I always find it interesting when people who are highly accomplished in their respective fields start getting their heads turned by cryptocurrency. One such case is Catherine Tucker, the Sloan Distinguished Professor of Management and a Professor of Marketing at MIT Sloan. 

I came across her excellent paper, Antitrust and Costless Verification: An Optimistic and a Pessimistic View of the Implications of Blockchain Technology, which was way ahead of its time, being written in 2018 yet still highly relevant today. Indeed, she surmises that at the time, her academic peers thought digital currencies were merely “a flash in the pan”. 

Sitting down to interview Catherine on the paper, as well as changes in the landscape since the paper was written four years ago, I got some answers on some topics that me curious. 

CoinJournal (CJ): It was quite early to be writing academic papers on cryptocurrency back in 2018 – how did you first get into crypto and decide to write the paper? What was the initial reaction from your professional peers?

Catherine Tucker (CT): As a researcher I started working on issues of cryptoeconomics back in 2014 when I was part of the team that helped run the MIT bitcoin experiment where we gave $100 in bitcoin to each MIT undergraduate. 

At the time my academic peers thought of digital currencies as a flash in the pan. 

CJ: Have your views on the impact of blockchain technology changed since 2018?

CT: No. Though I think more people are understanding that blockchain is not bitcoin. 

CJ: Would you have expected back in 2018 formal regulation around crypto to have progressed further at this stage, with regards to both antitrust and other areas?

CT: I think regulation has been slow and backwards looking so far. I think we have work to go when we come up with laws that reflect the nature of crypto rather than instead being laws that try and make crypto technologies work like earlier vintages of technologies. 

CJ: One area I immediately think of upon reading your (excellent) paper is that of Central-Bank Issued Digital Currencies (CBDC’s). The power this would grant either a large company (say Apple, Google) or a government could be enormous – do you have any thoughts on this, especially from an antitrust perspective?

CT: Well central banks already are in charge of fiat currencies! And we trade off any market power due to tradeoffs about stability and credibility. I don’t think this will be different here. I also think that in general due to low switching costs that any tech firm sponsored cryptocurrency is unlikely to have substantial market power in the traditional economics sense. 

CJ: Big tech companies have become even more powerful in the last few years. Do you still believe blockchain alternatives could theoretically offer more democratic platforms and impact growing antitrust, as discussed in the paper in 2018?

CT: Blockchain by making things less physical and more digital reduces switching costs that are the traditional source of market power. So I continue to be optimistic. 

CJ: You wrote about open source code, and how it is a key factor regarding blockchain platforms and antitrust, but do you believe that a lot of pump-and-dumps or fraud is as a result of simple copy-paste forks of existing blockchains being so easy to set up? 

CT: I think that crypto as an area of technology has been unusual in terms of the amount of scams that have existed. I think this is the combination of so much investment going in, new untested technologies and that there have been unusually high returns relative to other sectors of the economy. This combination has sadly led to scams. I don’t think it is necessarily a reflection of the ease of scamming particularly. 

CJ: Since you wrote this paper, decentralised finance (DeFi) exploded onto the scene in 2020. Could this have large impacts on potential antitrust, and the control that such big institutions currently have over financial markets? 

CT: I am excited about decentralised finance. If you think about it especially in economies out of the US, banking tends to be unusually concentrated and that there are large switching costs for leaving a bank. Decentralised finance as a movement promises to change this pattern of concentration. 

CJ: You wrote in the paper that “whereas the market is nascent and currently no cryptocurrency or blockchain project has reached any meaningful market power, at scale some of the projects will have enough market share to influence prices and consumer welfare”. Do you believe Bitcoin’s large lead in terms of influence and market cap does not constitute meaningful market power, given its ability to move the markets of all other cryptocurrencies?

CT: No. I think Bitcoin as a first mover in a sector where there are untested technologies has had an advantage in terms of attracting attention. I am not aware of any switching costs that would particularly mean though that its large market share implies monopoly power. As many a trader knows it is easy to switch between bitcoin and other competitors. 

The Massachusetts Institute of Technology (MIT) published their 2022 technological breakthrough and included the Proof-of-Stake (PoS) consensus algorithm to be adopted by Ethereum. Posted via the MIT Technology Review, the algorithm occupies spot 6 in a top 10 rank.

Related Reading | Ethereum Heads Towards 100K Transactions Per Second? Buterin Talks About Post-Merger Future

Comprised of varied technological use cases, such as COVID-19 variant tracking, long-lasting batteries, Malaria vaccines, Artificial Intelligence for drug development, compact fusion reactors, and more. The consensus algorithm that will support Ethereum’s next era broke the rank as an alternative to Bitcoin’s Proof-of-Work.

Per the MIT Technology Review, Bitcoin “uses a huge amount of electricity” claiming it consumes more energy than Finland in 2021. In opposition, Proof-of-Stake cuts energy consumption, the academic institution said, by around 99.95%.

The second crypto by market cap already launched its Beacon Chain, the PoS supported blockchain in the process of growing its number of validators. In the first half of 2022, Ethereum will undergo a process known as “The Merge”.

This will combine the current blockchain or ETH 1.0, recently named execution layer, with its consensus layer or ETH 2.0, finally leaving PoW behind. The MIT stated the following on their view over this consensus model, outlining the future of Ethereum, and the present of Cardano, Algorand, and other PoS blockchains:

With proof of stake, validators don’t have to vie against one another, spending big on energy and computing hardware. Instead, their cache, or stake, of cryptocurrency allows them to enter a lottery. Those who are chosen gain the authority to verify a set of transactions (and so earn more cryptocurrency).

An Obsolete Debate? Ethereum PoS v. Bitcoin PoW

The MIT claims The Merge could mark a turning point for Ethereum, but also for its consensus mechanism. If successful, other networks could adopt a similar model, the academic institution said.

However, in the top 10 cryptos by market cap, XRP, Binance Coin (BNB), Terra (LUNA), Solana (SOL), Cardano (ADA), Avalanche (AVAX), all run on PoS or a similar consensus model. Bitcoin is the only large-cap cryptocurrency with a PoW consensus algorithm.

The MIT Technology Review seems to be replicating an argument that fails to consider the complexities of Bitcoin mining and its tendency towards renewable sources of energy. As Bitcoinist reported back in January, the Bitcoin mining industry could be a “misunderstood” industry.

An article posted by Castle Island Ventures’ Nic Carter highlights the benefits and advantages of a PoW model. His argument is based on Bitcoin’s network capacity to take excess energy and turn it into a hard asset, its geographical agnosticism, and its capacity to take otherwise unviable models and turn them into reality. Carter said:

Bitcoin miners are attracted to the cheap power—they are willing to scoop up the stranded power and rescue the economics of wind and solar installations that might otherwise be uneconomical.

On the other hand, some consider PoS consensus models to favor the majorities or the underlying asset whales. Thus, leading to more centralized governance and less network decentralization.

If The Merge is successfully implemented, Bitcoin and Ethereum will co-exist with two opposite approaches to consensus. Time might be the final judge that settles that debate which, for others, seems outdated as they focused on benefiting from both networks.

Related Reading | What U.S. Lawmakers Need To Know About Proof-Of-Work Mining’s Energy Consumption

As of press time, ETH trades at $2,798 with a 3.7% profit in the past 24-hours.