Software Marries Money: A Q&A with the Leader of MIT’s Digital Currency Initiative

Do you remember what the internet was like in the ’80s? Most likely you don’t—it was still in its infancy, with barely any commercial providers and limited private access. And according to Neha Narula SM ’10, PhD ’15, that’s where cryptocurrency stands today.

“A lot of people think that because Bitcoin’s code was first released in 2009 that it’s a very advanced field, but we’re still fixing fundamental problems,” explains Narula, director of the Digital Currency Initiative (DCI) in the MIT Media Lab. “A lot of people like to say, ‘Well, we’re in something like 1995 of the internet, we haven’t launched Netscape yet, or we’re just getting around to browsers.’ I think we’re actually way earlier than that. I think we’re in the ’70s and ’80s. We’re still building out the core underlying protocols.”

Helping to shape those protocols and providing some structure to the field are the objectives of the team led by Narula, who spent eight years as a software engineer at Google before studying at MIT. The DCI was founded in 2015 on the belief that digital currency was here to stay and that it could potentially define the future of money. Being housed in the staunchly “antidisciplinary” Media Lab means that the initiative has a wide range of collaborators across MIT. Focusing largely on cryptocurrencies and blockchain technology, the group employs and also works with open-source developers outside of MIT, as well as several central banks.

Narula shared with the MIT Alumni Association her take on recent developments in the cryptocurrency space and how the DCI is playing a role.

How do you help people understand cryptocurrency?

I’m a technologist and a computer scientist, not an economist. When I first started to learn about this space, I had to learn how money works, what money is, where it comes from, how it evolved, and how it works today. You realize that money is sort of this made-up thing, but it’s so incredibly powerful. If you think of cryptocurrency as marrying software with money, then you start to get to what the potential is. What the internet did for information, we’re trying to do with money. It might not work out the way that the internet did—it might work out better, it might work out worse—but that’s the general idea. It’s a protocol for moving money and value around, on top of which we can eventually build lots of interesting applications.

Do you think that cryptocurrency could ever replace the US dollar?

When currencies like Bitcoin were originally created, some people thought that maybe they would replace the US dollar. Some people still believe that. I don’t think that’s super likely, but what’s really interesting is we’re starting to see private, industry-led cryptocurrency versions of the US dollar called stable coins—their price is stable; it’s supposed to be pegged to the dollar one-for-one. I think it’s really cool because it’s changing the way people use our payment system and getting people used to a different software interface for money. I think that many different currencies and cryptocurrencies will coexist, because they’re all designed in different ways and for different things. But maybe I’m just in the 1980s, saying there are going to be different internet networks. I have no idea what’s going to end up happening.

What is the DCI doing to advance the field of cryptocurrency?

Cryptocurrency is not yet ready to scale to a billion people. There’s still a bunch of stuff we have to solve with the technology. It’s not very scalable; we have to fix privacy issues, security issues; and usability is also really challenging. We’re also working to better the community. The cryptocurrency space is suffering from a deluge of white papers—the original Bitcoin paper was formatted in a way that makes it look like a scientific or mathematics paper, and since then everyone who launched a new system or network also wrote a white paper. So, we have thousands of these white papers, and it’s hard for people to pick through them and figure out what’s quality and what’s not. This is kind of the problem that conferences and journals and peer review are supposed to solve, so we’re working to develop a journal and planning a conference.

What do you think about investment in this space?

There’s a lot of people who are getting rich and a lot of people who are losing a lot of money because it’s so incredibly volatile, and that’s drawing a lot of attention to the space. I think the money and the investment is way ahead of where the technology actually is. There are some people who do that for a living, who invest in really risky technology, and I think that’s fine if you’re going into it with your eyes open and you know how risky it really is. But I urge people to be careful if you’re going to invest in this space—never invest more than you can afford to lose.

What is an aspect of this technology that you find particularly interesting?

This whole notion of decentralized finance. People are starting to build all sorts of crazy financial instruments on top of cryptocurrency. We’re starting to see some of the tools of the financial industry become a thing in the cryptocurrency world, and it’s going to be really interesting to see these things develop. Does lending work the same way—hedging risk, putting down collateral, taking investment? It’s really all up to be experimented with. And we might see crowdfunding in cryptocurrency really take off and become very powerful.

Photo (above): Grace Benson.