May 09, 2018
Show Me the Money: The Time is Ripe for Understanding Cryptocurrencies
By Param Vir Singh, Carnegie Bosch Associate Professor of Business Technologies of the Tepper School of Business and Ramayya Krishnan, dean of Heinz College Of Information Systems And Public Policy And William W. And Ruth F. Cooper Professor Of Management Science And Information Systems
From the time human beings began exchanging discs of metal for goods and services, the concept of money has been evolving. First it was metal to paper; then paper became plastic; then plastic became an app.
Now, it seems, we stand poised for a new iteration of the money evolution: cryptocurrency, in all its volatile glory, has burst onto a landscape that is ripe for disruption. That’s because the cost of all of our tried-and-true interactions is starting to add up. Each time we interact – be it through a bank, our credit card company, or our phones – somebody, somewhere, is tacking on a transaction fee. If a cryptocurrency can get the job done cheaper, it’s bound to catch on. Many of our colleagues in the Carnegie Mellon University academic environment believe that as the world becomes more digitized, cryptocurrencies will become the norm.
The problem is that even with all the attention bitcoin has generated recently, how cryptocurrency works remains a mystery. And bitcoin is just the tip of the iceberg; though it accounts for about 80 percent of the cryptocurrency market, roughly 2,000 other types exist, none of them well understood. That’s where a university can play a critical role in harnessing this disruption in a beneficial way.
At Carnegie Mellon University we confront complex problems everyday – whether it’s building driverless cars, sending robots to Mars, or unwinding economic conundrums. Carnegie Mellon is at the very leading edge of thinking on how technology is fundamentally transforming society and business.
Our vision with cryptocurrency is admittedly ambitious, but we are excited at the prospect: simply put, we are developing a project that uses our Pittsburgh campus to study cryptocurrency in real time, with real transactions involving real people. That’s the impetus behind CMU Coin, a multidisciplinary, cross-campus collaborative effort that seeks to build a deeper understanding of the impact cryptocurrency could have on our larger society.
There are two key elements to cryptocurrency that are ripe for this kind of exploration. It’s a product of both technology and economics. Carnegie Mellon is a campus with world-renowned experts in cybersecurity, economics, finance, public policy and technology. Our intent is to pool this diverse expertise together and apply it to a nascent product, bringing a better understanding to its users before it takes a deeper root in the real world.
Technology experts can help us understand how to make a cryptocurrency system more stable and more secure. For example, how can we prevent double spending, or digital counterfeiting? Economists can determine how regulation impacts the currency’s behavior. And public policy scholars can examine issues such as anonymity and privacy – how much to allow, and how much to withhold to protect the public from possible illegal activities.
By creating our own cryptocurrency, CMU Coin, as a testbed – which will be used throughout campus, and be associated with a verifiable, real-world identity – will allow us to study how people use this product and how these interactions develop. Imagine having the same microcosm at the dawn of the Internet, helping to predict and shape its growth in our society. The value of that kind of window on the future would be hard to calculate.
We look forward to furthering Carnegie Mellon’s tradition as a thought leader in forward-thinking research designed to tackle our world’s emerging opportunities.