







Professor Emi̇n Gün Si̇rer talks with CT about blockchain evolution and stagnation.

This interview has been edited and condensed.

The co-director of the Initiative for Cryptocurrencies and Smart Contracts (known as IC3), Emin Gün Sirer, is an associate professor at Cornell University, whose research focuses on peer-to-peer systems, operating systems, distributed systems and computer networking. He is one of the most influential scientists within the crypto and blockchain ecosystem, and his voice represents an academic view on the development of the technologies.

We met with professor Emi̇n Gün Si̇rer at Deconomy in Seoul, South Korea, and talked about the future of cryptocurrencies, the potential danger of their full implementation and the reasons for the stagnation of the technological evolution over the past 10 years.

Max Yakubowski: First of all, I would like to thank you for what you are doing. Because, honestly, for me, it was your research and papers I was reading when I was making my first steps into the blockchain and crypto industry. Scientists like you and Andreas M. Antonopoulos were my first guides into the ecosystem.

Emin Gün Sirer: Great, I am glad to hear that. That is a great way to get into it. And I’m glad I played a tiny role in that. That sounds great. I am always happy to hear such words, as I usually get the abuse. So, there are always some trolls who are attacking me for something I said or wrote. It's fantastic to, occasionally, hear something good.

The other thing that happens is there are a couple of people who do the equivalent of “hashtag Lambo.” They hit like a million dollars and then they send me a toy Lambo. So, I have a couple of toy lambos. (laughing) I took one picture on my desk of a Lambo toy, one is like 1/16 scale, and it is really accurate. And Nathaniel Popper [a journalist who covers finance and technology for The New York Times] wrote me back: “Did that really happen that somebody’d bought you a Lambo?” “Oh yes, it did! You will notice that it's in my maple wooden garage in old grove, looks really nice.” — That’s how rich I am.

Pessimism and optimism

MY: Yeah. It looks like we are coming to the end of the crypto winter and moving to crypto summer.

EGS: I hope so, but, you know, let’s not get too excited about just a small price bump. So, price bumps happen all the time.

If I think about what has really changed, nothing has changed. Like, there was no reason for it to go down as far as it did. There was no reason for it to go up as much as it did yesterday. There certainly wasn't any reason whatsoever for it to go up to $20,000 when it happened.

So, overall there are some really good signs that the crypto winter washed out most of the scams — that was good — but the technology isn't really quite there, yet. So, I think it's a bit premature.

MY: I guess it is quite important for the ecosystem that the discourse is stopping to be pessimistic and it is turning into optimism, as it was a couple of years ago.

EGS: Totally agree. I can sense it is changing. And, you know, a bunch of us — who've been in it for a long long time — don't really care about the price movements all that much. But even I was personally affected. We needed some morale boosts. And the morale boost — now and then — is a good thing to have. But, you know, I am really excited about use cases. I am really excited about people doing things, so that is not happening as much. It is still a speculative instrument, and I would like to see it built.

Changing the world

MY: I would like to proceed with a question related to your Twitter. You wrote “So, many academics forget that our goal, as a profession, is *not* to publish papers. It's to change the world.” Is that what you are doing? You are trying to change the world by implementing all those brand-new technologies into real life, aren’t you?

EGS: Absolutely. So, I very firmly believe that our mission is to change the world. It is not to get the next incremental paper out. It is not to have the next token of achievement. It is not to put together some papers that your friends read and then to meet them once a year. And you play this funny game of doing favors for each other. Some kind of a token exchange economy.

We are here to change how normal people live. And that is a different standard for work, it is a different standard for impact. It does mean a bunch of different things for academics. It means that we should judge each other based on impact. It also means that the bar is much higher, right?

So, it is not sufficient to write. You have to go out and make sure that your work is thick, that the work you do is not some fancy model and is, actually, relevant to what normal people are doing in their lives. That is what I am trying to do. You know, how effective I'm at it — that's a different story. But that tweet, you know, captures my values, my group’s values. We are trying to change people lives.

MY: My next point came out at the conference during the panel with Dr. Doom [Nouriel Roubini, an American economist] and Mr. Decentral [Vitalik Buterin, a co-founder and inventor of Ethereum]. You just wrote that Roubini’s biggest sin is that he sees the current financial system as normal. Let's talk about that a little bit. What is your point here?

EGS: Right, he is blind to it. And he’s blind to it in a unique way that economists are blind to rare events or rare-seeming events in the long term, but are actually not at all rare, so what are the chances of a currency collapse? They seem low. What are the chances of an overnight 30% devaluation?

They — it's such a far and remote possibility for most people — it would seem, perhaps. But really, take the long view back, I personally lived through at least 230% overnight devaluations myself, then maybe he is going to discount that. He is going to say to you and the 80 million people who lived in the country, where you grew up, “You know don't count. You are not the first world, we know better.” Do you really know better?

Anyway, so there is that. But also there are wars. I came from a family that was displaced. One fine morning, people came into the house and said — they lived in Greece at the time — “The Greeks are coming. You have to run.” And they ran. They literally left the breakfast on the table. And if you look around you, will find that an enormous number of people have similar stories. So, this happens to people.

This is what we do to each other. We engage in wars, we displace populations. And any time these things happen, the system collapses. And in some way, a lot of the crypto value proposition is a hedge against these kinds of scenarios.

And, more importantly, the entire thing that is underlying the Nouriel-approach to life is trust in the system, to have faith in the system, to have faith in the records, to have faith in the government. And, surely, on a day-to-day basis, it seems okay, but in the long run, the tail risk is rather high. You don't know what is going to happen tomorrow. We found in 2008 that Nouriel and his friends didn't know exactly what they were doing. They were quite capable of creating situations where, you know, in fact we had the commodity price spike, we had the entire banking system collapse... I mean, if I go back before then and we had a similar episodes in 1997... I mean, this happens with some regularity about every decade. We're overdue for another one about every decade or so. They found a way to collapse the economic system. So, the proposition is that we should just trust the powers, and that is the fundamentally incorrect point in what he said. So, that is what I think Vitalik [Buterin] should have really hammered on, that these things happen. It is not at all unusual to have a world war. We had two in the last century. Why wouldn't we have another one? How are you going to get your wealth out? Surely, that people would have enjoyed taking their wealth on a USB stick — if they could, back on the day — instead of leaving everything behind: their breakfast, their table, their houses. And this is not unusual.

Role of decentralization

MY: Some people — like Vitalik Buterin — are seeing that ecosystem as a beautiful utopia, while others — like Nouriel Roubini — as a terrible dystopia. How do you see this kind of decentralization applied to real life?

EGS: That is a great question. We have to give to Nouriel Roubini the point that these systems are not all that decentralized — there is a lot of “decentralization theater.” Bitcoin — when you look at it in detail, as we did in our paper comparing decentralization of Bitcoin material — Bitcoin comes down to about 19 mining pools, generating the vast majority of the blockchain. You don't need an incredibly expensive protocol to keep track of a ledger between 19 entrants.

We know better, more efficient protocols. So, Roubini is right — these systems pay a lot of attention, or pay a lot of lip service to decentralization, and deep down, they are not that decentralized.

On the other hand, if I look at almost every other construct that we have, whenever you create centralized chokepoints, what we get is some incumbent, sitting at that choke point, collecting rent. Roubini knows this very, very well. I'm sure he teaches it in his economics classes. And this becomes a choke point for society. We stop seeing innovation.

So a very, very simple example of this is telecom. Look at the phone system. Where is it going now? Nowhere! What happened since my grandfather's days to the phone system? It is the same dumb thing: You pick up the phone, you talk to someone, you press the buttons. So, it is a really abysmal system — it did not evolve because there was an incumbent collecting a fat, nice little paycheck.

In contrast, you look at the internet, and it is a completely different ballgame. People have to compete, and there isn't that single entity — at least there wasn't. But as the technology, it is sort of mature; the incumbents grow and they use regulatory capture.

We are going to see this same evolution applied where people will invent new things. Those things will put away the old. Over time, some incumbents come to own them in some fashion. And if they cannot own them technologically, they own them through regulatory, social means. And then, once they become entrenched, somebody else disrupts them.

We are very much in the disruption phase with blockchains. And what he [Nouriel Rubini] fails to see is that this technology is an existential threat to incumbents today.

Even if it is 99.99% sh*tcoins, if we evolve the new technology to build things — better custodial solutions, better means of auditing, a ledger of any kind — then it suddenly creates a different dynamic where you — the person or the citizen — can now audit what the government is doing.

And I don't think that the government is really the biggest, worst actor that we face. You can suddenly break cartels and monopolies — and, really, it is the companies that are most of the problem here.

There is now an open empty playing field. And you have the opportunity to tackle, to compete with incumbents. And that is great for all of us! And to come into this and to point out a bunch of fraud that is going on and technological limitations of first generation coins, I think is a bunch of cheap shots.

We can't get to where we want to be at three transactions per second. It is not gonna happen — even the Bitcoin devs say so. It is going to be an exciting year ahead of us, where we try to develop the technology that can deliver that dream. I am working on it. I know other teams are working on it. And we need better technology. The right way to do it is to rethink, to build, to provide vertical applications; where people don't even realize there are tokens or cryptocurrencies or blockchain underneath — they just see the end result of the technology that is better auditability, an even, open playing field and better platforms for all to use.

Comparing the invention of blockchain technology to that of the internet is sometimes rightful, but sometimes, it is a stretch.

MY: Do you think that, on the one hand, we are moving very fast developing and creating innovations — or on the other hand, it is not so fast because the technology itself has 10 years of existence, and we have not improved it to the highest level to implement it globally — like it has happened with the internet?

EGS: I think we have to call a spade a spade, which is that technology has been stagnant. It hasn't evolved, nor has it delivered the dream. This is a hard pill to swallow. Instead, what it has done: It has created this new social phenomena, where suddenly people buy into projects. And that is not something we had before. And we are seeing how powerful that idea is, because it turns an ordinary person into a crazy, rabid fan. And there is some value in that to be tapped. In fact, there might be more value there, at the moment, than there is value in the utility of the tokens.

The current technology that we have hasn't been evolved, and it has become a virtue to not evolve it. These are terrible ideas that take over a society and cause it to go down into a rat hole, where somebody else just comes in and takes the lead. I think that is what is happening in cryptocurrencies.

When the internet came about, it took awhile to evolve. It took awhile for the protocols to evolve, but they did evolve. And people are working on them actively, trying to change them dramatically. And they didn't try to ossify any aspect of it.

Even the IP protocol has been changed as it was never intended. There was no such thing as IP maximalism. There was no such thing as TCP [Transmission Control Protocol] maximalism.

Sure, standardization does happen, but we see this crazy current phenomena right now: 10 years of very little evolution, 10 years of almost the same thing repackaged, just very few credible teams have emerged. Very few actual, genuinely novel things have happened.

It is time for actual new things to be pushed forward. And I think 2019 is going to be the year when we begin to see people rebel against this proof-of-work craziness that we see. We were consuming far too much energy for keeping track of what is essentially a simple legend. And I think we are about to see that change: We are going to see a proof-of-stake solution.

Role of science

This is going to be the year when people come up with much more efficient solutions to the blockchain issues. I only hope that science prevails in these things, that these discussions proceed according not to emotions, not to rubidity of the fans, but based on sound, scientific principles.

There's a glorious future to be built, and it is not going to be built by sticking to the very first thing that came about. People are just now beginning to realize what I was saying about the Lighting Network two or three years ago.

It is time to rethink, it is time to come up with layer-one solutions that can scale, that provide a different API on top, that address some of the problems that we have seen with existing chains.

In the last few years there was such little innovation. I think after Ethereum was introduced, the Tether idea is a nice alternative. But, other than that, I haven’t seen much that I would consider genuinely new. And it is time for people to rethink the entire stack.

Role of misconceptions

EGS: There was this crazy fetishism that happens with Satoshi, rabid partisanship that happens around coins. The only guiding thing that I see, as an academic, is scientific reasoning and sound engineering. That is what saves us, that is what takes us forward.

People have a lot of misconceptions about money. And one problem I see with our space that we can fix without having recourse to anything else, but just among ourselves: We should stop lying to people, stop pushing blockchain on a false premise.

I have heard so many supposed thought leaders pitch the blockchain idea and tell people it is valuable because it is scarce. I've seen CEOs get in front of older audiences and say: “This is just like digital gold!” and “It is scarce, valuable!” This is not scarce, you know. If this one doesn't work, I will use other one. That is pretty equivalent, these are substitute goods.

There are misconceptions that people have inherited, and there's a general lack of understanding — that most people couldn't define the difference between monetary versus fiscal. It is just that most people don't understand how government debt is different than household debt. They think that government shouldn't have debt in the same way household shouldn't. That is not quite true.

And, you know, the theory of competitive advantage, these are things that are — once you understand them, once you've taken economics 101, they are pretty obvious. But most people haven't taken them, and so, you have — at the national stage — economic discussions that are completely incorrect.

People like Donald Trump do this very well, it plays into people's misconceptions. And then you have the thought leaders actively misleading the population. So, the only way out is education and, I don't think that it is technical education that is necessary, I don't think my parents should understand how the consensus protocol works. But it is essential for us to not propagates falsehoods.

I always wish that there was something nice at the high school level that would teach you, like: “You might think this about some topic” — especially economic topics — “but it isn't that way. So, don't fall into this. They are common traps — especially, regarding money.” I wish we would teach a course like that.

I know at Cornell University and other sister institutions, we are teaching courses on blockchains. But that is typically for a technical audience. That is a different niche.

Central banks and digital currencies

MY: How could the central banks use digital currencies? What about countries, where we can’t be sure that technological evolution will achieve globally good use?

EGS: If anybody is hodling a coin out there, and that coin is something that somebody started — an open-source project — and they expect a country to buy into that existing coin to make them super rich trillionaires — at the expense of the country to come after them, the other people to come in and buy into the coin after they do — they are going to be sorely disappointed.

There is a reason why the number of Bitcoin maximalists is always the same: Bitcoin went to $20,000, and none of these guys managed to retire. The entire thought pattern there is based on a false premise and a series of crazy hopes that will never get materialized.

Central banks — the ones that I have spoken to recently — don't believe that the technology is quite ready. And quite a few of them are doing proof-of-concepts, just the same way almost every big company is doing.

They are doing that exploration phase, but we are not going to see any big player buy into an existing coin. They will issue their own coins that they understand how to control.

How do you make sure that the use cases are ones that promote societal good?

It comes down to how do you control a decentralized currency. And if you can control it, it is not decentralized — that it has failed in some fundamental fashion.

We will find methods and techniques to put barriers around bad uses that we don't want. Crime should not be paid for using cryptocurrencies. It turns out that, if people use crypto to pay for crime, it is easier to track and easier to stem. So, it is actually a step up and better than dollar bills in my pocket.

Law enforcement will develop new techniques and I have no fear whatsoever that they [law enforcement officials] are supremely tech-savvy, way more than the average person.

When it comes to sanctions, similar things apply. Can you bypass sanctions using cryptocurrency as it is today, with the today's ecosystem? Yeah. You could also bypass sanctions with SWIFT, you could bypass sanctions the way we just recently had in the last decade: people flying gold in and out of Iraq and Iran.

And to their credit, law enforcement and regulators have been supremely cool, especially in the U.S., about cryptocurrencies. They have taken this sort of wait-and-see approach. They haven't come in with a heavy hand. They have allowed the technology to flourish. I think it has been pretty amazing, so I hope that continues, and I don't fear the bad use cases.

They already happen — crime is gonna take place in one way or another. But if we find a way to completely kill it off, so that there are no bad cases or abuses, then that is not money.

The fruits of this all

MY: How many years, or even decades, in your opinion, do we need to wait until we actually see...

EGS: The fruits of this all? I don't know. But I can tell you what I suspect we will see. We will start to see proof-of-stake protocols come up. These coins will never go away. Dogecoin will always be around, even Doge will always be around. Bitcoin will forever, of course, be around.

But a lot of the coins that occupy CoinMarketCap today are really, truly sh*tcoins. And they will probably not die, but they will get replaced by much better technology. We are beginning to see people who know what they are doing coming to the space. And we are beginning to see brand new ideas to come in. It is not the same stagnant code basis, the same stagnant ideas, the same conspiracy theories about lizard men. We are beginning to see people interact with the existing finance system.

How long is it gonna take? At least, five to 10 years. What will we see at the end of this? I think we are going to see governments evolve that are much more transparent about their activities. We are beginning to see this already. I think the government of Georgia and their land records are a very good example. And there will be some holdouts.

Bitcoin will never change, they will always try to do proof-of-work, and good luck with that! It is a tough proposition. If you ask me, it is not environmentally friendly, and it leaks value out of the store of value. But they have a bunch of advantages that will prop them up for a couple more years, I am sure. And they will never completely disappear.

But I am really excited about the new wave of projects to come. We are going to see a brand new set of systems that can live up to the dream that has been sold to the masses. It has been 10 years. The dream was really compelling, the tech… not quite there, yet. And I think it is going to take a few years for that tech to emerge fully, and then a couple more years for it to be adopted, slowly. But it will change the world. That is gonna be exciting.