Mark Zuckerberg is five years behind his nemeses, the Winklevoss twins, on cryptocurrency

“Should we throw him a welcome party?”
“Should we throw him a welcome party?”
Image: Reuters/Lucas Jackson
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Buried at the bottom of Mark Zuckerberg’s new year’s resolution post yesterday was a promise to study cryptocurrencies and to figure out the best way to use them in Facebook’s services. He’s only five and a half years behind his longtime antagonists, the Winklevoss twins, who have become cryptocurrency billionaires since buying their first bitcoin in the summer of 2012.

A quick recap of the Winklevoss-Zuckberg relationship:

In the winter of 2003, Tyler and Cameron Winklevoss were undergraduates at Harvard trying to launch a dating website for students at the university. They hired a sophomore named Mark Zuckerberg to help them code parts of it. Zuckerberg signed on. That fateful meeting meeting led to the creation of the world’s biggest social network, Facebook; an Oscar-winning film by Aaron Sorkin; and an acrimonious legal battle that turned the Winklevosses (sometimes referred to as Winklevii) into multi-millionaires.

The Winklevosses got $20 million in cash and Facebook stock as part of their settlement, according to the New York Times. That stake was worth over $200 million when Facebook went public in 2012. The twins used some of their Facebook millions to buy into a fringe phenomenon that was gripping the imagination of techno-libertarians, who claimed it was a new type of digital money: bitcoin.

The Winklevosses bought up 1% of all bitcoins in circulation at the time. That would have cost them around $1.2 million, since bitcoin was trading at about $10 a coin then. Last December, that stake was worth $1.3 billion (paywall)—a thousandfold return in five years. The twins also took a stake in BitInstant, an early bitcoin exchange that ended with its founder in prison, and now operate Gemini, an exchange  that’s important enough to be used by the Chicago Board Options Exchange to set bitcoin futures prices.

Zuckerberg will take his first steps into a technology where the Winklevosses are old hands, and where fortunes rivalling his own have been generated seemingly overnight. Take Chris Larsen, a co-founder of a cryptocurrency called ripple, whose holdings of the crypto coin were worth $37.3 billion a few days ago, making him the 15th richest American, according to Forbes.

Of course, that’s still 10 spots under and about $40 billion short of Zuckerberg’s net worth, but it illustrates the stark divide between the cryptomarkets and traditional capital markets, where a big-money IPO is no longer the only route to immense wealth. Zuckerberg will soon discover a market that is far more volatile and far less regulated than the tech scene he rules.

And the Winklevosses will be right there waiting for him.