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“Being too far ahead of your time is indistinguishable from being wrong.”
That was Howard Marks, co-founder of Oaktree Capital Management, in his 2011 book The Most Important Thing.
Marks had obviously never heard of bitcoin.
Luckily, two MIT students never took that adage to heart. On this day in 2014, Jeremy Rubin and Dan Elitzer announced a bombastic plan to give every undergraduate student at their university $100 in bitcoin.
The price of bitcoin has since multiplied by more than 220x. Take that, Marks!
On This Day — the MIT Bitcoin Project
Granted, mainstream Bitcoin discourse was indeed accelerating by this point in 2014.
Former Federal Reserve Chair Alan Greenspan had recently labeled bitcoin a bubble without intrinsic value. In the 18 months prior, bitcoin’s price had exploded from $10 to almost $1,000, one of its first great bull runs.
The Bitcoin economy was also actively evolving in response to government crackdowns. Mt. Gox had just filed for bankruptcy, while Ross Ulbricht’s Silk Road and Charlie Shrem’s BitInstant had peaked preceding the arrest of both founders.
Around the same time, Farmville developer Zynga had started testing bitcoin payments for in-game purchases, mirroring a recent move made by Overstock to accept bitcoin for ecommerce.
Those events put Bitcoin on the macro scale. Rubin and Elitzer went micro, opting to instead seed a bitcoin-based peer-to-peer economy in their campus.
Rubin was a sophomore at the time, studying computer science, and Elitzer a first-year MBA student at MIT Sloan and president of the MIT Bitcoin Club. Rubin went on to contribute to Bitcoin Core and has founded a series of ventures in the space. Elitzer later co-founded venture firms IDEO CoLab Ventures and Nascent.
The MIT Bitcoin Project also had backing from MIT Sloan professors Christian Catalini and Catherine Tucker, as well as from MIT itself, with the BTC drop positioned as an IRB-approved study on the role of early adopters in the tech adoption curve.
“One problem was that there wasn’t any traditional community in the world where bitcoin was used and understood. Initiating network effects is really hard,” Elitzer wrote in a retrospective years later.
“Our goal was to create the first such community at the world’s premier technical university. If there was anywhere bitcoin could take off, it was at MIT.”
The pair had raised $500,000 that would be converted into bitcoin and sent out to students, with half coming from Hudson River Trading co-founder Alexander Morcos and the remaining from around two dozen alumni and other donors from the bitcoin community.
It was enough to cover all 4,494 undergraduate MIT students enrolled in October 2014. Students had to sign up for a waitlist, complete a survey and register a Bitcoin wallet in order to receive the funds. Around 70% of the cohort did so, equivalent to 3,108 undergraduates.
“Giving students access to cryptocurrencies is analogous to providing them with internet access at the dawn of the internet era,” Rubin said in the announcement post. “When the distribution happens this fall, it will make the MIT campus the first place in the world where it will be possible to assume widespread access to Bitcoin.”
Sadly, bitcoin usage at MIT never really took off, despite a Bitcoin Expo and a hack-a-thon in support. Years later, Rubin and Elitzer recounted their experiences with spending bitcoin on campus: “I bought a mango smoothie from a ‘bitcoin-ready’ burrito joint, but the cashier was confused on how to do it correctly,” Rubin said.
Elitzer: “I purchased a hat at the Coop, MIT and Harvard’s student store. Not only did it take them five minutes to track down the only iPad in the store set up to take bitcoin, but I had to leave the store to send the transaction because my phone wasn’t getting any signal at the register.”
As for the MIT study, it was eventually published in Science in July 2017 with a key finding: delaying early adopters’ access to a new technology could slow down adoption.
The researchers had found that by holding back $100 bitcoin payments for a subset of students classed as “natural early adopters,” that group was 4.3 times more likely to dump their coins immediately, as long as they lived on campus.
Perhaps the natural early adopters (NEAs) found value in being perceived as having exclusive access to a new technology like Bitcoin, and thought it better socially to opt out if they weren’t first.
“Our results highlight a novel, understudied mechanism through which NEAs might obstruct further diffusion if they refuse to adopt because their desire to feel unique is challenged or the consumption value they derive from early, exclusive access is reduced,” the researchers wrote.
Joke’s on them. It’s unclear how many have sold in the meantime, but in 2017 more than half of the students were reportedly still holding their coins.
