Digital bitcoin wallet provider Coinbase is offering a promotional free $10 in Bitcoin to get college students interested in Bitcoin (and using their service). Inspired by MIT, who gave every student on campus $100 in Bitcoin, Coinbase recognized the potential for getting young people involved in the cryptocurrency movement.
The promotion was announced on Coinbase’s blog yesterday after it had been running on hearsay for a few days. Any user who signs up with a *.edu email address from any of around 500 approved universities worldwide will almost instantaneously see the equivalent of $10 USD deposited to their new Coinbase wallet.
For the uninitiated, Bitcoin is a digital currency that offers an alternative to any national currencies. In addition to simply being alternative, Bitcoin transactions are highly secure, efficient, low in fees, and can be made with near-anonymity. Unlike credit card transactions, there is no secret number that someone can learn to impersonate you. Instead, you have one or more public addresses from which you can send or receive Bitcoin payments.
Instead of relying on third parties like banks, who will try to turn a profit just for being a middle-man, Bitcoin is based on peer-to-peer technology. Everyone with a wallet contributes to keeping the network alive. Perhaps more importantly, there are no countries or corporations that can swoop in and change monetary policy, create arbitrary rules, or anything like that.
At this point, a lot of people are putting borderline supercomputers on the network to process all of the transactions and “mine” for new Bitcoin. By allowing people to use huge processing power to mine for Bitcoin, the system encourages people to join the peer-to-peer network that keeps it afloat. At some point, once it is so well-entrenched that there is no need for this incentive, there will not be any Bitcoin left to mine.
Bitcoin is simultaneously public and private in its transactions. Every Bitcoin transaction is recorded in a public ledger, which is the main way it is impossible to double-spend your money. After all, one of the key worries about non-physical currency is that it could be spent more than once and nobody would know the difference. Well, when your transactions are recorded publicly, everyone knows that two particular Bitcoin addresses were involved in a money transfer.
Since you can create an infinite amount of public addresses, though, nobody has to know which belong to you. I could solicit donations at one Bitcoin address, which belongs to me, but send it from a different one when I decide to spend it. Likewise, I can (and should) use a new address for each transaction, so nobody can try to collect my buying data – even if it would be difficult, since you’d have to know the identity of the other person, too. Each address will connect to your home wallet, but whoever you are doing business with won’t know that.
The public ledger is how your wallet knows how much money belongs to you. However, that ledger is encrypted using the same cryptological methods that the highest-grade of classified communications of the US government and military use. You will have a private key, which is like a password, except that you can’t make it something like “password” or equivalently weak passphrases. The private key enables you to prove that all of the Bitcoin that belongs to you, belongs to you. Without your private key, it would take a really, really long time to crack the code. How long?
If you assume:
- Every person on the planet owns 10 computers.
- There are 7 billion people on the planet.
- Each of these computers can test 1 billion key combinations per second.
- On average, you can crack the key after testing 50% of the possibilities.
Then the earth’s population can crack one encryption key in 77,000,000,000,000,000,000,000,000 years!
That is according to the latest research on cryptography. In other words, unless you yourself give up your private key out of carelessness, your Bitcoin are very safe.
So what does Coinbase have to do with it? Coinbase is an online digital wallet that makes it easy to access your Bitcoin stash over the ‘net. It is more secure to store your Bitcoin wallet on your computer or mobile phone, but hey, $10 is $10. I transferred the $10 to my online wallet at Blockchain.info, who I found to be a bit more secure and user-friendly.