Opinion: MIT-led team is aiming to build a better cryptocurrency – Sandy Pentland

Sandy Pentland, MIT Sloan Information Technology Professor

From MarketWatch

New technologies that make it possible to reinvent our financial system have exploded over the past decade.

Bitcoin BTCUSD, ethereum and other cryptocurrencies are proof that there’s a market for alternatives to the big, powerful players. And yet, it’s unclear how these cryptocurrencies will affect the economic landscape. Problems like bubbles, financial crashes and inflation aren’t going away any time soon. (Ahem, note recent events.)

But in the future, things could be different. These digital currencies and their supporting infrastructure hold great promise for deepening our understanding of the monetary circuit. With newfound clarity, we can build tools for minimizing financial risk; we can also learn to identify and act on early-warning signals, thus improving system stability. In addition, this new level of transparency could broaden participation in the economy and reduce the concentration of wealth.

A crypto alternative

How might this work? Leading cryptocurrencies, with bitcoin being perhaps the most famous, or infamous, example, have considerable logistical limitations. An alternative is needed. Read More »

How blockchain technology will impact the digital economy–Christian Catalini

MIT Sloan Professor Christian Catalini

MIT Sloan Professor Christian Catalini

From University of Oxford Faculty of Law.

The Platform of the Future?

The survival of any organization depends on its ability to outperform competitors and marketplaces in attracting and rewarding talent, ideas and capital. As communication and transaction costs have drastically declined because of the internet, new platforms have emerged, delivering goods and services at a speed and efficiency previously unimaginable. These new digital players took advantage of the changes in the underlying technology to challenge established business models and rethink pre-existing value chains. The ones that succeeded did so because they achieved a level of efficiency that their brick and mortar counterparts had trouble replicating. Through online reputation and feedback systems, digital players were able to create global marketplaces where individuals, products and services could be matched more effectively than ever before. By providing curation and ensuring the safety of transactions, these new types of intermediaries were able to reap the returns of this first wave of digitization.

A similar transformation is about to happen as blockchain technology and cryptocurrencies mature and mainstream applications emerge. Under this new wave of technological change, intermediaries will still be able to add value to transactions, but thenature of intermediation will fundamentally change. Whereas some established players will be able to use this opportunity to further scale their operations, others will be challenged by new entrants proposing entirely new approaches to value creation and value capture.

Read More »

Blockchain: New MIT Research Looks Beyond the Hype – Christian Catalini

MIT Sloan Professor Christian Catalini

MIT Sloan Professor Christian Catalini

From Crowdfund Insider

With a market capitalization of approximately $12 billion and with the price of Bitcoin reaching towards its 2016 high, Bitcoin is both the most established and the most secure cryptocurrency. Its ascendancy has triggered both a great deal of enthusiasm and a fair share of concern.

On the utopian side, optimistic proponents assert that cryptocurrencies will free consumers from the tyranny of their domestic currencies, will force out entrenched financial players and payment systems, will reduce transaction costs for businesses and fees for consumers.

On the dystopian side, pessimistic opponents argue that cryptocurrencies may undermine traditional monetary policy, support illicit activity, or simply cannot meet the speed, scale and privacy requirements of real-world financial applications and marketplaces.

Read More »

Why banks fear Bitcoin — Trond Undheim

MIT Sloan Sr. Lecturer Trond Undheim

From Fortune

Bitcoin heralds a new age more disruptive than that of today’s Internet. Disruption can be a good thing, especially when it affects banking, a failing set of business models which, for all the tweaks, have been virtually unchanged for millennia. Paradoxically, some banks are afraid of Bitcoin because it would force them to innovate.

Bitcoin is but the most famous example of an emerging technology network with the potential to improve banking. It belongs to the new type of financial animal called crypto currencies, i.e. decentralized, secure money storage and money transfer enabled by the Internet. What Bitcoin, and the even more promising Ripple network do, is not to poke a hole in banking’s basic business models—lending, deposits, trading, and money exchange—but to create the embryos for entirely new markets typically referred to as the Internet of Value. That is, a way for regular folks, as well as specialists, to potentially monetize everything, regardless of location, traditional market access and jurisdiction.

Cryptocurrencies have been with us for over five years, an eternity by Internet time. Using the elegance of mathematics they enable almost instant transfer of value at almost no cost between two parties without the need for a trusted third party. The disruption lies exactly there: in disrupting the intermediaries.

For a few years already, we have been talking about the sharing economy. Companies like AirBnb and Uber have enabled previously untapped, idle assets such as your empty bedroom or your second car to be mobilized for financial gain. Liquidizing such stale assets has added convenience in the utterly inefficient markets of room rentals and transportation services.

Read the full post at Fortune.

Trond Undheim is a Senior Lecturer at the MIT Sloan School of Management.

Innovating with Bitcoin at MIT — Christian Catalini

MIT Sloan Professor Christian Catalini

MIT Sloan Professor Christian Catalini

From Xconomy

In November, we began distributing $100 in Bitcoin to every undergraduate student at MIT. A large share of the 4,500 eligible students participated in the project.

Bitcoin is an innovative payment network that allows for instant peer-to-peer transactions with zero or very low processing fees on a worldwide scale. The objective of the study is to observe the diffusion of Bitcoin, a software-based, open-source, peer-to-peer payment system on the MIT campus.

The initiative began in April 2014 when students Jeremy Rubin and Dan Elitzer organized the idea, raised the funds from donors, and launched the MIT Bitcoin Project. I started working with these students when it quickly became clear that the project had to become a full research study and had to meet the rigorous requirements of academic research at MIT.

Observing the ways students will innovate because of their newfound Bitcoin cash should be fascinating: MIT students are tech savvy, not set in their ways, generally a bit cash strapped anyway, and often open to new innovations. In the same way that MIT gave students early access to computing resources through the Athena project in 1983, this project intends to give participants early access to a digital currency.

Read the full post at Xconomy.

Christian Catalini is the Fred Kayne (1960) Career Development Professor of Entrepreneurship and Assistant Professor of Technological Innovation, Entrepreneurship, and Strategic Management at the MIT Sloan School of Management.