Although it emerged from the field of cryptocurrency, blockchain’s tamper-proof, decentralized technology has important implications not only for the financial industry but for real estate, insurance, the law and other areas. Blockchain functions like a constantly-updated database distributed among a network of computers, instead of being controlled by a single entity.
Emin Gün Sirer, associate professor of computer science and co-director of Cornell’s Initiative for CryptoCurrencies and Contracts (IC3), says the widespread adoption of blockchains and smart contracts is going to be an “extinction-level event” for many companies.
What is blockchain, and why is it important?
Blockchain is a set of technologies that enables a set of distrusting parties to collaboratively implement a system. It limits what any single party can do, it ensures that even an insider cannot bring the system down, and it provides assurance to the users that they can check the financial records and perform an audit themselves.
For example, the country of Georgia recently placed all of its land records on a blockchain. There is great fear that people who are well-connected will falsify the records and pretend that some piece of government land actually belonged to their grandfather. It’s fairly easy to falsify records left in a locked room someplace, or kept on a single machine someplace. But if you are using blockchain you cannot do this.
Why are we hearing so much about blockchain right now?
Part of the reason is smart contracts, which are a programmatic way to determine how money flows, made possible by blockchains. Think of them as free, standalone programs that can take money, compute things and send money out in a way that nobody can interfere with. This allows us to decentralize traditional corporate tasks, and it allows us to have financial programs that are capable of making their own decisions, independent of any human entity.
For example, I can say I’d like to donate $5,000 to a new movie, assuming it can raise a million dollars, otherwise I want my money back. It’s very easy to do this with smart contracts; it’s impossible to do with the interfaces the banks give us.
The ability to cut out middlemen is going to be an extinction-level event for many companies. It’s also a great opportunity for new companies to form, because they can do things like build new business models that are much more transparent to the user.
What is Cornell’s role in the field?
Some of us at Cornell had been working on peer-to-peer cash even prior to [the development of bitcoin]. Bitcoin’s rise in popularity fueled a rush to apply similar technologies to all aspects of financial technology and other areas. We did some strategic hires, and we ended up organizing IC3, a multi-institutional effort providing leadership to this nascent push. Meanwhile, people were developing code in the outside world, but the scientific basis wasn’t there. We not only provided a scientific basis for what they were doing, we also showed that a lot of things people were repeating were false, and we provided new alternatives and sound foundations.
A recent report identified Cornell as a leader in providing blockchain-related classes. What courses are available at Cornell for students interested in blockchain?
The courses we have are typically geared toward advanced undergraduates and graduate students. It’s a fascinating field with lots and lots of interesting applications. It’s interdisciplinary, so there are many different takes.
At Cornell we value fundamentals. Anybody who is teaching just “blockchain” is probably doing students a disservice. We have a set of very interesting courses that teach the fundamentals of computer science and its interactions with finance, game theory and mechanism design, illustrated through examples in blockchain. I think the idea is to create people who can jump into blockchain because the area is exciting, but who also have the foundation to do anything else in computer science.
The course I taught last spring, for example, focused on the basics of distributed systems fundamentals. Every single application we examined was in blockchain, such that students leaving the course learned how to build blockchain applications.
It’s crazy how much interest there is in blockchains. I have undergraduates from all colleges coming by. I taught a 6000-level course in the spring. Normally you’d have three to seven people in those courses, and if you have more than 10 there’s a lot of interest. I had 80-plus people sign up.
What are the downsides of all this interest?
Any time you have a lot of hype you have some fraud. People are selling to the public what appear to be securities, hopes and dreams that are just unattainable. They’re selling cryptocurrency tokens that will someday be worth something when a system is built that cannot be built.
Also, the [kind of blockchain] that made bitcoin famous consumes enormous amounts of power. About Austria’s worth of energy – and Austria’s a big, industrialized nation.
At IC3, we are working on technologies that can revolutionize financial technology. These tools can achieve millions of transactions per second, and do so with no wasted energy, in a sustainable and green fashion. This, in turn, has the potential to enable new applications far beyond financial technology, that we cannot even fathom today.