About 40 years ago, Silvio Micali and colleague Shafi Goldwasser wanted to learn how to play poker together on their phones. They needed a way to make sure neither of them could figure out the other player’s hands.
The two UC Berkeley computer science graduate students developed what Micale calls “the first secure cryptographic scheme the world has ever seen.” For their invention, which proved vital to the modern internet, they were awarded the AM Turing Prize, considered the computing equivalent of the Nobel Prize.
Today, Micale, 67, is focusing on another application of cryptography: the blockchain, which is the basis for bitcoin and other cryptocurrencies. At the Milken Institute global conference this week, MIT professor Algorand promoted a blockchain he developed that he says is greener, faster, and more secure than other protocols.
Blockchains are usually described as public ledgers where transactions are recorded on an open network. One of the biggest security challenges is validating a batch of transactions to add to the ledger. Algorand says it is using a new approach that involves randomly selecting its users to ensure that the blocks of transactions are more resistant to hacking, which cost holders of cryptocurrency $14 billion last year with a single balance.
Algorand is one of a swarm of new blockchains that aim to transform finance and the modern world by serving as platforms for so-called decentralized smart contracts that can be conducted person-to-person and across borders without government intermediaries.
An announcement at the Milken conference about Algorand’s partnership with FIFA, the world soccer governing body, drove the prices of its algo coin, making it the 30th largest cryptocurrency on Coinbase on Tuesday, with a market capitalization of $4.5 billion. (Bitcoin has a market capitalization of $725 billion.)
Your contribution to modern cryptography has won you a Turing Prize. What applications does it have today?
It is used to secure a lot of things that go through the Internet. When you send a message to Citicorp, one of the practical side products of our work is that your browser knows that it is speaking truthfully to Citicorp and not to a broker who is intercepting messages and pretending to be Citicorp.
Bitcoin has been around since 2009. What is your first impression of it?
I bought the main idea. The idea is nice, but the solution is somehow not quite elegant. We all aspire to beauty and elegance in what we do.
One criticism of Bitcoin is the power needed to verify transactions and mine new coins. There is a bill in the New York State Assembly that would impose a moratorium on bitcoin mining. Can you describe Algorand’s energy efficiency in terms I can understand?
Bitcoin absorbs as much electricity as a small country, and we will consume as much electricity as about 10 homes. [Algorand uses a so-called pure proof-of-stake method for validating blocks of transactions, versus bitcoin’s far more energy-intensive proof-of-work system.]
Where are we on the adoption curve with blockchain technology?
We are in a very divided world. We have blockchain 1.0, 2.0, 3.0, 4.0 – which I think Algorand is – coexisting during the same time. So this is very unique. If you look at the industrial revolution… you have more and more development [technologies], so usually not all of these things coexist. We are in a very unique moment where there are highly developed chains like our blockchain and when there is a very early generation of blockchains still in existence at the same time. It’s like you have Neanderthals and Homo sapiens living together.
What do you see after 10 years down the road?
The moment the blockchain starts being used in transactions, a few blockchains that are really capable of transacting at a very low cost, will emerge, in my opinion. When traditional finance starts getting on the blockchain, you will see that the blockchain is already being used in a massive way and transactions will accelerate. And store a few values [like bitcoin] Maybe it will stay.
New blockchains such as Algorand are being created to serve as platforms for diverse decentralized applications such as digital currencies, carbon offset trading, and personal identification. However, many people are more interested in buying coins as a speculative investment.
First of all, we can’t stop people from speculating. But what we want to offer is technology to enable people to use our platform for a variety of transactions and really complex transactions as well.
Can you give an example?
So if you look at stocks, right, stocks have a settlement time of T plus 2. T is the time you buy a stock and two is the number of days after that trade is settled. This is two days of waiting for the settlement of the transaction. We settle our [blockchain] At 4.4 seconds today, at the end of the second quarter at 4 seconds and at the end of the third quarter at 2.5 seconds. This is a huge difference.
This future is hard to predict and anyone logging into a Coinbase account for the first time will be baffled by all the investable cryptocurrencies. What is the only advice you would give a beginner?
I really think you should invest in what you understand. But no one can say that you have to understand technology, no more than you have to understand how airplane flight works to take a plane. But you have to ask some very basic questions.
What are these?
To invest in cryptocurrencies, the primary tool is consensus [verification of the blockchain]. One question I would like to ask if you want to join the blockchain is, “Can I join the consensus process on the blockchain?” This is a very fair question. And if the answer is, “Sure, buy two supercomputers and join us.” And you say, “I don’t have a bunch of supercomputers and I don’t have the money to buy them.” So, I would say be careful.
Any other bad answers?
If the answer is, “You can but we already have a club. Sorry, you are not a club member.” So I have to say you should be concerned.
Is there a good answer?
If the answer is that you are not only allowed to join, but you have the technical means to join because your laptop is sufficient or something very basic, then I have to say that this means that the blockchain is really decentralized. I believe that decentralization is really the ultimate source of security.
The last question. You are a brilliant computer scientist with a Turing Award at MIT. Were you lying to us? Could you be Satoshi Nakamoto, the legendary anonymous Bitcoin creator?
[Big laugh.] No, but I can’t prove it.