Student startup storms cyberspace

ehrenberg_startup-7
Photo by Henry Ehrenberg.

A student start-up launched in July gives consumers easy access to new digital currency that is quickly spreading across cyberspace.

Thomas McCabe ’12 founded Get-Bitcoin.com this summer after struggling to find websites that sell Bitcoins, a digital currency created in 2009 that people can use to anonymously trade and buy products from select companies. McCabe said traffic on the website is increasing daily — the site earned over $8,500 in revenue on Monday alone — but the company could potentially face restrictions from the U.S. government.

Since Bitcoin trading is anonymous, people often use them to buy or sell illegal drugs and services, and this illegal activity has prompted U.S. Senators Charles Schumer and Joe Manchin to call for government regulation of Bitcoins. The government could potentially regulate Bitcoins like they oversee commodities by issuing rules such as a requirement to hold a license, McCabe said. Still, the market for Bitcoins is growing as more companies, such as hotels and video game vendors, begin accepting them as payment.

“It’s like virtual gold,” McCabe said of Bitcoins. “When you have a piece of gold, you have a piece of metal, but people think it has value. Bitcoin has value because people trust it.”

McCabe said he thought there is only a “rare chance” that the government will try to regulate or ban the trading of Bitcoins since he expects the First Amendment to protect people’s rights to trade Bitcoins, which he compared to the right to trade information.. But he has still insured his assets for up to $50,000 to guard against lawsuits from the government, banks and angry customers.

Doug Feigelson, a student at the Massachusetts Institute of Technology who created a different Bitcoin network site called bitbills.com, also said he sees no legal basis to outlaw Bitcoin but is more concerned by vulnerabilities created by the anonymity of the system. Once someone purchases a Bitcoin, McCabe said, it is virtually impossible to reverse the transaction, which leaves room for fraud by “dishonest customers.” McCabe said he does not accept credit cards or PayPal to reduce the chance of fraud, and Feigelson said he also is taking steps to combat potential scammers.

“Payments are about to change dramatically,” Feigelson said of the trend to use online currency. “That means I’ll probably be in the Bitcoin business for a while.”

In September, McCabe’s site was endorsed by We Use Coins, one of the top information guides for beginners to the Bitcoin market, causing traffic on the site to quadruple for that month. The jump in usage forced him to eliminate his most popular currency exchange vehicle, MoneyPak, because the site was “sending too many payments through them.” McCabe said GreenDot, the company which provides MoneyPaks, requested his company to stop issuing payments through them until at least January 2012.

Still, in just the past two weeks, McCabe said, the number of orders for Bitcoins has quadrupled. He added that the website now accepts direct payments from U.S. bank accounts, allowing customers to make orders straight from their homes.

Some of companies that accept Bitcoins include E-Cigs, online writing and copy editing firms, and Murray’s List, a site that is similar to Craigslist but lists prices in Bitcoins.

Comments

  • wenzel

    This is a heaping pile of bull. Not only is McCabe one the most self-inflated, delusional students ever to transfer to Yale, but bitcoin is [a scam][1]. I would bet my left testicle that The Little Salad Shop makes more money on any given weekday night than McCabe has all summer.

    [1]: http://www.quora.com/Bitcoin/Is-the-cryptocurrency-Bitcoin-a-good-idea

  • wenzel

    Also, bonus points to anyone who can actually read through McCabe’s [online resume][1] without laughing.

    [1]: http://www.rationalfuturist.com/resume.html

  • jimbobway

    Good work Thomas! Keep the bitcoin movement alive!

    bitcoinblogger.com

  • River_Tam

    The next Alexei Vayner?

    http://www.rationalfuturist.com/resume.html

    This guy cracks me up. Where does Yale find them?!?

  • BladeMcCool

    I dont think Bitcoin really qualifies as a ponzi scheme because there can only ever be 21 million bitcoins and because anyone can jump into mining if they want to. Also when you buy Bitcoin you are not required to do so through some central authority, its completely decentralized. Just because some early adopters got a bunch of them relatively easily does not make it a ponzi. To say that this early adopter phenomenon makes the system a ponzi is the same as saying that gold is a ponzi because every time a fresh patch of gold is found the gold rushers get first easy access to gold.

    Bitcoin is like digital virtual gold. It takes energy to produce, and it has a limited supply. But it is better than gold in the sense that you can send it instantly around the world.

    I like Bitcoin better than I like anything offered by central banks. There is certainly potential to kick it up a notch, and implement some kind of ripple payment system within a bitcoin public ledger block chain type of thing, but that will take time.

    Getting people into the concept of triple entry accounting with Bitcoin is a great start, and anything that gives people more methods of getting control of some, like this Get-Bitcoin.com, is a good thing.

  • Morse

    I’m not sure why there is so much hate directed towards Mr. McCabe. The man is clearly brilliant, as evidenced by his test scores and academic achievements. Whether or not you believe in something like the technological Singularity is up to you, but people with significant real-world accomplishments, like Ray Kurzweil, have made a compelling case for it.

    Regarding Bitcoin, it faces an uncertain future for a number of reasons, but it was never intended as a scam. As someone who has been following digital currencies for over 15 years, I can attest that it is first real, decentralized, digital currency that has shown real-world potential. I encourage you to read the responses to the quora article cited above, do other independent research, and come to your own conclusions. Bitcoin addresses some very real shortcomings in existing payment systems.

  • jimbobway

    I think Yale attracts people who are such high achievers they are jealous of other people’s accomplishments. Give credit to where it is due.

  • River_Tam

    Oh god, now we’re attracting all the bitcoin crazies.

    Seriously, the next Alexei Vayner?

    > In 2003, when I was 11, I discovered the technological Singularity after doing a Google search for Graham’s Number, the largest number ever used in a mathematical proof.

    > When I was 12, I took the SAT as part of a program by Johns Hopkins’ Center for Talented Youth. My score was 790 Math, 680 Verbal, which was the highest in all of New York State for my age.

    > I also took eight Advanced Placement exams, earning six perfect “5”s and two “4”s, was a finalist at the 2006 National Chemistry Olympiad and competed in the 2007 National Science Bowl.

    Honestly, I’m just surprised, there are Yalies who got 4’s on AP exams. I thought everyone got 5’s on those things.

  • jimbobway

    River_Tam, why do you like to criticize people negatively so much?

  • River_Tam

    jimbobway, I am actually just a sane, rational person with a working understanding of economics who understands why Bitcoin is a ridiculous and unworkable “currency”.

  • anon12

    Does $8,500 in revenue mean profits for the site, or just the total value of bit coins exchanged that day. These are extremely different values. And it seems unlikely that the site earned $8,500 in one day.

  • anonymouz

    Wow, after reading this article I expected McCabe’s classmates to be supportive of him, not turn to his resume and mock it. It takes a lot of creativity and hard work to form a startup. But it does not take much at all to make a snarky remark on an article about it. River Tam, if your problem is with the economics of bitcoins, then I would have expected an intelligent comment to that end, rather than a stupid personal assault.

  • River_Tam

    @anonymouz: wenzel’s link to the quora discussion pretty much covered it.

    It would be like if a guy was really into palm reading – I don’t really feel the need to retread the bashing of an already discredited idea.

    > It takes a lot of creativity and hard work to form a startup.

    This is true. It also takes a lot of crazy to write that bio. There are plenty of creative, hard-working, completely insane people. I work with some, in fact. I went to school with others. McCabe seems to be cut from that cloth.

    > rather than a stupid personal assault.

    Disclaimer: I’ve never met Mr. McCabe, so I clearly cannot comment on him as a person. I am merely commenting on whatever public front he’s decided to present. That public front makes him seem more than a little crazy and straight-up autistic to boot. Who publicly posts their SAT scores from when they were a 12 year old? Who lists the number of AP tests he took? Who feels the need to awkwardly shoehorn in the fact that he was interested in Ramsay Theory at the age of 11, and also add the fact that was accepted to some college that he did not attend?

    I want to see the Rumpus do a piece on this kid.

  • Tom_McCabe

    To River Tam:

    This is Tom McCabe. I don’t see why you feel the need to criticize me, but if you must, why not do it to my face, instead of hiding behind anonymity? My email address is on the front page of my website, which you seem to have found without any trouble.

    The purpose of a resume is, for better or worse, to brag about one’s accomplishments. I think my early SAT scores and AP exams are valid accomplishments; I worked hard for them, and they’re part of the reason why I got into Yale in the first place. I don’t mention them much nowadays, since I’ve done more interesting things since then, but I’ve been busy and haven’t updated that part of my website in a year or two.

    The Graham’s Number story I tell just because people seem to find it interesting. If you don’t find it interesting, you’re welcome to ignore that part.

    As to my supposed autism, I make no claims to be a master of social graces, but I am popular enough to have been elected to the board of the World Transhumanist Association. How many elections have you run in?

  • Tom_McCabe

    To anon12: The $8,500 figure is our gross revenue, not our profit after expenses (I wish).

  • River_Tam

    Hi Tom,

    I really do apologize if you took offense from the harsh language I used earlier.

    As I said before, I have no doubt that you are very intelligent and creative. However, the confluence of bitcoin, transhumanism, and your bio lead me to draw certain conclusions about what kind of person you are. Maybe they’re the wrong conclusions! Jaron Lanier (Keane-baiting here) got it right when he said that transhumanism is over-ideologized and is comprised of intellectual posers who prefer to talk about the singularity rather than actually DO, just as Adam Cohen on Quora got it right when he said that bitcoin was a scam that preys off of those without basic understanding of economic systems. Both bitcoins and trasnhumanism tend to attract smart young people with endless ambition, because both present shortcuts to the sort of incrementalism (wealth accumulation, engineering) that bores them and lets them get straight to the goals. It also lets them convince themselves that they are Renaissance men, who know more about subjects than the experts in those fields, when in reality they’re just ignoring Socrate’s proclamation. I’ve seen people get lured down these rabbit holes before.

    I suggest, if you want to prove me wrong, Tom, that you focus on something that will get you closer to your goals. Focus on Computer Science, on Economics, or Biomedical Engineering. Fascinated by cryonics and cybernetics? Spend your life in school, getting advanced degrees in neurology, computer science, and biomechanics, and you will be ready to tackle the subjects. You want to revolutionize currency? Get a PhD in cconomics. Transhumanists and bitcoin aficionados are fringe populations that don’t get any respect from the mainstream *for a reason* – namely, that they don’t actually understand the subjects they talk about. They convince themselves that having strong mathematical skills (being “rational”) is sufficient to solve tough problems, and they completely leave out the *knowledge* component of the equation.

    (By the way, being elected to the board of the World Transhumanist Association is kind of like being tapped to run Buddy Roemer’s 2012 campaign for President. It doesn’t exactly prove much. And given my online and offline interactions with *members* of H+, I wouldn’t exactly say that being on the board demonstrates anything about your social skills. But you already knew that, of course. You’re a smart kid.)

    You’re still young and you seem (obviously) bright. Don’t screw it up. The world needs smart people. Be a doer.

  • Inigo_Montoya

    ^ The above is less wrong than I expected it to be, and it demonstrates a singular method of rationally engaging with the H+/SIAI/etc. crowd ;-)

    Joking aside, I hope Tom McCabe responds seriously to this argument, and doesn’t dismiss it out of hand just because River insulted him earlier (which she shouldn’t have) or because her argument sympathetically quotes Lanier, who gets about as much respect within transhumanist circles as Eliezer Yudkowsky gets outside of them.

    (By the way, I admit that Lanier has lately been pandering to less sophisticated technoskeptics, and that he deserves criticism for it. That said, [this essay of his][1] has much more real content. It presents an intriguing challenge to one of the central premises of belief in a positive singularity, and I think it would get him much more respect than he currently has among transhumanists if they read it and engaged with it).

    I do agree with River that transhumanists sometimes display a troubling willingness to dismiss expert disagreement as rooted not in good science but in naïve ludditism, which doesn’t tend to go over well with the (often quite pro-technology) experts in question. I hope McCabe doesn’t fall prey to that.

    [1]: http://www.davidchess.com/words/poc/lanier_zombie.html

  • Standards

    River, that was the smartest thing I’ve ever heard you say.

  • River_Tam

    @Inigo_Montoya:

    Without getting bogged down too far in transhumanism itself (you know what they say about beating you with experience), let me caveat everything I said above: I’m not a technoskeptic – I truly believe that the world is getting better due to technology and it will continue to do so at an accelerating pace.

    That being said, I am a humanist, not a transhumanist. The difference here is humility. I think this is the same as the difference between conservatives and libertarians. I am the former, transhumanists tend to fall into the latter category, as do bitcoin afficionados and objectivists — all of whom tend to bleed together into a morass of really smart but incredibly arrogant people. My point, then, was not really about transhumanism proper, but more a lament about the personality type that tends to gravitate towards these sorts of movements.

    *[Note the number of prominent transhumanists who have stories similar to Tom’s: autodidacts (eg: Yudkowsky, whose great fanfic of Harry Potter is by far his best work) and extremely young university-goers (eg: Ben Goertzel).]*

  • Inigo_Montoya

    ^Upvoted. I understood that, and I agree. I was mostly riffing/having a little fun/making some transhumanist community puns.

    And though I’m not politically conservative (as you no doubt know), I am pro-humility heuristic, and also pro-technology (as I think Lanier genuinely is, which is why his more recent pandering to technoskeptics makes me sad).

    As for the similarity of the transhumanists’ stories, I think that goes a long way toward explaining the resume people were discussing above. McCabe touts precisely the sorts of things that get you respect within transhumanist circles, if not outside of them.

  • HighStreet2010

    Bitcoin is a decent concept that serves a specific purpose, namely anonymous and decentralized purchasing, and which also has other neat features. I’m not sure why people are dismissed as “bitcoin crazies” for thinking that it isn’t a scam. Although I can see why someone who considers himself a prominent member of the transhumanist community might get that label.

    Did you people even read the responses to Adam, or his later statements? (http://news.ycombinator.com/item?id=2612237) Bitcoins aren’t in danger of becoming t-bills anytime soon, but the responses here were a little over the top.

    I also find it hilarious that River is telling someone who has just founded an apparently successful business that he should “be a doer”.

    This – “It also lets them convince themselves that they are Renaissance men, who know more about subjects than the experts in those fields, when in reality they’re just ignoring Socrate’s proclamation. I’ve seen people get lured down these rabbit holes before.” – is incredibly patronizing and quite ironic coming from someone that rides their high horse on the internet all day every day.