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Tuesday, September 2, 2014

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Students and alumni cash in on global bitcoin 'gold-rush'

Adam Glanzman/Daily
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By Adam Glanzman, Daily Staff Reporter
Published February 2, 2014

The bitcoin craze is often equated to the Gold Rush of 1849, when hundreds of thousands of fortune-seekers flocked to California to test their luck and strike gold. Those who actually found riches were the ones selling the gold mining equipment, food and resources the miners needed.

At the University, however, bitcoins are the target of the modern gold rush. Bitcoins are a digital currency, or cryptocurrency, that can be traded from person to person. It was invented in 2009 and has since grown in prominence among techies. It’s now beginning to enter mainstream commercial and financial spheres.

However, bitcoins are available exclusively online and are not backed by a central bank like the U.S. Dollar. These qualities have raised speculations about how stable the currency is and many lawmakers are displeased by bitcoins’ history of being used for illegal activities.

Nevertheless, a small community of bitcoin users at the University have created their own business to cash in on bitcoin’s rise in popularity.

Engineering junior Robert Greenfield is in the process of creating an online cryptocurrency firm with a few friends where people can trade currencies for profit.

“The really crazy thing about cryptocurrency is that you can recreate anything and everything that is already used for regular money and have a great start up from it,” Greenfield said.

University alum Kinnard Hockenhull became interested in bitcoin in 2011 during his junior year. He later left school to pursue his bitcoin business, but like many, Hockenhull was skeptical when he was first introduced to bitcoin.

“I didn’t really understand it at first,” Hockenhull said. “I kind of thought it was either going to be a fad or some sort of abstract scam.”

Hockenhull’s business, BitBox, started out as a platform for users to trade currencies, but is now expanding its operations to enable faster transactions of bitcoin similar to the Facebook-meets-Paypal app Venmo.

BitBox has over 8,000 users and has coordinated over $300,000 in transactions, according to Hockenhull.

Engineering and LSA junior Daniel Bloch is working with Hockenhull to expand BitBox. He is also starting his own bitcoin-based non-profit organization called Coingive that aims to benefit local charities. Bitcoin donation websites already exist, but Bloch hopes to grow this platform through Coingive while making bitcoin payment more accessible to local charities.

“Charities would very rarely not accept money, but it’s not easy for them to accept bitcoin,” Bloch said. “They don’t have the time to learn how to do it, and they’re not going to pay somebody to do it.”

Bloch believes that in order for bitcoin to become a universally trusted and used currency, more commercial retailers must start accepting it as a form of payment. Websites such as Overstock.com, OKCupid, and Wordpress are currently accepting bitcoin.

In the Metro Detroit area, there are a few merchants who have recently begun accepting bitcoin. However, there are currently no Ann Arbor businesses that accept bitcoin, Bloch said. The Bronx Deli in Farmington Hills has been accepting bitcoin since November 2013.

University alum Scott Goci, developer at Alfa Jango, a web-based consulting company in Ann Arbor, agreed with Bloch that the spread of bitcoin depends on more brick-and-mortars retailers accepting it as a form of payment.

“I want Ann Arbor to become an area where we’re one of the first cities to have 1 percent of our businesses accepting bitcoin,” Goci said.

However, many remain skeptical about bitcoin’s future. Since bitcoin’s soaring popularity and media coverage, many more cryptocurrencies have been created. Economics Prof. Miles Kimball believes that electronic currencies will be vital in the future, but investing in bitcoin now is unwise.

“Bitcoin has no long-run future because government-sponsored electronic money will displace it,” Kimball wrote in an e-mail.

Goci also said bitcoin may eventually be replaced by a different cryptocurrency.

“I think bitcoin is just a stepping stone to a different crypto-currency that will finally become the one that’s accepted in the marketplace,” Goci said. “The next one will be the one that’s accepted by the masses.”

Correction appended: A previous version of this article misstated that the Bronx Deli started accepting bitcoin in November 2011. The restaurant began accepting it in November 2013.


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