Boston students and experts shape the future of cryptocurrency

By Xia Xue
BU News Service

BOSTON – Cryptocurrency, a digital asset that can be used for transactions, is spreading throughout Boston. College students are making workshops to create them. People are funding startups using cryptocurrencies, and both experts and investors are coming together to discuss risks and opportunities of this new currency.

Bitcoin is the most famous and most used cryptocurrency, but it is not the only one. There are currently over a thousand kinds of cryptocurrencies online. While some people worry about the risks of these online tokens, some believe that cryptocurrency is the future.

At MIT, students from the Bitcoin Club organize weekly workshops about Bitcoin and blockchain. Bitcoin is a new technology that cryptocurrency is based on and works like a decentralized database platform where individuals can do business transactions without a centralized institution.

Erick Pinos, the President of MIT Bitcoin Club, bought Bitcoin in 2017. Since then, it’s price has increased about 3,000 percent.

“A hundred percent of my network is in Bitcoin cryptocurrencies. Many people say it’s not a smart move — it’s risky. For me, it’s not trying to make money off my investment. It’s making a statement that I really believe in digital money,” Pinos said. “And since I entirely moved to Bitcoin, it’s easier for me to carry around my wealth when I travel to other countries. I try to use it whenever I can. I try to buy stuff online, to buy airplane tickets, to buy groceries, because they accept the coins.”

Bitcoin is not the only cryptocurrency in the market. AirFox, a startup company in Boston, has developed AirToken, a cryptocurrency that can be used for providing mobile data and financial services to people without bank accounts in emerging markets.

Last year, AirFox raised $1.5 million by launching an Initial Coin Offering (ICO) campaign to finance its micro-loan programs. Through ICO, new cryptocurrency ventures can raise funds by selling their own tokens to investors without giving up ownership of the businesses.

According to William Grimes, Associate Dean for Academic Affairs at the Frederick S. Pardee School of Global Studies at Boston University, cryptocurrencies can further reduce the cost of cross-border transfers, and digital currency like Bitcoin can increase financial inclusion. However, Bitcoin is much more volatile than conventional money.

“It’s problematic, because the price goes up and down, being driven by speculation. And the management of the supply is also kind of arbitrary,” Grimes said. “There are a lot of ways in which Bitcoin and other cryptocurrencies are simply not as good as money.”

In 2017, Bitcoin’s price soared from $1,000 to $17,000 per unit. In January 2018, cryptocurrencies including Bitcoin, Ripple, and Ethereum crashed, and Bitcoin fell about 60 percent. In February, Bitcoin rose approximately 100 percent from its lowest level, and within the first week of March, it fell 20 percent.

While many people worry about the price volatility of Bitcoin, Pinos thinks the crash is a good thing.

“Now, after the market crash happened, we’re going to see people going back to the fundamentals, asking the important questions, talking about the technology and the new paradigm shift we are going to take onwards,” Pinos said. “I am really excited about the market crash. It’s making the space and opportunity to make it get bigger.”

Cryptocurrency also has its downsides. A report published by Forbes in December 2017, explores the link between cryptocurrencies and illegal activities, such as money laundering, tax evasion, extortion and drug trafficking.

In December 2017, U.S. Securities and Exchange Commission (SEC) issued a statement warning investors to be extremely cautious about cryptocurrencies and ICOs because their lack of regulation increased the possibility of fraud and scams.

For James Seibel, AirFox’s Chief Technology Officer, the link between cryptocurrency and crime is questionable at best. “Before cryptocurrency, people still bought drugs with US dollars. So before Bitcoin, there is no crime. After Bitcoin, there is crime? That is not a relevant argument to me,” he said.

At the MIT Venture Capital & Innovation Conference, cryptocurrency investors Jamie Goldstein, Vanessa Grellet and Tadge Dryja participated in a panel discussion about how blockchain disrupts ventral capital investment.

According to Grellet, the mechanism of Initial Coin Offering (ICO) has the potential to change the way startups raise money. In August 2017, CNBC reported that the amount of money raised by internet companies through ICO had exceeded traditional venture capital funding for the past two months.

However, Goldstein has a different opinion. “Most ICOs that happened over the past 18 months are totally crap,” he said. “Those people who issued ICOs never think about the economics.”

Tadge Dryja works on improving blockchain scalability — the limits on the amount of transactions the bitcoin network can process. He doesn’t believe that blockchain is a silver bullet.

“I may be more skeptical about this technology than any other people because I have been working on this for a long time,” Dryja said. “When I first look at it, it’s pretty cool. But it doesn’t really scale.”

To answer the question of how valuable these tokens are, Grellet explained that even if the value of cryptocurrency is zero, the price will not be equal to zero. The three investors all agreed to see these tokens as assets or commodities, rather than currency, as the prices of cryptocurrencies are too volatile.

While the intrinsic value of cryptocurrency is hard to be determined, the blockchain technology that crypto is based on is still valuable for its potential. “Blockchain can stop institutions from controlling your personal data, and help you reclaim control over your identities,” Grellet said.