Building the Internet of Value

How Neha Narula and the MIT Digital Currency Initiative are helping innovate a new financial system


If you haven’t bought into the currency of the future just yet, you will. Not because bitcoin might make you a lot of money, but because the technology it relies on could impact our financial system from the ways companies raise money to everyday financial transactions. Blockchain technology, as director of the MIT Media Lab’s Digital Currency Initiative Neha Narula explains, has the potential to move value around as quickly as we move information today, thanks to the internet. But this technology is also still very new with more questions and challenges that need to be addressed. Narula spoke at the Forbes Under 30 Summit with panelists including Tadge Dryja, Lightning Network co-creator, and Linda Xie, Scalar Capital founder, on spending cryptocurrency and where the technology is being used today. We spoke with her ahead of the Summit about privacy in the age of digital currency, how cryptocurrencies could democratize access to funding for businesses and why a male-dominated industry isn’t changing anytime soon. The Forbes Under 30 Summit takes place through Oct. 3.

What ideas are you exploring at the Digital Currency Initiative that most interest you right now? The blockchain space, even though Bitcoin has been around 10 years, it’s still really new. It’s something that’s captured excitement and attention. However, it also has a lot of problems that we need to figure out how to solve. One of those problems is around the underlying agreement protocol used in blockchain. It’s called the consensus protocol. There’s a lot of innovation happening in this space. The oldest and most well known is Proof of Work or mining. One of the questions I’m really interested in is trying to understand exactly how secure this really is and what the cost of it is.

Another area we’re really focused on is scalability. How do we scale this technology to a billion people? We work on a lot of different projects in that area. And the third area is around the challenge around privacy in this technology.

Why might the average person care about privacy? If I asked you if would you be comfortable publishing your credit card statement on the internet, you’d probably say no. I’d certainly say no. People do care about privacy. Financial privacy, in particular, and financial transactions can reveal a lot about you. We don’t want all of our financial transactions to be public to everyone. People can see what kind of doctors you’re visiting or find out that you had a subscription to a certain newspaper or newsletter. Your boss could decide that you don’t share the same political opinion as her, for example.

In a lot of blockchain systems today—in fact in most of them—all the financial transactions are basically public. They don’t have your name attached to them. But it is possible to deduce who’s been involved in what. The problem we’re trying to solve is how do we make sure that our financial transactions can be private and don’t get exposed while at the same time supporting the public policy that we want to have around making sure there isn’t fraud or criminal activity.

Why do you think it’s important for the Digital Currency Initiative to exist? One thing that’s different about this space is everyone has a token or coin that they’re selling. Usually the developers of these projects own a lot of these tokens. So they have a vested interest in getting people to buy in order to make the price of their token go up. And we’ve seen a lot of outright scams where people have said that they were going to build some interesting technology, raise a lot of money in the form of token and then disappear.

There’s a really important role for an unbiased rigorous academic organization that is focused on the technology and the truth; focused on exploring questions and trying to answer them in an as unbiased way as possible. That’s what we aim to be. What the internet did for information, we want to do for value. But what’s happened in the cryptocurrency blockchain space is that the money and commercial interest have gotten ahead of the technology. It’s really important to have organizations like ours that make it more about the technology than the commercial and financial investment aspects of it. MIT specifically has just such a rich history of being a broker between open source communities and industry and setting standards. And we’re taking an interdisciplinary approach, we work with not only computer scientists but also economists and lawyers.

How does digital currency impact fundraising for companies? What we’re seeing with these initial coin offerings is the beginning of a whole new way of funding organizations. Fundraising comes in many different forms. There’s crowdfunding, venture funding, private equity, raising money from the public when the company does an IPO. These are all really important. I think that the idea of creating digital tokens to represent shares or rights in a project democratizes access to this fundraising mechanism. This is a programmatic way of raising money that is kind of auditable and traceable. You see how many shares are issued. You can check and make sure that they’re actually fulfilling what they promised to do with their shares. Anybody could do it. We’ve been exploring ways that small businesses could use this as a funding mechanism.

Does this technology hold an opportunity to create a more gender equal environment in the finance or STEM fields? In theory it does … but in practice I’m not sure that’s actually happening. I think there are all these sort of insidious ways that bias comes in to play, whether it’s the pictures on your website or the informal networks used to do fundraising, it ends up being the case that there are a lot of closed doors. In particular because there are fewer rules and bias can end up creeping in unexpected ways. Because it’s so new, it might be the case that a lot of groups that are traditionally underrepresented might just not know about it yet. So getting that awareness out there is really important. This is the intersection of technology, which is super male-dominated, combined with finance, which is also super male-dominated. We’re working on this. It’s something really important to us. A couple of summers ago, we ran a cryptocurrency bootcamp for underrepresented minorities, which was really successful, and one of those students is now at the Media Lab working on cryptocurrencies. I hope we can do more scalable things like that in the future.

Could I use bitcoin at a local business right now? I think that there are still a few places. Veggie Galaxy and Thelonious Monkfish used to take bitcoin, but I don’t know if they still do.  What’s happened is that as bitcoin has gotten more popular, the transaction fees have gotten higher and that has turned a lot of merchants off of it. There is new technology coming down the pipeline to make bitcoin transactions much cheaper. It’s called the Lightning Network.

What are you most optimistic about for the future of digital currency? We’re trying to build the internet of value—where moving around value is as easy as moving around information. And opening all of that up to people who build applications and new services. I feel like our financial system has stagnated. There have been innovations in things like high frequency trading, which doesn’t really help people. But this technology is actually designed to help people and be something that everyone can use.

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