Pair raises $500K, preparing to rain bitcoins on undergrads
$100 per student hoped to spur innovation at MIT
CLARIFICATION TO THIS ARTICLE: The print version of this article incorrectly suggests that Professor Simon Johnson is involved with Rubin and Elitzer's project.
Donors have committed to giving $100 in bitcoins to each of MIT’s about 4,500 undergraduates this fall.
Jeremy L. Rubin ’16 and Daniel B. Elitzer, a first-year Sloan MBA student, are spearheading the project, which they hope will sow the seeds of an innovative bitcoin “ecosystem” at MIT.
Rubin and Elitzer said they’ve secured more than $500,000 in commitments from about 25 donors. Half of the money will come from Alexander Morcos ’97, who co-founded Hudson River Trading, a high-frequency trading firm based in New York.
Rubin and Elitzer met with MIT administrators before announcing their plans. An MIT spokesman wrote in an email that “[t]he administration wishes the project’s leaders and participants all success.”
The initiative’s press release lists 10 MIT faculty and staff as supporters of the project.
Former International Monetary Fund chief economist Simon Johnson, an MIT professor unaffiliated with the project, said that he was “all in favor” of encouraging innovation in finance and that Rubin and Elitzer’s experiment “could be a positive” for perceptions of bitcoin. He noted that the cryptocurrency’s credibility has become a bigger concern this year after the bankruptcy of Mt. Gox, once the largest bitcoin exchange.
Bitcoin is a digital payment system that uses a peer-to-peer network to facilitate payments made in units called bitcoins. Members of the network can use an open-source cryptographic protocol to verify payments in return for transaction fees and new bitcoins in a process called mining.
One bitcoin could be bought for about $443 at press time, according to Coinbase, a bitcoin wallet service. The value of one bitcoin rose from less than $15 in January 2013 to a peak of over $1,100 in December.
Rubin and Elitzer’s announcement months in advance is timed to give local businesses a chance to begin accepting bitcoin and to give students and researchers a chance to develop bitcoin-related applications.
“What I’m hoping is that infrastructure gets sufficiently built around MIT that bitcoin actually becomes a useful commodity to have,” Rubin said.
Rubin said: “Everybody has access to the Internet, right — so you want to launch a webapp? Everybody can do that. You want to launch a bitcoin or cryptocurrency app? That’s a little bit harder … you can’t test it in your immediate friend group. But hopefully [that’s] what we’ll enable.”
Elitzer said that they hoped the project would also spur new research, both in the technology of cryptocurrencies and in the economics of how people use them.
“Right now there is not a geographic place that you can go to and assume that people have relatively broad access to bitcoin,” Elitzer said, suggesting that that could change with their experiment, which might make for an interesting case study. “What might the world look like if bitcoin, or something like bitcoin, were widely accepted?”
MIT’s undergraduate education dean, Dennis M. Freeman PhD ‘86, said in a statement: “By bringing students and faculty together to inform members of the MIT community about what bitcoin is and to research its use, Rubin and Elitzer are helping everyone to better understand this emerging technology.”
This experiment is neither student’s first bitcoin-related project.
In 2013, Rubin worked with three other undergraduates on a bitcoin-related project called Tidbit. Tidbit was later subpoenaed by the New Jersey attorney general as part of a consumer fraud investigation. Rubin, with the help of the Electronic Frontier Foundation, a digital rights group, is currently fighting for the subpoena to be withdrawn. MIT has sent a letter to the New Jersey attorney general in support of Rubin.
Elitzer said he was initially drawn to bitcoin after working at a non-profit, when he saw a potential for open protocols like bitcoin’s to improve on “mobile money” systems aimed at those living in countries where most don’t have a bank account. Elitzer is president and founder of the MIT Bitcoin Club, though he said that the club’s role in the plans to distribute bitcoins to students is still being worked out.
Morcos said that perceptions of bitcoin have suffered due to its role as a funding mechanism for illegal enterprises (like the now-closed Silk Road), but he believes illegal activity makes up a much smaller portion of its present-day use. He said that even though it is not the main focus of the project, he hopes MIT students using bitcoin will highlight the technology’s benefits, which he says “people in the bitcoin community already know.”
Elitzer said it was one of their goals to “highlight” the “positive uses” of cryptocurrencies and related technologies.
Professor Alex P. “Sandy” Pentland PhD ’82, director of the Human Dynamics Laboratory at the Media Lab and a faculty supporter of the project said in an email to The Tech, “I am supporting them because it is generally an awesome hack, and more specifically I am working to understand how our society can thrive in an age where everything is datafied and can be controlled by computer.” He added, “While the specific properties of bitcoin have some real problems, getting everyone at MIT to start playing with bitcoin … will prompt the MIT community to begin thinking seriously about how we can live in an all-digital future.”
Rubin and Elitzer are aware that some students may decide to cash their bitcoins in for dollars.
“My chief hope is that there is not flux out,” Rubin said, “that the bitcoins stay within the MIT community, or that it keeps on coming in because people buy more.”
He and Elitzer want to see a bitcoin “ecosystem” develop at MIT in which people are not only exchanging bitcoins but also experimenting with related technologies.
According to Morcos, “Bitcoin is so novel, and to the extent that people do use it, it’s really just as a novelty thing … You could go all day or all month and never see anywhere that you could spend bitcoin.” With Rubin and Elitzer’s project, he said “you could get a sense of what it might be like if [bitcoin] ever took off and became a more common way of buying things or using currency.”
Elitzer challenged “some of the brightest technical minds of a generation” to come up with novel ways to use bitcoin.
Rubin listed secure wallet storage, bitcoin-based bill splitting, and web-based “microtipping” as possible examples of projects he would like to see inspired by the initiative, as well as research into the more technical topics like “colored coins” for network-based ownership agreements and “sidechain protocols” related to alternative cryptocurrencies.
Rubin added, “I think that MIT should be absolutely the center of the bitcoin universe. As a school that’s a leader in technology and science fields … it’s kind of a shame that we’re not already at this point.”
Launching the project
Rubin first approached Elitzer with the idea in March. The original suggestion was just to give bitcoin to a select group of students. Elitzer instead proposed giving bitcoins to all undergrads, to which Rubin agreed. They wanted enough people involved for there to be “network effects.”
Elitzer approached Morcos about the idea at the CoinSummit conference in San Francisco in late March. Morcos said he volunteered to organize the fundraising and reached out to MIT alumni and people he knew “in the world of bitcoin” in an effort to have all the funding committed before announcing the project.
Rubin and Elitzer met with MIT administrators and faculty about their plans in the weeks leading up to the announcement. Their press release lists as supporters, among others, Associate Director of the Media Lab Andy Lippman, computer science professors Hal Abelson PhD ’73 and Frans Kaashoek, and Executive Director of the MIT Kerberos & Internet Trust Consortium Thomas Hardjono.
Rubin said that the timing of the announcement and fall launch date was intended to give students the summer to work on bitcoin-related projects.
According to the press release, Rubin and Elitzer, along with HackMIT, the MIT Society of Women Engineers, the MIT Bitcoin Club, and the College Cryptocurrency Network are organizing the MIT Bitcoin Expo, to be held Saturday, May 3. Rubin emphasized the role of the Society of Women Engineers in promoting diversity at the event and among those interested in the project.
The event’s speakers will include Gavin Andresen, chief scientist and board member of the Bitcoin Foundation, among other important members of the bitcoin community. Rubin said the expo was meant to “give [students] the tools to make something over the summer.”
According to Rubin, the details of how the $500,000 will be managed have not yet been determined.
The initiative’s press release stated that the donations would provide for the purchase of $100 in bitcoin for each undergraduate in addition to informational events and the necessary infrastructure to distribute the bitcoins. Rubin said that the technical details of the distribution would be determined over summer, but added that they did not plan to use one commercial wallet service. He added that the bitcoins provided to undergraduates would be purchased shortly before their distribution so that their value would be as close as possible to the target amount of $100 per person.
Morcos emphasized that participation in the program was optional for undergraduates.