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Annals of Technology

Pumpers, Dumpers, and Shills: The Skycoin Saga

The cryptocurrency promised to change the world and make its users
rich in the process. Then it began to fall apart.

By Morgen Peck

August 18, 2021

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A party in top of a cloud where coins are falling down
Illustration by Nata Metlukh

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On an April afternoon in 2011, a twenty-seven-year-old tech
entrepreneur named Bradford Stephens arrived at a stucco bungalow
near the canals of Venice, California. He had recently started a new
data-analytics company, and had come to speak with a coder named
Brandon Smietana, whom he hoped would get involved. Stephens had
already met Smietana online, where he uses the handle Synth, and
where he often debated minute points about math and programming. When
Stephens and Ryan Rawson, an employee who tagged along, arrived,
Smietana invited them into a carpeted den. A computer sat on a table,
its casings removed to reveal a tangle of circuits; a sleeping bag
lay on a sofa. Smietana was in his early twenties, with dark hair and
a youthful face. Rawson told me, "He had the air of this mad
scientist couch surfing." Stephens pitched his new company, but got
no traction. Smietana had turned his attention to a new technology:
cryptocurrency. "The only people who have to work for money are the
people who cannot create it or print it out of thin air," he told
them.

The first cryptocurrency, Bitcoin--released in 2009 by an anonymous
programmer (or a group of them) called Satoshi Nakamoto--was a feat of
computational brilliance. A bitcoin is an abstract unit of value that
people track and spend with digital wallets. When someone contributes
her computer's power to process Bitcoin transactions, the computer
also races to solve an equation, a process called "mining." Each
solution that meets certain criteria mints new coins. The number
created decreases by half every four years or so--an event known as
the Halvening--which keeps the supply limited, guarding against
inflation. The whole economy is maintained on a blockchain, a shared
ledger that keeps a tally of every Bitcoin transaction. As miners add
transactions, the Bitcoin software coordinates and finalizes their
contributions, making the ledger transparent and unchangeable and the
system nearly impossible for governments to shut down.

Morgen Peck is a freelance journalist who has covered cryptocurrency
since 2012.
More:CryptocurrencyBitcoinEntrepreneursFraudMoneyTechnology

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