The flagship and founder of cryptocurrency, Bitcoin, and the cutting edge blockchain technology that powers it are at the forefront of incredible opportunity, study and controversy in Lansing.
In the dusty tiled basement of the Eastside business incubator The Fledge, owner Jerry Norris teaches the basics of blockchain technology to Lansing’s youth via a very low tech method — the whiteboard.
It is part of a learning experiment The Fledge is conducting using a basic ledger, a critical component to understanding blockchain technology.
“If we can’t do it on paper, we can’t do it faster on computers. If we don’t start on paper, we will never understand the process and the flow,” Norris said.
On the board is a list of chores and tasks related to The Fledge like washing dishes in exchange for usage of the building's music studio. In theory, when members of The Fledge do dishes, other members see this person doing it and verify a studio time credit for them.
The ledger traacks credits and costs in a transparent, centralized medium, but this method isn’t without flaws.
“Entropy will take over this whiteboard, whether it is dust or people running up against it or maliciously changing it or people writing down a mistake and recording it,” Norris said.
Norris hopes the participants will welcome a digital ledger after seeing the shortcomings of a central ledger. Afterward, Norris will provide digital copies to every person who wanted to do business with the whiteboard.
If all those digital copies stay in sync and produce the same result, Norris and his students will have created a decentralized ledger.
However, this isn’t the last step. If someone figures out a way to change the ledger digitally, that’s when the ledger will reach a final step requiring the most brain and computer power: digital encryption.
Norris said the end result will be a self contained “Fledge Coin” cryptocurrency. However, these same learning principles behind The Fledge’s homegrown crypto currency were exploited in a cyber attack two years ago.
In April 2016, the Lansing Board of Water and Light was hit by a ransomware attack in conjunction with other city facilities nationwide.
Opened via company email, the virus took over BWL’s digital and cyber systems, encrypting all the files and requesting $25,000 in Bitcoin payment to decrypt them.
With the decentralized nature of cryptocurrency and no treasury department or bank oversight, the encrypted transactions are almost untraceable to authorities —the trusted “follow the money” line of investigation simply does not apply to this realm.
According to a BWL report released in Nov. 2016, BWL paid the ransom. The $25,000 in Bitcoin was only a drop in the bucket compared to the roughly $2 million BWL subsequently spent to invest and rework its cyber security against future attacks. Most of the expense was covered by insurance aside from a $100,000 deductible, according to BWL.
“Based on our discussions with cyber-security experts, law enforcement agencies, and other organizations who have also been the targets of these types of criminals, paying the ransom was distasteful and disgusting but sadly necessary, and was the only action we could take to ‘unlock’ our system and free it from the ransomware,” BWL CEO Dick Peffley said.
The Fledge now houses the former East Lansing Bitcoin ATM where BWL paid the $25,000 ransom, Norris said. It is one of five in Greater Lansing.
The older model machine sits in the corner of the former church atrium with an adjacent small security camera on watch. Its default screen simply displays “Buy and sell Bitcoin here.”
Norris said The Fledge tries to keep an eye on who uses it and for what reasons.
“If we start hearing about the more evil side of it, that’s where we will ban them from the machines,” he said.
Aside from the ledger experiment, The Fledge has the most serious on the ground framework of Bitcoin in the Lansing area. It plays host to a group of 10 cryptocurrency and blockchain enthusiasts called the Lansing Blockchain Gang. All of its vendors accept cryptocurrency as payment and it was briefly home to a Bitcoin mining operation.
Mining Bitcoin or cryptocurrency in general is when a network of computers are hooked up and lend their computing power as members of the blockchain verifying transactions in exchange for a small percentage in return.
The bulk of The Fledge’s mining force was made up of old gaming computers and processors out of gaming systems.
It wasn't a very lurcrative option. “We ran it as a complete academic exercise and we lost money in electricity use compared to what we gained. We are not talking significant money, but dollars,” Norris said.
The Fledge plans to develop a system that will compare the price of cryptocurrencies versus the electricity cost to mine them and make decisions off this data.
Supplementing electricity use with solar arrays will also be an option, Norris added.
The applications for cryptocurrency and blockchain as an entrepreneurial tool are also being looked at from the academic perspective in Lansing.
MSU director of undergraduate entrepreneurship Neil Kane said cryptocurrency caught his eye in 2017 after Bitcoin blossomed to nearly $19,800 per coin.
“Going into the spring of 2018, I began to hear the number of universities who are leaders in the space offered courses in blockchain,” Kane said. “The New York Times did a story called ‘Cryptocurrencies Come to Campus.’ I saw that article, ran it by the entrepreneurship program and thought we should do it.”
At the time, Kane said he had no intention of teaching the course and thought it was more about awareness. “It circulated to the deans and they responded favorably,” he said.
In Fall 2018, the course MG 491 was born. It was put together in only four months and was the first of its kind in Michigan higher education.
The staying power for cryptocurrencies like Bitcoin is up in the air, but the technology that powers it is revolutionary and warrants study, Kane said.
Kane saw blockchain technology as introducing new ways to track pharmaceuticals, document real estate transactions and manage supply chain statistics.
They also had to develop a business plan using blockchain technology.
One group argued blockchain’s encrypted decentralized ledger could better keep records of confidential documents under HIPPA laws more efficiently than any human system, Kane said.
“I’m told by students today that their employers say the skills in blockchain are in demand," Kane said. "For those who were interested, we can develop the competency and credentials for the job market to go in that field.”
MSU has not given an update on whether the course will be returning next fall.
“If we offer it again, there are tweaks and refinements to make to it. There was a learning curve. It was like a beta version. Now that we had a dress rehearsal, next time we would be a lot smarter about doing things,” Kane said.
There's a Wild West aura to cryptocurrency that appeals to Norris and his entrepenurial ilk but not to state officials. Michigan department of the Attorney General still has an active consumer alert on the dangers of “virtual currency.”
According to the consumer alert, “Virtual currency is not legal tender and is not issued or backed by any central bank or governmental authority… Because it is not real currency, virtual currency should be treated like an investment. As with any investment decision, you should thoroughly research virtual currency before investing your hardearned money.”
Don’t go out buying cryptocurrency thinking to be the next millionaire, Norris said.
“The big mistake people make when they are getting into this and investing is they think it is all going to be like 2017. People probably got hurt when they were buying Bitcoin at those amounts thinking they could double the amount of Christmas presents that year. It didn’t turn out for them.”
Bitcoin is now trading at around $3,400 per coin, down $16,400 from its 2017 high.
Utility and adoption are the indicators for good cryptocurrency, Norris said.
For Norris, investing in cryptocurrency is about hanging on for the ride.
“I’m trying to curl up in a ball and wait to see what happens. I do believe it is way undervalued. This is not investment advice, but I believe in the growth of it.”
Norris said the real value in cryptocurrency and its blockchain technology is providing individuals with powerful ways to circumvent the power structure and judgement from big institutions.
“This is the key point: Wall Street controls how the money flows and who gets the money. The rich get richer and the poor get poorer or whatever you want to say. It is the decentralized aspect of Bitcoin that says ‘Ok, we shouldn’t have a single person or organization that can control this power.’ It should be more driven in a pure, free market fashion.”
Cryptocurrency also gives individuals deemed unbankable a way to store and exchange goods, he added.
“If I try to go to a bank and have a credit problem, they might not let me have a bank account. If a lady might not like how I look —if I’m Muslim or a certain color or whatever— there is a lot of judgement in that process, some of it legal, not legal and personal.”
We have alternatives to this method, Norris said.
“If we really want to help underserved people, we need to get them bankable. If they can’t be bankable in the traditional sense, cryptocurrency offers a way.”
One of Norris’ mottos is ‘Keep Bitcoin shady.’ This isn’t an endorsement for bad activity, he said.
“I see banks and institutions having futures on the cryptocurrency exchange. As I see that getting introduced, I see all these little people I think it could help getting pushed out of the system. When I say ‘keep Bitcoin shady,’ what I really mean is keep big institutions out of it.”
The blowback on cryptocurrency and blockchain technology is like listening to an old man lament over new progress, Norris said.
“Why it sounds so bad or evil is the bankers telling you how horrible it is, just like the Taxi drivers telling you how horrible Uber was and the hotels telling you how horrible AirBnB was. I would ask people to look at it objectively. I remember when we were scared of the internet and scared of email.”
We had no idea how big the internet was until we further experimented with it, Norris said.
“We are in that phase with cryptocurrency right now. We have no idea how this is going to change things.”
For Lansing, there might be no change to the local economy if blockchain and cryptocurrency was to boom, Norris said.
“It may not be so much about what the blockchain is doing to Lansing; It might be what Lansing can do for the blockchain and effect the rest of the world. People are being enabled with this technology and we can create great things too.”
For more information, visit thefledge.com
Graphic designed by Austin Ashley