Bitcoin in Budapest: Zombies, Survivalists, and $60 Million Pizza
10.09.2018

In 2010, Barnabás Debreczeni was worried about zombies.

Living in Budapest, the Hungarian saw a bleak future where, as he now puts it, “human infrastructure would fall apart, and people start killing each other for food.” So he decided to do something about it. Along with a dozen or so buddies, Debreczeni helped create a “zombie-proof farm” in the mountains of Mátra, 60 miles northwest of Budapest. They started bio-intensive farming. Some of the guys moved to the mountains full-time, and some remained in Budapest, living a normal life, but took twice-a-month trips to Mátra to work the land “until the zombies come.”

Debreczeni is a tall guy with long hair and a beard, and he wears a blazer over a t-shirt. He says the word “zombie” with a straight face, and with his intense, Jared Leto-like stare, for a second I think he’s serious. And he might be. Yet “zombie apocalypse” is his shorthand for a global catastrophe like a financial meltdown, nuclear war, or other such cataclysm. He figured that if they survived this apocalypse, a new community would form. Some people would cook, some would dig ditches, some would build houses. How to structure this community? How to create a civilization from scratch? “We decided not to use Communism,” Debreczeni says, “because that failed many times.”

The Zombie Farm would have a capitalist-style economy, and for this they would need a currency. They needed something that would not depend upon the outside world, because the outside world, after all, would be overrun by zombies. First they set up something called a Local Exchange Trading System, or LETS, a “zero sum game” currency, where a central scorekeeper has a tally of your “credits.” You cut someone’s hair: +10 credits. Someone gives you a meal: -5 credits. The Zombie Farm actually implemented this system, first with 50 accounts, and then 100. It was working. Other locals in Budapest joined in the experiment, and soon they had 500 accounts. “The system started to break down when you have more than 500 users,” Debreczeni explains, as the currency couldn’t scale. Plus, the LETS system was in a centralized location. “What happens if the zombie bites the server, and everyone loses their balance?”

He needed a decentralized currency, and you can see where this is going. The zombie-farmers pored through 40 years of academic research to hunt for a solution. Soon he found Satoshi Nakamoto’s white paper. Lightbulb. Someone had already done it! Debreczeni has a background in computer science, and after that first read, he was hooked. This is so simple. This will work. He started buying bitcoin, toying with the code, and talking crypto with his buddies over beers. He organized meet-ups and he started the company Bitcoin Budapest. (Debreczeni is an early adopter. Years later, other Survivalist groups would also look to bitcoin.)

In 2013, Debreczeni traveled to San Jose for one of the first bitcoin conferences, “The Future of Payments,” where he was surprised to find an early Wall Street presence. “Even back then there were suits all over the place,” he remembers. “No more hoodies.” At that conference there were three bitcoin ATM manufacturers—the early prototypes. He tried using the first one, but found it to be “a useless piece of shit,” where you had to manually enter the bitcoin address on a keyboard. The second one wasn’t much better. The third “looked like something Apple designed,” he remembers fondly, as if recalling a past romance. “Gorgeous. Simple. Clean.”

He bought one on the spot. Let’s make Budapest a cool city with a bitcoin ATM, he thought. He paid 5 bitcoin, or around $400 at the time. Eighteen months later, the shiny new ATM was finally manufactured and installed as the first bitcoin ATM in Hungary, and the fifth in Europe. Debreczeni had expected two or three transactions per week. Instead there were ten…per day. Then came some buzz from the local news, and soon he booked 100 transactions per day. People stood in line.

In a procedure that now seems quaint, people actually swapped cash for bitcoin and then they spent that cryptocurrency, as merchants offered discounts to encourage adoption. One use case: Budapest is packed with students, so parents would buy bitcoin in the country that they lived (such as the Philippines), send it to their son or daughter in Hungary, and then the student could spend it locally, or cash it out in the ATM. The opposite was also true. “Parents in Budapest had children studying abroad in parts of the world that didn’t have financial infrastructure,” says Debreczeni. “They bought bitcoin here from the ATM, sent it to their kids in Taiwan or Mexico, and those kids cashed it.”

Now? Debreczeni knows that the landscape has changed. There are rarely lines. No one is buying beer with bitcoin. “Everyone just uses it for investment.”

I’m drawn to the Zombie Farm story as a parable, of sorts, of what could be possible with bitcoin. As the blockchain and cryptocurrency world has become fractured and filled with Twitter spats, it’s nice to remember a simpler time when people like Debreczeni looked to bitcoin as an elegant solution, and actually did something with it. This is a reminder of what is possible, and the conference that I’m at today, Blockchaineum 2.0 (what a name!), is an attempt, by lead organizer Tamás Czeglédi, to “help Budapest be a regional center for this technology.” That’s a tacit acknowledgment that Budapest is not yet a hub, as Czeglédi says that “what’s missing from this market is a sort of business mindset from people who have an understanding of blockchain.”

Czeglédi gets up to begin his speech…and I can’t understand a damn thing. “AL:j laks bitcoin hdf;ah jlasdlk. Lakshjv;la. Ethereum Jlih,” says Czeglédi, or at least this is what it sounds like to me.

Budapest might not yet be known for blockchain, but it is known for its nightlife, and after a few evenings of fact-checking, I can confirm that the reputation is earned. Much of the action happens in “ruin bars”—abandoned buildings that have been retrofitted into funky, eclectic dives with bicycles and kitchen sinks hanging from the walls. So it feels appropriate that the Blockchainem Expo is in a club and concert hall, Akvárium Klub, a massive underground ruin bar (literally underground) with a ceiling that looks like it’s made of water—we’re somehow beneath a pool.

Czeglédi gets up to begin his speech…and I can’t understand a damn thing.

“AL:j laks bitcoin hdf;ah jlasdlk. Lakshjv;la. Ethereum Jlih,” says Czeglédi, or at least this is what it sounds like to me. “JOlkase alksdjf. Lahjs ICO.”

Oh, God. It never occurred to me that a Hungarian blockchain conference would be spoken in, well, Hungarian. (Ugly American 101.) For a while I try and decode what he’s saying, perking up whenever I hear words like “ICO” or “Ripple,” and then I realize that the event has actual translators, like at a UN Conference. I grab a set of headphones. The translator is struggling to keep up with the machine-gun speed of the speakers—everyone speaks fast in crypto—and she frequently sighs in frustration, exasperated, and perhaps regretting the assignment.

In the past few years, like much of Europe, Hungary has tilted towards the right. The Prime Minister, Viktor Orbán, has proudly called his vision for Hungary an “illiberal democracy,” and cultivating what The New York Times’ Patrick Kingsley has described as a “political greenhouse for an odd kind of soft autocracy, combining crony capitalism and far-right rhetoric with a single-party political culture.” Human Rights Watch wrote Orbán an open letter that gently accused him of using public funds to “fuel xenophobia and intolerance.” Orbán was an early endorser of candidate Donald Trump.

Some Hungarians turn to blockchain and cryptocurrencies as a way of pushing back. “Crypto gives power to the people,” says the CEO of one Hungarian startup, who wished to remain anonymous out of fear of government reprisals. “Orbán said that he wants to lead Hungary towards an illiberal democracy. That includes non-transparent management of funds, or funds that are not being used properly. Bitcoin has the potential to bring some transparency to this.”

It’s hard to miss some echoes of the United States and Trump. “The younger and educated people voted against Orbán,” the CEO continued, adding that the Prime Minister racked up votes in rural, poorer, less-educated areas where people are only watching state-controlled or state-influenced TV. (Sound familiar?) “They [Orbán’s far-right political party, the Fidesz] claimed that they are the only ones who can protect us from immigrants, and people were afraid.”

Not every Hungarian at Blockchaineum sees the space with a political lens, as plenty are into blockchain for the usual reasons—intellectual curiosity, entrepreneurship, or to make a buck. Yet others voice similar concerns, and see some hope in blockchain. “Hungary is fucked up,” says the founder of a Hungarian blockchain real-estate startup. “The VAT [Value-added tax, a common sales tax in Europe] is 27 percent, the biggest in the European Union. But our salaries are not the biggest. We hope that blockchain technology will help. You would pay your tax [with cryptocurrencies, via blockchain] and you follow it where it goes. You can perfectly follow the money chain.”

The founder takes a couple of puffs on a cigarette, thinking. “In the US, you have a liberal system. Everyone can say his opinion. But not in Hungary.” Another cigarette puff. “It could be a problem if you put this story on the internet.”

On May 22, 2010, an early bitcoin developer named Laszlo Hanyecz ordered two pizzas. In a transaction that is now legendary, he paid 10,000 bitcoin, meaning that they cost around $60 million at today’s prices. The world’s first spender of bitcoin is Hungarian. So is Nick Szabo, the longtime cryptographer who some speculate to be Satoshi Nakamoto. (Technically, Szabo is an American citizen of Hungarian descent. But still.)

The founder of Blockchain Budapest, Szilagyi Imre, proudly name-checks both of these men and says that their Hungarian roots are not coincidental. “Hungary is very strong in IT,” says Imre, who spends his days organizing blockchain conferences, and his nights playing in a Hungarian rock band that performs U2 and Bon Jovi covers. “Ethereum has lots of programmers from Hungary. Whenever I read white papers, I always find someone from Hungary.” Yet this strength in technology, says Imre, has not yet translated into marketing or lambos. “We are strong on development,” he says, “but on the business side, there’s not as much there yet.”

Perhaps this is due to the Hungarian government’s lack of clarity on blockchain regulation, which has caused local companies to look elsewhere. “In Hungary, Fintech is not so big,” says Csabai Csaba, a financial-blogger-turned-blockchain-entrepreneur. In 2008, Csaba started blogging about MMORPG and Korean video games, then he made the usual pivot from World of Warcraft to finance, and now he blogs about the Hungarian blockchain space at Variance.hu. “If I go to the Central Bank and ask about a possible ICO, the Central Bank says ‘we have no regulation for this kind of activity, so please do not do it in Hungary.’ This is why my company is Estonian. This is why all Hungarian ICOs are in Estonia, Switzerland, and Malta,” says Csaba.

Plenty of Hungarian startups have done just that. On top of running his blog, he’s the founder of In-Lock, a loan system that lets you use your cryptocurrencies as collateral. Other Hungarian projects include Augmint, a stablecoin project that tries to peg crypto to the Euro; the Zombie Farmer Barnabás Debreczeni’s current company, Shinrai, which runs an exchange called “Mr. Coin”; and TE-FOOD, a farm-to-table food traceability blockchain project that is already up and running in Vietnam; the company claims to already track “12,000 pigs, 200,000 chickens, and 2.5 million eggs daily.”

Most people I spoke with, however, acknowledge that Budapest is not yet a hotbed of crypto culture, at least not outside of this startup community. Csaba says he’s part of a Telegram group of 277 Hungarian blockchain members, but throughout the week, when I ask random Budapest locals about bitcoin (I’m a weirdo who does that), most just shrug their shoulders.

There are maybe three hundred chairs in this underground concert hall. Only one is taken.

The Blockchaineum crowd seems to thin throughout the day, and while that’s normal at conferences—full at the start, half-empty by the end—today it seems particularly grim. This isn’t lost on Tamas Czeglédi, the lead organizer. “Last year was totally packed,” he tells me. “There was more hype. The bitcoin price was higher. And the advertising bans on Facebook didn’t help us.” (The Facebook ads were so problematic, he says, that a conference in Prague had to cancel entirely.) Yet the show would go on, and Czeglédi hustles off to prepare for “Block Knight,” a competition he launched to spur blockchain innovation; the finalists would now make their pitches to a panel of judges. I attend the Block Knight presentations and try to follow along, but once again they speak Hungarian, and this time there are no translators. (You can watch the winner, P2P Car Rental, here, provided you speak Hungarian.)

The final speech of the conference is from an AI and robotics company, Keplertek, based in Georgia (the country) that aims to be “the first AI and robotics ecosystem powered by blockchain.” On the one hand, it’s something of a win for Hungary to attract international speakers; after all, Czeglédi’s goal is to become a regional hub. I settle into the back row and wait for the crowd to fill.

There are maybe three hundred chairs in this underground concert hall.

Only one is taken.

That would be the chair that I am sitting in, fiddling with my translation device. Thankfully I don’t need it, as the presenters press forward in English, gamely giving a speech to no one.

I am literally the only person in the room.

Maybe the rest had been taken by the zombies.

All photos by Jeff Wilser