About 40 years ago, Silvio Micali and his colleague Shafi Goldwasser wanted to find out how to play poker together on their mobile phones. They needed a way to ensure that neither could know the other player’s hands.
The two UC Berkeley computer science students designed what Micali calls “the first secure encryption scheme the world has ever seen.” For their invention, which proved vital to the modern internet, they were awarded the AM Turing Award, considered the equivalent of the Nobel Prize in computers.
Today, Micali, 67, is focusing on another application of encryption: the blockchain, which forms the basis of Bitcoin and other cryptocurrencies. At this week’s Milken Institute Global Conference, the MIT professor promoted Algorand, a blockchain he is developing that he says is greener, faster, and more secure than other protocols.
Blockchains are typically described as public ledgers that record transactions on an open network. Validating a series of transactions to be added to the general ledger is one of the biggest security challenges. Algorand says it uses a novel approach that involves randomizing its users to ensure transaction blocks are more resilient to hacks that cost cryptocurrency holders a record $14 billion last year.
Algorand is among a bevy of new blockchains aiming to transform finance and the modern world by serving as platforms for so-called decentralized smart contracts that can be performed person-to-person and across borders without government intermediaries.
An announcement at the Milken conference that Algorand would be partnering with FIFA, the governing body of world football, boosted the prices of its ALGO coin, making it its 30th coin on Tuesday with a market cap of $4.5 billion .largest cryptocurrency on Coinbase. (Bitcoin’s market cap is $725 billion.)
Your contribution to modern encryption has earned you the Turing Award. What applications are there today?
It is used to secure many things that are transmitted over the Internet. When you send a message to Citicorp, one of the handy by-products of our work is that your browser knows it’s really communicating with Citicorp and not with a middleman intercepting the messages pretending to be Citicorp.
Bitcoin has been around since 2009. What was your first impression of it?
I bought into the main idea. The idea is nice, but somehow the solution isn’t exactly elegant. We all strive for beauty and elegance in what we do.
One of the criticisms of Bitcoin is the energy it takes to validate 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 blockchain technology adoption curve?
We are in a very divided world. We have Blockchain 1.0, 2.0, 3.0, 4.0 – which I think is Algorand – coexisting at the same time. So this is very unique. If you look at the industrial revolution… you’re getting more and more sophisticated [technologies], so not all of these things usually coexist. We are in a very unique moment where there are extremely sophisticated blockchains like ours and where there are very early generation blockchains that are still there at the same time. It’s like Neanderthals and Homo sapiens living together.
What do you see in 10 years?
The moment the blockchain is used for transactions, I think the few blockchains that are truly capable of transacting at very low cost will emerge. When traditional finance starts moving onto the blockchain, you will see that the blockchains that are used really massively and transactionally will accelerate. And a few stores of value [like bitcoin] might stay.
New blockchains like Algorand are being created to serve as platforms for various decentralized applications such as digital currencies, carbon offset trading and personal identification. However, many people are more interested in buying the coins as a speculative investment.
First of all, we cannot stop people from speculating. But what we want to give is a technology that allows people to use our platform for a variety of transactions and also for really sophisticated transactions.
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 transaction is settled. That’s two days of waiting for a transaction to settle. We regulate ours [blockchain] Transactions in 4.4 seconds today, 4 seconds at the end of Q2 and 2.5 seconds at the end of Q3. That’s a huge difference.
This future is difficult to predict and any person logging into a Coinbase account for the first time would be confused by all the investable cryptocurrencies. What single piece of advice would you give a newbie?
I really believe that you have to invest in what you understand. But nobody can say that you have to understand the technology any more than you have to understand how a flight works in order to take a plane. But you have to ask some very basic questions.
What are these?
To invest in cryptocurrency, consensus is the most basic tool [verification of the blockchain]. One question I would ask if you’re looking to join a blockchain is, “Can I participate in that blockchain’s consensus process?” That’s a very valid question. And if the answer is, “Sure, buy some supercomputers and join us.” And you say, “I don’t have a bunch of supercomputers or the money to buy them.” So, I’d say be careful.
Any other bad answers?
If the answer is “You could, but we already have a club. I’m sorry, you’re not part of the club.” Then I have to say that you have something to worry about.
Is there a good answer?
If the answer is that not only are you allowed to join, but you also have the technical means to join because a laptop is enough or something very simple, then I have to say that the blockchain is truly decentralized. And I believe that decentralization really is the ultimate source of security.
Last question. You are a brilliant MIT computer scientist who received the Turing Award. did you lie to us Could you be Satoshi Nakamoto, the legendary anonymous creator of Bitcoin?
[Big laugh.] No, but I can’t prove it.