In 2010, a 16-year-old Chinese teenager named Zhou Tong bought Bitcoin for $10. Later, this self-taught programming genius built the first cryptocurrency margin trading platform, Bitcoinica, in just 4 days. The trading volume of the platform reached $40 million per month, second only to the largest exchange at that time, Mt. Gox.
However, due to consecutive hacker attacks, Bitcoinica eventually lost 101,554 BTC.
Recently, X-account Rizzo told the story of this legend. PANews translated and compiled the original article, which will tell the story of how this teenager lost 102,000 Bitcoins, which are now worth $6.8 billion, in a dramatic way.
At the age of 16, the Chinese teenager Zhou Tong bought Bitcoin for $10 and was deeply interested in the idea that this currency could be transferred globally. He introduced Bitcoin to all his friends because he thought it was “cool”.
At that time, it was very difficult to buy Bitcoin in 2011, and it took time and relied on intermediaries. The largest exchange at that time, Mt. Gox, was often offline. Shortly after Zhou Tong bought Bitcoin, Mt. Gox even experienced a flash crash, and the price of Bitcoin dropped to $0.01.
Zhou Tong was not discouraged by the price drop. This self-taught programmer built an exchange called Bitcoinica in just 4 days. It was not just another Bitcoin exchange, as it allowed margin trading, allowing traders and miners to speculate on future prices.
Users could immediately bet up to 50 Bitcoins.
After going online, Bitcoinica’s trading volume soared, with a monthly turnover of up to $40 million, second only to Mt. Gox. As for Zhou Tong, he made $10,000 in the first two weeks, equivalent to about 2,000 Bitcoins.
However, Bitcoinica soon encountered some resistance. Some users were worried about Zhou Tong’s young age, while others were concerned about his lack of experience. As Bitcoin appreciated, users began to pay more attention to the security measures taken by the exchange to protect Bitcoin.
Bitcoinica continued to trade hundreds of thousands of Bitcoins per month. But at the end of 2011, when investors found him, Zhou Tong quickly sold the company. At that time, he was still in school and busy with exams.
The new owner, Wendon Group, had some doubts about Zhou Tong’s work. Therefore, they sought the help of experienced Bitcoin developers to conduct the necessary audits for the exchange. One of them was Amir Taaki, a outspoken hacker activist who was passionate about WikiLeaks and 3D printed guns.
Wendon Group wanted to prove to Zhou Tong and Amir that they were serious—they made a large investment. They even spent $1 million to purchase the industry’s most sought-after domain name: http://Bitcoin.com.
However, Bitcoinica soon fell victim to a hacker attack. In March 2012, it lost 43,554 Bitcoins. This loss caused a huge uproar and was permanently engraved on the cover of the second issue of “Bitcoin Magazine”.
The situation worsened. In May and July of the same year, Bitcoinica’s servers were attacked twice. Hackers stole a total of 58,000 Bitcoins. At that time, there were no hardware wallets or multi-signatures: all the hackers had to do was reset a few passwords.
Who is responsible for these consecutive attacks? Zhou Tong? Wendon Group? Or Amir? Users didn’t care, they just wanted to recover their lost Bitcoins. Users like @rogerkver lost over 24,000 BTC.
What happened next is still a mystery. Zhou Tong’s conclusion to this situation is that Bitcoin users and companies need to take their personal security seriously.
Due to these attacks, Zhou Tong’s reputation collapsed overnight. His name became one of the earliest viral Bitcoin memes. In the OG community, “Zhou Tonged” is still used to describe investors who were robbed and deceived.
Zhou Tong’s last move was to invest 1,000 Bitcoins in the rare Casascius coins. In fact, he owns one of the only three rare collectibles, which are now worth over $60 million. Then, he left the industry…
Hacker attacks on exchanges continue to this day. That’s why serious Bitcoin investors are advised to use hardware wallets or multi-signature custody. It is estimated that over 1 million Bitcoins, worth $65 billion, have been lost in exchange hacks. Based on the total number of lost Bitcoins, Bitcoinica is the third largest loss in history.
Today, Bitcoinica still serves as a warning, reminding people of the 68 billion dollars worth of lost Bitcoins. Users should take their custody seriously, use multi-signature security measures, and learn from the Bitcoinica incident.