Forbes: Bitcoin's "backbone" controlled by "two young Slovenians"

Home » Forbes: Bitcoin's "backbone" controlled by "two young Slovenians"


It’s hardly a secret that one of the bitcoin community’s weakest links are its legacy exchanges. Less than six months ago, the failure of the then-biggest and best-known exchange, Mt.Gox, unleashed a tidal wave of negative coverage that still colors the public perception of digital currency. While a new generation of cryptocurrecy exchanges like Vault of Satoshi and Kraken are steadily gaining ground, the vast majority of bitcoin’s volume is still traded on platforms dating back to the Mt.Gox era.

As Forbes reporter Kashmir Hill explains, one reason that the U.S. Marshal Service opted to auction off their seized bitcoins, rather than simply cashing them out, is that there is no legally recognized U.S. exchange at which to sell them. While this is likely to change in coming months thanks to efforts by regulators in New York, at the moment U.S. bitcoin users seeking to trade have very limited options. As Hill notes:

When it comes to turning significant amounts of Bitcoin into U.S. dollars, all the action is in Europe. The top three BTC-USD exchanges are Bitstamp, Bitfinex and BTC-e, based in Slovenia & the U.K., France (maybe?) and Bulgaria (probably?), respectively; they collectively see daily trading volume of 10,000 Bitcoin, or $6 million USD.

Hill notes that bitcoin exchanges have “historically been regarded as mysterious and, well, weird.” But after the fallout of Mt.Gox, which took nearly half-a-billion dollars out of the bitcoin ecosystem as it collapsed, investors are becoming more wary of risking their money at exchanges without so much as a reliable mailing address. At the same time, the “press-shy” operators don’t seem inclined to change their operations.

Bitfinex’s founder keeps his remarks to Reddit. The BTC-e crew has stayed anonymous while rumors swirl that they are actually based in Russia, where Bitcoin is illegal. But the two twenty-something founders behind Bitstamp, Nejc Kodrič and Damian Merlak, are increasingly opening up. They’ve attended Bitcoin events, collected a “best virtual currency startup” award at a European tech conference, and spent an hour with me on Skype talking about what it was like to discover Bitcoin and suddenly become two of the richest people in Slovenia.

The article profiles Kodrič and Merlak, as well as their business, noting the exchange’s rapid growth to an 11% market share and the leader in USD/BTC trades. In less than six months, Bitstamp has gone from a small European exchange to serving over 350,000 customers — seven times the population of Kranj, the city the company is based in — and attaining industry-leader status. As Kodrič boasts, “We’re the backbone of the entire Bitcoin industry.”

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