In an S-1 filing with the SEC, the Winklevoss Bitcoin Trust, headed by Cameron and Tyler Winklevoss, said it will sell around $20 million worth of shares, which will each represent a fraction of a single bitcoin, the digital currency the twins have invested in.
According to the S-1 filing:
The investment objective of the Trust is for the Shares to reflect the performance of the Blended Bitcoin Price of Bitcoins, less the expenses of the Trust’s operations. The Shares are designed for investors seeking a cost-effective and convenient means to gain exposure to Bitcoins with minimal credit risk.[...]The Sponsor believes the Trust to be the first exchange-traded product that seeks to track the price of a Digital Math-Based Asset such as Bitcoins. Some of the distinguishing features of the Trust and its Shares include directly holding Bitcoins using the Trust’s proprietary Security System, storage of the Trust’s Bitcoins in various premises of the Trustee located in the United States, the experience of the Sponsor’s management team, the use of as custodian, third-party vault inspection and the use of a security consultant to advise on upgrades to the Trust’s technology and custody procedure.
The S-1 filing listed the following risks of dealing in Bitcoin, among others:
- Currently, there is relatively small use of Bitcoins in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in the Shares.
- The administrators of the Bitcoin Network’s source code could propose amendments to the Bitcoin Network’s protocols and software that, if accepted and authorized by the Bitcoin Network’s community, could adversely affect an investment in the Shares.
- If a malicious actor or botnet obtains control in excess of 50 percent of the processing power active on the Bitcoin Network, such actor or botnet could manipulate the source code of the Bitcoin Network or the Blockchain in a manner that adversely affects an investment in the Shares or the ability of the Trust to operate.
- As the number of Bitcoins awarded for solving a block in the Blockchain decreases, the incentive for miners to continue to contribute processing power to the Bitcoin Network will transition from a set reward to transaction fees. The requirement from miners of higher transaction fees in exchange for recording transactions in the Blockchain may decrease demand for Bitcoins and prevent the expansion of the Bitcoin Network to retail merchants and commercial businesses, resulting in a reduction in the Blended Bitcoin Price.
- If the award of Bitcoins for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners, miners may cease expending processing power to solve blocks and confirmations of transactions on the Blockchain could be slowed. A reduction in the processing power expended by miners on the Bitcoin Network could increase the likelihood of a malicious actor or botnet obtaining control in excess of 50 percent of the processing power active on the Bitcoin Network or the Blockchain, permitting such actor or botnet to manipulate the source code of the Bitcoin Network in a manner that adversely affects an investment in the Shares or the ability of the Trust to operate.
- The acceptance of Bitcoin Network software patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in the Bitcoin Network could result in a “fork” in the Blockchain, resulting in the operation of two separate networks until such time as the forked Blockchains are merged. The temporary or permanent existence of forked Blockchains could adversely impact an investment in the Shares.
- Intellectual property rights claims may adversely affect the operation of the Bitcoin Network.