Bitcoin's made some people very rich indeed - at least on paper.
I've made an extraordinary amount of money.
For some investors here, it's a roller-coaster
ride, as values plunge.
My son says, "Hurry up and become a Bitcoin millionaire, mum!"
We discover the power behind Bitcoin.
Every single one of these is a desktop computer.
There are thousands of them.
But is this all just some media hype?
It's human nature to jump on the bandwagon.
It's what every great bubble is made
of and they are calling this the greatest bubble of all time.
And behind the hype, we uncover a plain old-fashioned scam.
Show me the money!
Tonight on Panorama: Who Wants To Be A Bitcoin Millionaire?
Pounds, euros, dollars - they're all currencies
that we know and we recognise.
We might think we could do with a bit more,
but at least we know what money is and how money works.
We keep it in banks and we spend it.
But now there's a new currency which has got everyone talking,
and it's very different.
It's called Bitcoin.
Have you heard of it?
I don't really understand it.
But yes, I have heard about it.
I do and I wish I had got in on it about a decade ago.
That would have been nice.
I know some people are making a lot of money and some people aren't.
I do also think they are a load of nonsense and it's just a con.
I've been following Bitcoin for the past five years,
and even now, there's still a lot of confusion about it.
For one thing, it might be called Bitcoin,
but there aren't actually any physical coins.
Or notes. You can't hold it in your hand.
Bitcoin is a new type of currency called a cryptocurrency,
and it only exists digitally.
Now, actually, there are quite a few types
of cryptocurrencies,
but they all have one thing in common.
They operate completely separately from the normal banking system.
When you buy something with cryptocurrency,
the banks don't handle or check the payment.
In fact, they don't even know about them at all.
There are shops that accept cryptocurrency,
where instead of using your bank card to take money
from your bank account, you scan your phone instead.
Transaction confirmed.
Thank you.
But the reason you've probably heard of Bitcoin is because its value has
gone through the roof.
Even with its recent crashing price, if you'd bought £50 worth of Bitcoin
at the beginning of 2011, it would now be worth more
than £1 million.
I'm going to find out if we've all missed the boat or whether it's
still possible to become a Bitcoin millionaire.
It started as something for computer geeks, but it's now moved
into the mainstream.
This is Millie.
She's a Newcastle mum with three kids and four pugs.
She's been buying and selling books on the side for
almost 15 years.
But now her new hobby is investing in cryptocurrency.
30,000 books I had to hand-sort.
Yeah, it took me a whole year to do it.
Considerably more hard work than dabbling in bitcoin.
My son says, "Don't do the books anymore.
"Hurry up and become a Bitcoin millionaire, mum!"
She heard about it before Christmas and she's been dabbling
for the past couple of months, and has also earned commission
getting family members to buy, too.
What I'm doing at the moment is I'm going to buy
like £100 worth of bitcoin.
Oh, my God, it's like my guilty pleasure.
I'm sneaking a peek all day long.
I bought Bitcoin in the hope that it might improve my life.
If I lose my four or five hundred quid, c'est la vie.
All over the country, little pockets of people
are starting to play around with cryptocurrency.
Over the last few months, it's amazing how bitcoin has moved
into the mainstream.
Tabloid newspapers are doing special features about the latest
cryptocurrencies and which one you should buy.
This has gone very quickly from a tiny, niche little nerdy tech
that a tiny number of people cared about to something that the ordinary
person on the street is suddenly fascinated by.
But while Millie is careful not to invest more than she can afford
to lose, others aren't.
The staggering rise in the value of many cryptocurrencies
has driven some people to take huge risks, even taking out
mortgages to cash in on what they see as a gold rush.
We have begun to ask questions and look at it.
But I don't think anyone in British politics or the regulation system
in our country is going at the right speed, bearing in mind what has
happened within cryptocurrency over the last few months.
Now we seem to have a real live situation.
But Bitcoin's value has gone down as well as up.
If you'd invested £50 just before Christmas,
you'd now have £20.
These recent price crashes have caused some authorities to act.
Just last week, banking giant Lloyds banned its customers
from buying cryptocurrency with their credit cards.
They're worried about people racking up debt.
The idea behind cryptocurrency is that it is a way of storing
money and making purchases without involving the banks.
But remember, the banks don't just hold our money,
they also keep a check on who has paid what.
They are a trusted central point.
So how do you do banking without the banks?
When you want to buy something normally
using your normal bank card, this is what happens.
I give my card details to the shop.
The shop asks the bank if I'm good for the money.
The bank checks its records to see if I have got enough in my account.
If I do, it lets the shop know, it updates its records to show
the movement of money from my account to the shop's.
Oh, and it takes a little cut for its trouble.
Now, if you wanted to remove the bank from that system,
who else would you trust to keep those records, and not alter them
or cheat in any way?
I wouldn't trust you.
I wouldn't trust you!
In fact, I wouldn't trust any single person but I might trust everyone.
The idea is you don't have a central record of transactions.
Instead, you distribute many, many copies of this
ledger around the world.
Each owner of each copy records every transaction.
So there's no way that a forged transaction can make it in.
If I try to alter a ledger, it won't match all the other copies
and it gets rejected.
So to buy something using cryptocurrency,
I give the shop my details.
The shop asks all the book-keepers if I'm good for the money.
The book-keepers all check their records to see if I have enough.
If I do, they tell the shop and then all update their records to show
the movement of money.
Oh, and one of them, at random, will be given a reward of some
newly-created cryptocurrency.
This is how cryptocurrencies work.
And remember, all these book-keepers, all these
ledgers are not people.
They are computers.
Lots of computers.
And I mean a lot.
That random reward for being a book-keeper is an important point.
It was the original incentive for people to use their home
computers to help keep the books.
But I feel the scale of these places is tipping the odds away
from average investors.
Every single one of these is a desktop computer.
There are thousands of them all wired together and all doing
one thing - book-keeping for cryptocurrency.
And because every so often they get that reward of new cryptocurrency,
they call this operation mining.
Now this particular mine contains 20,000 machines,
a very expensive set-up.
As well as the cost of the hardware,
running an outfit of this costs a lot in electricity.
That's not just electricity to power the computers,
but also to power the cooling systems to stop this
lot overheating.
That's why they've put this one in Iceland.
Like a lot of mass computing operations,
north is best.
It means you don't need to run energy-hungry air chillers.
You just suck in that freezing air from outside.
Oh, and the electricity here is geothermal and really cheap,
thanks to the volcanic activity just underground.
Despite all of that, though, this place spends more
than EUR1 million a month on electricity.
So you can imagine how much money they're making.
It's absolutely remarkable that you have these banks of computers,
warehouses full of them all over the world.
All these computers and all the amazing things they could be
doing and all the computing power that could be spent on all sorts
of tasks is being dedicated solely to this one peculiar job
of mining a cryptocurrency.
It's absolutely ridiculous in some ways that this
is what we are using our computers for.
The higher the price of cryptocurrencies,
the more money the miners stand to make and the more mines
spring up.
Thanks to more and more press coverage
and more and more chatter on social media, rumours
of a gold rush have spread.
And in any gold rush, there will be winners and losers.
I know many people are still going to invest,
I understand that.
It's not because you're stupid.
It's humas nature.
There is this incredible thing called a fear of missing out, right?
And it's just such a powerful thing.
And wherever there's the promise of gold, there's also those
who want to exploit the prospectors.
This might look like a rock concert, but it is in fact a recruitment
drive for a cryptocurrency called OneCoin.
Based
Based on
Based on the
Based on the success
Based on the success of
Based on the success of Bitcoin,
Based on the success of Bitcoin, but
better,
better, smarter
better, smarter and
better, smarter and more
better, smarter and more innovative.
OneCoin, we're told, will make us rich beyond our wildest dreams.
Layla got interested in cryptocurrency after a trusted
friend, and OneCoin salesman, asked her along to
one of the meetings.
It took me 20 years to save up this money.
I made lots of sacrifices with two jobs while studying,
and the aim was ideally to get on the property ladder,
use it for my marriage, and also to help my mother
and my brother.
Layla attended a seminar similar to this one 18 months ago in London.
It encouraged people to sign up to a scheme to help spread the word
about the OneCoin cryptocurrency.
So Panorama decided to go undercover to see the hard sell for ourselves.
We wanted to investigate how unsuspecting investors
are lured by OneCoin to part with their hard-earned cash.
Layla felt pressured by the salesman.
Handing over £32,500 of her savings in just one day.
He then went on to telling me there was a guaranteed return
of more than £400,000 and I was making the best
decision of my life.
I then told my mum, my sister and that totalled up
to £56,000.
Listening to the sales pitch, you can see why the family
thought they'd struck gold.
What do you earn a year?
Six figures is good, right?
We make 35,000 a week.
We should have listened to you a long time ago
and if you did you'd be a multi millionaire.
You can make millions of pounds and very quickly.
Not so for Layla though.
Shortly afterwards she discovered she'd lost access to all her money.
And that's when I realised that I had just made the poorest
decision in my life.
Last month, the Bulgarian authorities raided
OneCoin's headquarters
and shut down their servers.
It is one of many investigations from around the globe.
Several of OneCoin's representatives were arrested in Britain.
In a statement to Panorama, OneCoin told us they have
offered full cooperation and are collaborating
with all authorities to finalize the case as soon as possible.
However, they claim that Layla had gathered enough information to take
an informed decision.
And that she had received, activated and used her accounts.
Therefore we consider that there is no legal reason
for claiming a refund from the company.
Today, Layla is shattered.
She's lost her life savings in what is essentially
an old fashioned pyramid scam, using cyrptocurrency hype.
And she's not the only victim.
The authorities say they need more help from legislators to bring
this area under control.
We need the help of regulators, we need the help of legislators,
particularly to crack down on these high valued investment scams
and you know this trend of fools' gold effectively that is offered
to people as they seek to cash in on the Bitcoin frenzy
and are just scams - perfect scams and because it's not
regulated there is no means by which the investor can make
an informed decision as to if it's safe to invest my money in this.
I think that to date cryptocurrency has not been on Parliament's
agenda or on the agenda in Whitehall that much.
I think probably hand on heart we have all been too slow,
but the opportunity is not lost, and we should get
on with the job now.
As the authorities struggle with regulation, the most powerful
online platform has decided to act.
Facebook has banned adverts that promote cryptocurrency and these
recruitment events - these so-called
Initial Coin Offerings.
But away from some out-and-out cons, there are other ways that
cryptocurrencies can be used to subvert the system.
Remember how cryptocurrencies bypass the banks?
Well, that means that your transactions are very,
very hard for the authorities to regulate or trace.
So if you happen to have a few million that's difficult
to move around the world, Bitcoin could be the
perfect system for you.
So, here we have a beautiful property, it's 4,800 square feet.
The asking prices is 17.5 million pounds and this property
is available to be acquired in Bitcoin, in fact that's
the prefered method for payment.
Eleesa Dadiani is a London art gallery owner who brokers deals
between ultra-rich sellers and ultra-rich buyers.
Fine art, F1 cars, precious stones, bullion, fine wine, bloodstock,
thoroughbred horses...
all the normal categories.
So we have a new breed of high net-worth individual who've made
a lot of money with cryptocurrency.
So now we have a problem.
How do we cash in these holdings?
So there's another way of doing things.
Move from crypto into tangible assets.
I mean it's a great problem to have.
And this is where the unregulated nature of cryptocurrency
really comes into its own.
One of the reasons to not use conventional currency
is because you can't.
A lot of clients are from China, Russia...
And these are people who are willing to put a lot of money
into the UK market for example.
How do you move this money from a sanctioned nation
like Russia, for example?
How do you move this money here?
If you are under the sanctioned domain, you will have probably
had your money frozen at some point, you have banks controlling
what and how you spend your money, transactions being flagged up
even though there's nothing wrong with them but just
because they don't look like your normal transactions.
You're probably going to acquire cryptos, and then very easily
transcend that handicap.
Eleesa stresses she does stringent checks on clients to make
sure their money is clean before she deals with them.
Others are not as scrupulous.
One of the things around crypto currencies is that they have come
along at a time when anti-money laundering and know your client
regulations has reduced the supply of legitimate money to the illegal
economy and so we have seen a substitute coming
through in the form of Bitcoin.
This ability to make payments, which avoid going through the banks,
is what really kick-started Bitcoin.
By making it the digital currency of choice for criminals.
Since its earliest days, websites on the darknet have allowed
the trade of illegal goods like drugs and weapons,
with Bitcoin considered a safe way to make payments and even pass funds
to terrorist organisations.
But it's the use of cryptocurrencies to hide money earned
through crime which is particularly worrying authorities.
There are three to four billion pounds worth of dirty money
being laundered each year in Europe through virtual currencies.
It's still a small proportion of the overall amount,
but it's quickly growing.
And of course because this is an unregulated area,
highly anonymised, it's very difficult for the police
in most cases to identify who is actually cashing this out.
But we're also seeing a trend where drug money
is being converted into Bitcoins - cash buying Bitcoins and then
the criminals distributing that money through multiple accounts used
by individuals that are not seemingly connected
with a criminal organisation.
There are then darker sides to Bitcoin and virtual currencies,
but there is also a lot of money to be made - if you get
your timing right.
I'm travelling to the heart of this new movement - San Francisco.
In the 60's, this city brought the world hippy culture
and free thinking ideas.
Today, it's an anti-bank revolution the people here want.
And these early adopters are far more interested in cold hard
cash than free love.
I've come to the Cryptocastle - a New Age commune of
which Jeremy Gardner is the king.
So tell them to look at the volatility.
It's something you google.
Look at Bitcoin.
Now "The Castle" is actually a three storey house
which this 25-year-old sublets to other cryptocurrency enthusiasts.
I am surprised there are so many bunk beds in a house that
accommodates so many millionaires?
The millionaires, once they make their millions, move out.
Right.
In 2013, he put all his savings into cryptocurrency,
and after four years of growth...
I've made an extraordinary amount of money relative
to what I ever conceived.
To me, crypto assets are like social security for millennials.
In theory, young people who invest today have the potential to see
a lot of their wealth being generated just
by holding these crypto assets as they appreciate in value over
the next years and decades.
It's an investment opportunity of a lifetime.
I've lived through crashes in the value of these assets before
and if my net worth dropped 95% tomorrow, it would have no
effect on my happiness.
It strikes me that even if it drops 95% you are still
going to be very wealthy.
I'd still be fine.
You know I don't want to come across as too obnoxious.
Hang around with these guys for just a little while and you do get
the sense that something really is happening here.
They talk a good game.
But Jeremy is only a Bitcoin millionaire.
Next stop, a billionaire - recently named by Forbes as one
of the richest cryptocurrency investors on earth and one who truly
believes it will change everything.
This is the future.
You're not going to use pounds and dollars and euros
and whatever anymore.
In five years, you're going to walk into a Starbucks and you're
going to try and pay the pounds or dollars or euros
and he or she will laugh at you.
He or she will laugh at you and they'll say,
wait a minute, don't you have any Bitcoin?
Tim Draper owns hundreds of millions of dollars worth
of cryptocurrency himself - so maybe it is in his interest
to talk up its value.
Mind you, back in 2014, he did predict, almost to the month,
that the value of one Bitcoin would hit $10,000.
But now he accepts that that value may be out of control.
Bang the gong.
It could easily go to one million or 2000 per Bitcoin in any given
period of time because depending on people's perception and how
excited they are and how the press portrays it and how governments
push it around.
This is the greatest thing that's happened to the world
economy in centuries.
Depending on who you talk to, you get two very different
visions of cryptocurrency.
It's either the future of money, and you should grab it
and get in early...
Or...
This is something to me which is a classic bubble.
It's an irrational movement in prices and ultimately I think
investors who put money into this risk losing a lot.
The process of building a bubble means that individual investors have
to have almost a religious faith in the future value
of the crypto currency.
And because they believe this is going to unlock
riches in the future, they are prepared to pay more
and more money for that today.
And the bubble keeps on inflating.
At some point either the price becomes too absurd or circumstances
change or it's revealed that there is not going to be
any fantastic value in the future and the bubble
will come crashing down.
The hype and excitement surrounding the promise of riches is all too
familiar to this guy.
The key to making money is to position yourself
before the settlement.
Played by Leonardo DiCaprio in the film The Wolf of Wall Street,
Jordan Belfort made a fortune from persuading ordinary people
to invest in shares he promised would inflate in value,
before the scheme collapsed and he pleaded guilty
to fraud charges in 1999.
If anyone knows about cons and bubbles, it's Belfort,
and he doesn't see Bitcoin - or any cryptocurrency - ending well.
So what would the Wolf have made of Bitcoin?
God, if I had Bitcoin back when that was, thank god I didn't.
Right, I would have made $50 billion seriously, this is so,
it's almost a mirror image of what was happening at my company.
Belfort says he recognises all the signs of market manipulation.
They're out there putting out these sort of false narratives and these
half truths that if you read them or hear them and don't fully
understand the big picture, it is very easy to think
that they are right, that this thing is going to the stars,
it's going to be the next big thing and that you throw your money in...
People are mortgaging their homes, people are taking loans out
on their credit cards, they're putting their last
dollars into Bitcoin.
You know the ones at the end of the day that typically get
slaughtered the most are the average mums and dads.
So far, Millie has lost a small amount of money on her trades
but she is still hoping for good returns.
I'd like to buy a house, I'd like to leave my
children lots of money.
I think I want all the things that other people want,
just the normal stuff, enough money to open
a pug sanctuary!
But maybe the idea of becoming a Bitcoin millionaire
is a perversion of the real, original intention of Bitcoin -
to reinvent money - to move power away from the few,
and give it to the many.
These currencies are here to stay.
They might fall in value, they might rise in value
but the underlying tech is not going anywhere and more
and more people are going to start using them.
And I don't think governments are ready for that yet.
The people behind cryptocurrencies designed an almost perfect way
to wrest control from the financial system - and governments.
But I wonder if they expected their model to be
jumped on by investors, scammers, and criminals.
And I wonder if they thought they could escape the grip
of the financial authorities that they so railed against.
As those authorities start to awake, the battle to impose
control on cryptocurrencies is only just beginning.