Drew Stone (E ‘17) entered the world of Bitcoin in 2013, before most self–identifying financial experts. Purchasing his first bitcoins wasn’t a shrewd market calculation. He was a senior in high school, and he bought $200 worth of Bitcoin because a website offered 20% off an XBOX video gaming system with the purchase.
Looking back to 2013, he couldn’t help but laugh: “I was that silly person that actually spent his Bitcoins,” he chuckled. “I probably spent three–quarters of a Bitcoin on that Xbox, which is now probably like $9,000.”
Four years later, he still dabbled in cryptocurrency. During his spring semester of his senior year, Drew sold his shares of a second digital cryptocurrency called Ethereum for more than $20,000. His gamble of sinking a couple thousand dollars of his savings had paid off, and the price of his initial investment had increased more than ten times over.
Little did he know that if he had waited a only a few days longer, the market would increase tenfold again, and Stone would have $200,000 sitting in the palm of his hand when he unlocked his phone.
Questions of “what if?” plague the minds of the Penn students who invest thousands in these digital currencies.
What if I had waited longer?
What if I had sold sooner?
What if I had invested more?
“It’s definitely an addiction,” said Kudrat Lokman (W ’18), who started investing in the beginning of 2017 after talking to another student how had already seen large returns. After a couple of months, his initial investment of 500 dollars had multiplied.
“You get used to the dramatic drops because you believe, or you know, that it will go up again. I just see it as a game.”
The potential promised by blockchain has caused a surge of interest on college campuses across the country. The Penn Blockchain Club has grown to nearly 400 active members in a matter of months. The club’s members are not all just computer science engineers, but a collective of undergraduates and graduate students, Whartonites and Collegians, legal scholars and businessman. All of them want to get in on the action.
However, it can be difficult to parse the fog of crypto mystery. More often than not, ask someone on Penn’s campus who invests in cryptocurrencies how they work and you will hear a response along the lines of “you won’t understand,” or that “it’s too complicated.”
Beyond the raincloud of technical jargon, the basic mechanics of platforms like Bitcoin are quite easy to wrap one’s head around. At their core, cryptocurrencies like Bitcoin are digital ledgers—electronic account books—that are shared around the globe by their users. Every account is protected by a “private key": a meaningless array of numbers and letters strung together by an algorithm.
While the value of national currencies are presided over by state–run banks, one of the greatest appeals of crypto is its decentralization. Tight security programing and the complex cryptography of these private keys ensures that the currency remains egalitarian, open–sourced, and—perhaps most appealingly—anonymous.
If the Penn Blockchain Club is at the forefront of the university’s blockchain craze, then its presidents, Nathan Rush and Jitin Jain, are the club’s gravitational centers and leading visionaries.
The two make an unlikely pair on first glance: Nathan is a 20–year old College sophomore studying Computer Science, while Jitin, at 32 years–old, is a 2nd year graduate student pursuing a MBA in entrepreneurial management and statistics. He returned to university purely to pursue his master's degree and blockchain ventures. The two met in the summer of 2017 while working at ConsenSys, one of the handful of emerging blockchain technology companies actively building software to enable decentralized governance through the Internet.
Like Drew, Nathan’s introduction to blockchain happened when he was still in high school. Nearing the end of his time in high school, his father had introduced him to the world’s first crowd–funded and crowd–managed venture capital fund: “The DAO.” Nate contributed a mere three dollars. He watched as the total fund grew to a staggering $150 million in a matter of months—setting the record for the largest crowdfunding campaign in human history.
Then, early in the morning of June 17th, 2016, anonymous users found a hole in the code that held the DAO together. Within a matter of minutes, they stole 50 million dollars of digital currency, reminding Nathan that human greed persists even within the coded vaults of the Internet.
“From that moment, I thought ‘Holy shit I don’t know what the fuck just happened, but that was the craziest thing I have ever seen in my entire life’,” he said. “It just kind’ve consumed my brain from there.”
Now, two years after the DAO hack, securing a safer digital currency has developed into such an obsession for Nathan. He decided to take a leave of absence from his studies at Penn this past semester—unbeknownst to his parents—to study blockchain protocol full–time. On most days you can find him holed up in Van Pelt Library, deep in research from the early afternoon until well past midnight.
Nathan admits that his obsession has been taxing. He used to reach for his phone to check his investments as soon as his morning alarm went off. Now, to retain his sanity, he purged himself of any Internet connected devices during his semester off. He uses a “shitty” Nokia phone and a laptop without the driver.
“I needed to totally disassociate myself with the market’s extreme volatility in order to work on it,” he said.
Two years ago, before the gold–rush of the blockchain boom, Reed Rosenbluth (E ’17) founded the Penn Bitcoin Club: the neglected precursor of what is today’s Blockchain Club. He remembers that most club events would only have about 20 or so people in attendance.
Now, Nathan finds that practically every Penn Blockchain–sponsored event—whether it be a visit from an influential blockchain developer or merely just an introductory class led by one of the club’s senior members—is filled to the rafters.
Rosenbluth didn’t seem surprised: “That has everything to do with the price of crypto.”
There’s one crypto–related event on campus that stands above all others: . The inaugural conference will take place on April 6th, 2018 in Hunstman Hall. Touting the slogan, “Design, Build, Invest,” the conference will feature some of the foremost developers and leaders in the blockchain industry, including Joseph Lubin, the prolific co–founder of Ethereum.
Many of the details of the event are still kept under lock and key, but the event has already garnered hundreds of RSVPs.
At a university with an infamous reputation for streamlining business students into the cookie–cutter careers of finance and consulting and pushing budding engineers into the ilk of Silicon Valley, blockchain has offered countless students of both disciplines an entirely new frontier.
Although many Penn students familiar with blockchain are only concerned with their own bank statements, the blockchain disciples of the Penn Blockchain Club believe in technology’s potential to shift the very nature of the internet on a tectonic level.
To them, the emergence of the Internet—the era of “The DotCom Bubble”—was the first iteration of the Web; the rise of Facebook and social media the second; then blockchain, undoubtedly, is the third.
Even the group’s mentor, Professor David Crosbie, a Penn Engineering professor who had logged many years amongst Fortune 500 companies and Wall Street banks, admits that he cannot overstate blockchain’s potential.
“If you think back in human history, we used to live in little family groups and we used to only trust our blood relatives,” he said. “Now we do a deal with our government where we basically say ‘You can kill us, take our belongings, in exchange for a legal system.’”
The potential of Bitcoin and other digital currencies is, as he puts it, their ability to paradoxically take humanity back to a totally decentralized, even primal, idea of trust, where humanity can rely on digital protocols instead of corruptible or inefficient state institutions.
In short: by trusting technology, we can trust ourselves.
He’s even spearheading Penn’s first blockchain course in the upcoming fall semester.
“The most profound effects will be in places where there is limited trust,” he said. “If you have a solution to this trust problem, then it will have the most impact in environments where there is the least trust. People will be essentially choosing between blockchain and anarchy.”
A space with limited trust, for example, could be a corrupt bank in a developing country that siphons customers’ savings. In this situation, Bitcoin could create financial avenues for the world's most impoverished people.
In theory, the idea of creating a universal and impregnable ledger can be applied to any number of ideas. It could potentially facilitate a universal healthcare database, track the world's refugee crisis, or prevent voter fraud.
Depending on who you ask, concepts like these make blockchain potentially the most important technological innovation since the internet. This freedom has been made possible by the technology at the core of cryptocurrency: blockchain—a term often used interchangeably with cryptocurrency. Crypto, though, is merely the most visible manifestation of blockchain protocols. While each cryptocurrency is an electronic ledger, cryptographically sealed, blockchain code is the backbone of what makes these digital transactions possible. To do so, the electronic ledger that makes up the currencies’ transactions is replicated and shared across hundreds of thousands of blocks—hence the term blockchain—across the web. Each block stores an identical copy of the ledger, which is stored across the hundreds of thousands of computers, or “miners,” that make up the currency’s network. People all over the world—including Penn students in their off–campus houses and dormitories—lend their computers’ memory to process a currencies’ many transactions.
However, despite its optimistic future uses, Bitcoin has dark roots. Some of the earliest to embrace crypto were drug dealers and other criminal syndicates. In truth, some of Penn’s earliest adopters of cryptocurrency did so for the sole purpose of anonymously purchasing a variety of illicit drugs off of the Dark Web and having them mailed directly to their homes.
The week of Monday, January 28th, the global market value of the world’s digital cryptocurrencies stood at a staggering $600 billion. By Friday, in one of the most violent drops in the market’s history, that number nearly halved to $348 billion. In a single day, the price of Bitcoin—the world's first and most prevalent of the cryptos—dropped an eyebrow raising seven percent. Ethereum, the second most prominent of the currencies, nosedived a pulverizing thirty.
Many students lost thousands. Some lost even more.
Derek Hsue (W ’18) is one of the handful of student cryptocurrency investors that lost millions of dollars in cryptocurrency assets. Along with his partner Anders Larsen (W ’18), Hsue presides over a multimillion dollar cryptocurrency hedge fund. With a drop of this magnitude, hundreds of thousands of dollars are lost in a matter of days.
A seemingly crippling amount of loss, but Hsue seemed unfazed by such sizable losses. At this point, they are normal even—drops like these have happened four or five times in the last two years.
“Obviously the short term fluctuations are going to be stressful, but I think it’s super important to maintain a long–term vision,” he said. “We don’t invest in anything that don’t believe will actually change society.”
Like many investors, he has faith in cryptocurrency.
In fact, he's buying even more.