, their lack of privacy. “Merchants must be wary of their customers, hassling them for more information than they would otherwise need,” Nakamoto wrote in the academic paper explaining how his homemade currency would work, “but no mechanism exists to make payments over a communications channel without a trusted party.”
Bitcoin is that mechanism. And four years later, it does what Nakamoto envisioned. The peer-to-peer network that keeps track of the “Blockchain,” a running ledger of Bitcoin transactions, is massive. There are over 11.4 million Bitcoins in circulation. They’re worth about $90 each, putting the value of the Bitcoin economy at more than $1 billion. But there’s a catch. How do people first acquire Bitcoins? How do they sell them for U.S. dollars? “There’s a lot of anxiety and angst around the actual buying of Bitcoins,” says Light. To use the Mt. Gox exchange, for example, you have to submit photo ID and proof of residency before you can create an account. Processing new accounts can take weeks. Once your account is online, it still takes days to move money in and out of the account. Last month, Mt. Gox temporarily suspended money transfers to U.S. bank accounts. “Those waits can cause anxiety when there are delays or when the companies simply stop doing withdrawals or deposits for a period of time,” Light says.
It’s traditionally been tough to quickly buy Bitcoins with U.S. dollars, and recently it’s become tougher. Regulators at the federal and state level have made it clear that anyone engaged in the business of swapping Bitcoins for cash needs to know who their customers are in order to comply with anti-money laundering laws. That’s led to a pretty healthy off-the-books market for Bitcoin traders. Ground zero for this business is a website called Localbitcoins.com, but buyers and sellers can also hook up over Internet Relay Chat at #bitcoin-otc