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.