Bitcoin, the world's first decentralized cryptocurrency, is met with an even mix of fear, skepticism or excitement by those familiar with the virtual form of money. Introductions usually are greeted with a mere scratch on the head. According to a recent survey by Bitcoin organization Coin Center, 65 percent of its respondents have never heard of Bitcoin.
Eight years after its launch in 2007, still not much is known. Even the identity of its creator (or creators) – known only by the pseudonym Satoshi Nakamoto – remains an unsolved mystery.
Its detractors are vocal and bold. Is Bitcoin safe? Trustworthy? Convenient? Will it, can it, succeed as a mainstream currency? Even Frank Abagnale Jr., the infamous imposter and scam artist depicted in the 2002 film "Catch Me If You Can," singled out Bitcoin as "the greatest scam of all time" in The Atlantic.
One person who is excited about Bitcoin is David Duccini ’94, ’99 M.S.S.E. He believes in Bitcoin's promise so much he founded a charitable organization based solely in Bitcoin. Do a Bit of Good serves as a conduit between nonprofits and pro-social causes and their supporters. Duccini also hopes it will help “change the conversation” about Bitcoin.
“There's been a lot of negative press around Bitcoin. It's been used for illicit purposes, for instance, like that Silk Road thing that was in the news quite a bit last year, so I wanted to start creating some positive buzz and energy. You could definitely say I'm optimistic about the value of cryptocurrencies.”
A charity is born
As cryptic as Bitcoin is to the minds of many, the way Do a Bit of Good works is surprisingly simple. Perhaps it's because Duccini, who has bachelor’s and master’s degrees in software engineering from St. Thomas and an M.B.A from Carlson School of Management from the University of Minnesota, understood the concept of Bitcoin from the get go.
“Between the two advanced degrees, I got it right away. I got the technical side, the software piece of it, the consensus and the distributive nature of it. Then from the M.B.A. side I could see why it had value and how it could work,” he said.
According to Duccini's model, organizations register, for free, with Do a Bit of Good's directory. Then, they upload their own photo albums and link them to as many funding campaigns as they want to create. The organizations' supporters then may download a patent-pending screen saver program that runs in tandem with a Bitcoin generation system, together developed by Duccini. When a supporter's computer is idle, the screen saver displays the campaign's images and triggers the program to "mine" the Internet for Bitcoins, which are then donated to their favorite charities.
Duccini helps the organizations in setting up an exchange of their choice, like BitPay or CoinBase, which is basically the same concept as PayPal but using Bitcoins. The coins are sent to whatever payment address the organizations want and they can convert them to U.S. dollars themselves.
Do a Bit of Good is technically a for-profit, but Duccini has never made money off it. He's in the midst of setting up the Strength in Numbers Foundation, a nonprofit parent organization, to the charity's brand and system. It soon will be granted 5013c status.
"I wanted to do Do a Bit of Good as a for-profit because, in my mind, the only real difference between for- and nonprofit is a tax designation," he said. "Fundamentally all organizations are interested in sustainability. In the end we feel that having a nonprofit itself own and manage the system feels better and aligns with stakeholder expectations."
A handful of animal shelters were among the first to try out his idea.
"The cool thing, particularly with animal rescues, is that this supports their core mission of finding homes for adoptable pets," Duccini said. "Our screen savers are flashing a picture of a different adoptable pet every five or 10 seconds, so someone could walk by their screen, see a dog or cat that they or someone they know might be interested in, and call the shelter for more information."
Participating organizations needn't have a working knowledge of Bitcoin, just a means to accept them, which Duccini's organization facilitates, like crowdfunding but on a micro scale. The dozen or so organizations in Duccini's network, which also includes food shelves, a homeless shelter and a clean water initiative, currently make around 50 cents a day, "but it's money they wouldn't have had anyway," Duccini said.
A bit about Bitcoin
At the dawn of Bitcoin, a computer processor could handle the energy load required to solve the math puzzles, a process known as mining, that secure the public ledger. These days only specialized hardware and software designed specifically for Bitcoin mining will do the trick.
“The hardware is customized, so you just plug it in and point it at an IP address and it will make guesses all day long," Duccini explained. “The puzzle acts like a throttling mechanism or traffic light that leaks money into the economy consistently every 10 minutes and keeps the network secure. That's all the puzzle is there for.”
When an individual's computer solves a puzzle (algorithm), she/he is awarded a share of 25 Bitcoins; however, because most computers can't solve the problem on their own, it's de rigueur for groups of people to work together, chipping away at the puzzle bit by bit, so to speak.
“What you're doing is like taking random guesses at winning lottery ticket numbers,” he said. "There's math behind it, of course, but basically everyone who's mining with you is taking random guesses at the solution to the algorithm. The first person who finds it gets the reward for that round. So let's say I helped, my share would be based on the number of guesses my computer can make per second or per minute.”
Duccini thinks if the future doesn’t favor Bitcoin, it will favor something else like it, which is why he was compelled to get in on the act.
“For me, it was never about the money. It was just fun to learn the underlying technology, which is so cool, and then the fact that it has value was just a side benefit,” he said. “When I first started mining, it was just an experiment. I didn't think Bitcoin would become a new currency, but I thought it was disruptive enough … it turns the notion of money completely on its head because most monetary transactions are private affairs between buyer and seller," Duccini said.
In the Bitcoin model, everyone who participates in the Bitcoin economy has a copy of the ledger, which protects it against counterfeiting. Duccini explained, “So let's say I'm account number one, and I'm going to pay $5 to account number two. I tell everybody, and they dutifully write that down in their copy of the ledger. So although no one knows who account one and two belong to, they do know the values exchanged, and that's what miners do. They verify these transactions to make sure people can't spend money they don't have.”
The total number of Bitcoins in existence, found and yet to be discovered, is capped at 21 million tokens. (There are eight decimal places, and most people can transact using micro payments.) Once they've all been mined, the Bitcoin market will cease to grow and only those who already are in possession of Bitcoins can take part in their exchange. Despite its limited life cycle, Bitcoin prospects still may have time to board the Bitcoin wagon. As the puzzles get harder, fewer Bitcoins are released into the market each successive year. With each solved puzzle, miners are awarded mere fractions of a Bitcoin, with one Bitcoin now worth about $200, down from a peak of more than $1,200 in late 2013.
Despite a 60-percent drop in its value in 2014 Duccini is still in good company as more entrepreneurial powerhouses throw their hats into the ring.
In December Microsoft began to accept Bitcoins as a payment option to buy apps, games and other digital content from Windows, Window Phone, Xbox Games, Xbox Music or Xbox Video Stores. Even the New York Stock Exchange recently stepped into the Bitcoin arena, backing CoinBase, a U.S.-based Bitcoin exchange that opened in January, and will work to bring increased stability to the Bitcoin ecosystem. The same month, Cameron and Tyler Winklevoss, the twins of early Facebook notoriety, announced their plans to take Bitcoin mainstream as they unveiled “Gemini,” a Bitcoin exchange for U.S. consumers they hope will grow into the “Nasdaq of Bitcoin.”
“We have that top 1 percent thing happening in Bitcoin,” he said. “Only the top 1 percent can really afford to mine now. It's the dirty little secret of Bitcoin, you could say – as the puzzles get harder, your hardware burns up a huge amount of energy."
His hardware, purchased just a year ago, already is antiquated, so he plans to discontinue mining in the near future but will continue to grow Do a Bit of Good.
Despite Bitcoin's rarefied outlook, Duccini, who also teaches in St. Thomas' Mini MBA program and works in security architecture for Target, said he will continue his research in a new cryptocurrency named Givecoin – using his own customized water-cooled computers that help keep the high-end graphics cards cool and efficient.
He also may reward himself in downward dogs and sun salutations. Duccini recently convinced his favorite yoga studio, Bliss Yoga in St. Paul, to accept Bitcoins.