16-Year-Old Chinese Prodigy Loses $7.2 Billion in Bitcoin Dramatically

In 2010, Zhou Tong (name transliterated), a 16-year-old prodigy and programmer from China, bought Bitcoin for $10. Self-taught, he created the cryptocurrency margin trading platform Bitcoinica in just four days, shaking up the market. Unfortunately, the platform suffered three successive hacker attacks, ultimately losing 101,554 Bitcoins, valued at approximately $7.2 billion today.

On Sunday, May 19, overseas crypto influencer Rizzo revealed this astonishing story. Zhou Tong, fascinated by the idea of a currency that could be sent globally, bought Bitcoin for $10 at the age of 16. He introduced Bitcoin to all his friends because he thought it was "cool."

Back in 2011, buying Bitcoin was quite difficult, time-consuming, and reliant on intermediaries. The largest exchange at the time, Mt. Gox, was often offline. Shortly after Zhou bought his Bitcoins, Mt. Gox experienced a flash crash, dropping Bitcoin's price to $0.01.

Undeterred by the price drop, Zhou, a self-taught programmer, established Bitcoinica in just four days. Unlike other Bitcoin exchanges, Bitcoinica allowed margin trading, enabling traders and miners to speculate on future prices.

At that time, users could immediately bet up to 50 Bitcoins.

Following its launch, Bitcoinica's trading volume soared, reaching $40 million per month, second only to Mt. Gox. Zhou earned $10,000, equivalent to about 2,000 Bitcoins, in the first two weeks.

However, Bitcoinica soon faced some challenges. Some users were concerned about Zhou's young age, while others doubted his experience. As Bitcoin's value increased, users became increasingly focused on the security measures the exchange took to protect their Bitcoins.

Bitcoinica continued trading hundreds of thousands of Bitcoins each month. At the end of 2011, when investors approached him, Zhou quickly sold the company. He was still in school and busy with exams at the time.

The new owner, Wendon Group, had some doubts about Zhou's work. They sought help from experienced Bitcoin developers to audit the exchange. One of them was Amir Taaki, an outspoken hacker activist passionate about WikiLeaks and 3D-printed guns.

Wendon Group aimed to show Zhou and Amir they were serious by making substantial investments. They even spent $1 million to acquire the highly coveted domain, http://Bitcoin.com.

However, Bitcoinica soon fell victim to hackers. In March 2012, it lost 43,554 Bitcoins, causing an uproar and making the cover of the second issue of Bitcoin Magazine.

Things worsened when Bitcoinica's servers were hacked twice more in May and July of the same year, with hackers stealing an additional 58,000 Bitcoins. At that time, there were no hardware wallets or multi-signature protections; hackers only needed to reset a few passwords.

Who was responsible for the attacks? Zhou, Wendon Group, or Amir? Users didn't care; they wanted their lost Bitcoins back. Users like Rogerkver lost over 24,000 Bitcoins.

Today, the situation remains a mystery. Zhou summarized the ordeal by stating that Bitcoin users and companies must take their security seriously.

These attacks ruined Zhou's reputation overnight. His name became one of the earliest viral Bitcoin memes. Among old-timers (OGs), the term "Zhou Tonged" is still used to describe investors who have been robbed or scammed.

Zhou's final act was to invest 1,000 Bitcoins in rare Casascius coins, owning three of the only six in existence, now worth over $60 million. He then left the cryptocurrency industry.

Exchange hacks continue to this day, which is why serious Bitcoin investors are advised to use hardware wallets or multi-signature custodians. It's estimated that over 1 million Bitcoins, worth $65 billion, have been lost to exchange hacks. By the number of lost Bitcoins, Bitcoinica represents the third largest loss in history.

Today, Bitcoinica remains a cautionary tale, reminding people of the $6.8 billion worth of lost Bitcoins. Users should take their custody seriously, use multi-signature security measures, and learn from the Bitcoinica incident.