Episode 753: Blockchain Gang

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Charlie Shrem had a prison epiphany. Instead of using packets of mackerel to buy and sell things, inmates should use something more like the digital currency Bitcoin. He even came up with a way it could work in prison, never mind that it was Bitcoin that got him arrested in the first place.

Before getting locked up, Shrem had run the company BitInstant. BitInstant made buying Bitcoin as easy as purchasing a money order. By the time he was 22, Shrem had hired dozens of employees, found a brand new office in Manhattan, and was processing a million dollars a day.

Shrem though ended up helping some of the wrong people trade dollars for Bitcoin: buyers and sellers of illegal drugs on the website Silk Road. As he was getting off a plane from Europe to New York, Shrem was arrested. He was convicted of aiding and abetting an unlicensed money transmitter, and sentenced to two years in federal prison .

While Shrem was behind bars he began to see Bitcoin in a new light. So did the rest of the world. Now he's got a new idea, and he's trying to convince investors to give him a second chance. It's not about Bitcoin for him anymore. It's about the technology behind Bitcoin: Blockchain.

Charlie Shrem's journey to prison and back out again is a parable for the transformation of Bitcoin over the last five years. Shrem and Bitcoin have gone from being idealists to outlaws to trying to make it as respectable citizens.

On today's show, a thought experiment involving packets of mackerel as a prison currency and a story about how a libertarian's dream technology was taken over by big banks and stock traders.

Music: "Funk Fathers" and the Bitinstant Jingle. Find us: Twitter/ Facebook.

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Special thanks to Wall & Broadcast, the podcast where we first heard Charlie Shrem's story.

Note: This episode has been corrected. Charlie Shrem was convicted of aiding and abetting an unlicensed money transmission business, not of money laundering.