16-year-old Zhou Tong, a self-taught programming prodigy from China, purchased Bitcoin for $10 in 2010. In just four days, he built the first ever cryptocurrency margin trading platform, Bitcoinica. The exchange quickly gained popularity, reaching a monthly trading volume of $40 million, second only to Mt. Gox at the time. Unfortunately, Bitcoinica suffered three consecutive hacking attacks and ultimately lost 101,554 BTC.
Recently, a foreign blogger named Rizzo from X platform shared this legendary story. PANews has translated the original article, which details the process of how this teenager lost 102,000 BTC, now worth $6.8 billion, a story full of drama.
At the age of 16, Chinese teenager Zhou Tong purchased Bitcoin for $10 and was intrigued by the idea of a currency that could be sent globally. He introduced Bitcoin to all his friends because he thought it was “cool.”
Back in 2011, buying Bitcoin was a challenging task that required time and intermediaries. The largest exchange at the time, Mt. Gox, was often offline. Shortly after Zhou Tong bought Bitcoin, Mt. Gox even experienced a flash crash, with the price dropping to $0.01.
However, Zhou Tong was not discouraged by the price drop. In just four days, this self-taught programmer built an exchange called Bitcoinica. It was not just another Bitcoin exchange; it allowed margin trading, enabling traders and miners to speculate on future prices. Users could immediately bet up to 50 BTC.
After launching, Bitcoinica’s trading volume skyrocketed, reaching a monthly trading volume of $40 million, second only to Mt. Gox. Zhou Tong himself made $10,000 in the first two weeks, equivalent to around 2,000 BTC.
However, Bitcoinica soon faced obstacles. Some users were concerned about Zhou Tong’s young age, while others worried about his lack of experience. As Bitcoin’s value increased, users became more concerned about the security measures taken by the exchange to protect their Bitcoin.
Despite the challenges, Bitcoinica continued to trade hundreds of thousands of BTC each month. But by the end of 2011, when investors found him, Zhou Tong quickly sold the company. He was still in school and busy with exams.
The new owners, Wendon Group, had some doubts about Zhou Tong’s work. They sought the help of experienced Bitcoin developers to conduct a proper audit of the exchange. One of them was Amir Taaki, an outspoken activist involved in hacking activities and passionate about WikiLeaks and 3D-printed guns.
Wendon Group wanted to prove to Zhou Tong and Amir that they were serious, so they made a significant investment. They even spent $1 million to purchase the highly sought-after domain name: http://Bitcoin.com.
However, Bitcoinica soon fell victim to hacking attacks. In March 2012, they lost 43,554 BTC. This loss caused a huge uproar and was permanently etched 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 hacked again, resulting in the theft of 58,000 BTC. At that time, there were no hardware wallets or multi-signature solutions; all the hackers had to do was reset a few passwords. (Note: The exact number of lost BTC mentioned in the original X platform post is 99,000, or an incomplete calculation.)
Who was responsible for these consecutive attacks? Zhou Tong? Wendon Group? Or Amir? Users didn’t care; they wanted to recover their lost Bitcoin. Users like @rogerkver lost over 24,000 BTC.
Today, what exactly happened remains a mystery. Zhou Tong’s conclusion from this situation is that Bitcoin users and businesses need to take their personal security seriously.
Due to these attack incidents, Zhou Tong’s reputation collapsed overnight. His name became one of the earliest viral Bitcoin memes. In the OG community, the term “Zhou Tonged” is still used to describe investors who were robbed and deceived.
Zhou Tong’s final move was to invest 1,000 BTC in rare Casascius coins. In fact, he owns one of only three of these rare collectibles, now worth over $60 million. Then, he left the industry…
Exchange hacks continue to this day. This is why serious Bitcoin investors are advised to use hardware wallets or multi-signature custody. It is estimated that over 1 million BTC, worth $65 billion, has been lost in exchange hacks. Based on the total number of lost BTC, Bitcoinica is the third-largest loss in history.
Today, Bitcoinica still serves as a warning, reminding people of the 102,000 BTC now worth $6.8 billion that was lost. Users should take their custody seriously, use multi-signature security measures, and learn from the Bitcoinica incident.
This article was originally published on PANews.
