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Peter Thiel
Entrepreneur Peter Thiel speaks during the final day of the Republican National Convention in Cleveland, Thursday, July 21, 2016. (AP Photo/J. Scott Applewhite)

The founder of PayPal just made a massive bet on Bitcoin


Founders Fund, a venture-capital firm co-founded by Silicon Valley financier Peter Thiel, just made a huge bet on Bitcoin.

The firm has acquired hundreds of millions of dollars worth of the cryptocurrency spread across several of its most recent funds, according to the Wall Street Journal. One of the funds started investing in Bitcoin as recently as mid-2017. Founders between $15 to $20 million, which is now reportedly worth hundreds of millions of dollars thanks to the cryptocurrency's remarkably profitable year in 2017.

Thiel is one of Silicon Valley's most notable names, and Bitcoin isn't his first foray into game-changing finance. He was one of the co-founders of the wildly successful payment site PayPal, which went public in 2002. Thiel also was an early investor in Facebook. Founders has $3 billion to its name, and holds interests in several breakthrough companies such as Airbnb, SpaceX and Lyft.

How Bitcoin Works Under the Hood

Bitcoin became a household name last year when its value skyrocketed from about $1,000 in January to nearly $20,000. Today, it is trading at around $16,000. It went live in January 2009 and was created by an enigmatic person or persons who go by the name Satoshi Nakamoto. No one knows Nakamoto's true identity to this day.

Bitcoin is unique because it is the first digital currency that is completely decentralized, meaning it has no government authority or central bank overseeing it. Instead, it relies purely on a network of peer-to-peer transactions, which, unlike other transactions, do not require an intermediary. It is unclear why Thiel and his partners made the decision to make such a heavy investment in Bitcoin, though he is known to harbor strong Libertarian views. Bitcoin's decentralized nature and anonymous transactions have made it popular among those who don't like leaving too many footprints.

Few major investors have made a similar plunge into Bitcoin, despite its tremendous recent success. Their reasons range from the cryptocurrency's volatility to cybersecurity concerns. James Dimon, co-chief exective of JPMorgan Chase waived it off as a "fraud." Others have warned its just another bubble, much like the housing market that contributed to the 2008 financial crisis.

Critics have reason to be concerned. Mt. Gox, formerly the top Bitcoin exchange in the world, declared bankruptcy in February 2014 after it lost approximately 850,000 bitcoins, valued at $450 million at the time. Approximately 200,000 were eventually found, but not before tanking Bitcoin's value. It's still unclear where the remainder is located, though Jonathan Levin, co-founder of the blockchain surveillance firm Chainanalysis, told Congress last year that the company has located them.

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