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Paying It Forward
Before the University of Puget Sound could accept what has been called the first bitcoin donation to a U.S. university, Sherry Mondou had to clarify a laundry list of concerns.
“The risks that came to my mind were: Could there be a way for hacking or some way for the gift to be stolen while it’s in process?” Mondou, the university’s vice president for finance and administration, said. “By accepting bitcoin, is there some association with criminal activity? The big one was, really, in the end, how could we avoid the currency volatility?”
Bitcoin and its roughly 150 spinoffs, with names such as dogecoin, flappycoin and takeicoin, are cryptocurrencies -- electronic money. Despite the illustration photo used for this article, bitcoin has no physical form. The currency uses cryptography, and stores all transactions in a public ledger called the block chain. As an incentive for good bookkeeping, users in the bitcoin community can earn coins by confirming the integrity of other users’ transactions -- a process called mining.
Bitcoin, whose creator was allegedly unmasked on Thursday, has been around since 2008, but it is only recently that the electronic currency has established a significant physical presence. Thousands of businesses around the world now accept bitcoin, and the first bitcoin ATMs recently powered on in the U.S.
The currency’s growing popularity has also caused wild market fluctuations, such as when hackers gained access to the exchange site MtGox and got away with almost 850,000 bitcoins -- about 7 percent of the bitcoin economy -- which at the time was worth about $480 million. And since a part of the community is drawn to the currency to make illicit purchases anonymously, bitcoin has yet to convince many that it can be used as a payment tool or an investment strategy.
“You read a lot of headlines,” Mondou said. “You want to make sure you know what you’re getting into.”
Puget Sound eventually settled on BitPay, an electronic payment processing service, and billed the donor for $10,000 to circumvent the currency volatility issue. But apart from soliciting donations, colleges and universities have yet to find a use for bitcoin. Instead, students are leading the charge. Bitcoin clubs have in recent weeks sprung up at Ohio State University, Pennsylvania State University and the University of Michigan, among many other campuses, where students meet to educate one another on the uses of digital currencies.
“I think it’s proof that bitcoin is growing,” said Jad Mubaslat, a junior biomedical engineering major at Ohio State. “More and more people are coming on to it, and if you’re going to hear about bitcoin from word of mouth, the first place you'd start hearing that is on college campuses.”
To illustrate how students are running the show, consider this: A faculty adviser for one bitcoin club declined an interview, saying the students themselves could provide “far more information.”
Mubaslat, whose bitcoin club was founded earlier this year, said the interest among college students is partly fueled by less altruistic motives than supporting a community-based currency. The market price of a single bitcoin surged to almost $1,200 late last year, which caught the attention of technologically savvy college students, he said.
“You shouldn't get involved or like bitcoin because it’s 1,200 bucks a piece or you think it’s a great investment, but the reality is that’s how a lot of the people got interested in bitcoin,” Mubaslat said.
In interviews with members of bitcoin clubs established this year, students said they hope to focus on increasing awareness, helping community businesses accept bitcoin and supporting philanthropic organizations. (Some of their institutions, such as Puget Sound, have banned mining on campus, anyway.)
Mubaslat, for example, has founded the exchange site BitQuick, and has already helped a local barbershop accept bitcoin. Daniel Bloch, who founded the bitcoin club at Michigan, is about to launch a philanthropic crowdfunding site called Coin-Give. Penn State’s club, led by freshman supply chain and information systems major Patrick Cines, has partnered with the BitGive Foundation to support a bitcoin-funded clean water project.
Launching startups is not without its risks, as a group of students at the Massachusetts Institute of Technology recently discovered. The students came under investigation by New Jersey officials for their start-up, called Tidbit, with the authorities demanding they turn over the source code. After being criticized for not coming to the students' aid, MIT president L. Rafael Reif released a statement saying they have "the full and enthusiastic support of MIT."
Bloch, Cines and Mubaslat are now in the early stages of organizing a college cryptocurrency conference, tentatively scheduled for April 2015, where students can network, discuss their startup ideas and hear from other entrepreneurs.
“I think it’s important to note that there's a big proportion of people that like the anonymous part bitcoin for legitimate purposes,” Mubaslat said. “A big part is trying to get the smaller organizations from the different colleges to have a place to make sure that as individual organizations, we’re still trying to follow a larger goal.”
Ironically, the students said the anonymity associated with bitcoin -- which so many users value -- has stymied community development online and in person.
“You could be trading coins with your neighbor without realizing,” said Bloch, a junior double major in plant biology and environmental engineering at Michigan. The bitcoin clubs at Michigan, Ohio State and Penn State were likely founded within days of each other, yet Bloch said he had no idea students at other universities had similar plans. “Because this is still not such an open community, you have to find those people,” he said.
With April 2015 more than a year away, the students acknowledged that the bitcoin economy may look very different by the time they are able to meet. In fact, many of the organizations are still awaiting official campus recognition, and their goals are likely to change as more students join. Yet the students said they were unfazed by the critical news surrounding bitcoin lately.
“A lot of the things that have been happening in bitcoin have been issues of services that run on the protocol, but I have yet to see any evidence that the protocol has any issues,” Mubaslat said. “There’s so much innovation that can be made of bitcoin. I can’t see it dying any time soon.”