MIT's 3 big blockchain ideas: smashing the internet model, creating central bank digital currency, and improving privacy

How can this not raise eyebrows when one of the world’s most prestigious universities announces that it will explore a controversial and often misunderstood subject fraught with the interests of thieves and speculators.

This was back in July 2015, when the Massachusetts Institute of Technology (MIT) announced it was beginning work on a blockchain digital currency project, led by a former White House adviser.

Blockchain technology now ranks easily alongside MIT’s robotics, solar nebula research, and other imaginative futuristic projects underway.

The MIT Media Lab’s DCI program now has a team of 22 researchers and at least seven ongoing research projects, and is also incubating three startups that use cryptocurrencies and their underlying technologies.

So far, the project has funded the work of bitcoin protocol developers, supported a range of research, collaborated with distributed ledger technology startup Ripple and developed enterprise-level data projects.

Neha Narula, DCI Research Director, said:

“We’re doing a lot of blockchain research.”

Some of the DCI’s notable projects range from how the technology underlying Bitcoin can (and can’t) reshape the internet to whether the technology can lead to more confidential and auditable transactions.

1. Smash the “echo chamber effect” of the Internet

Looking at the ambitions of blockchain developers, perhaps none is greater than the idea of ​​one day reinventing the World Wide Web (www), on which current payment networks depend.

It’s no surprise, Narula said, that MIT is exploring how blockchain technology might be used for online publishing problems, noting that some estimates suggest 85 percent of news site traffic comes from Google and Facebook.

Narula said:

"In this US election, we saw that most people only have a few sources of news, and those sources have a strange algorithm that only shows certain things. We live in this kind of 'echo chamber'."

She and other MIT researchers have been working on the peer-to-peer hypermedia protocol IPFS and Blockstack, which aims to create an internet based on the bitcoin blockchain. Both IPFS and Blockstack aim to put control of information in the hands of users through the use of blockchains.

Narula said the DCI will soon publish a paper detailing their findings.

While these blockchain projects can be used to alleviate certain issues, she doesn’t foresee them becoming a panacea.

“There are still some underlying issues with network economics and content payment models. Like advertising, clicks, comments, etc. To do this well, it seems that even though the incentives of the big platforms are getting bigger and bigger, they are also collecting more and more user data.”

She also said:

“Until we find new ways to monetize content, we’re going to be in trouble.”

2. Improve blockchain privacy

Another big research topic at MIT is privacy and confidentiality — a long-standing weak link in Bitcoin, where MIT’s view on this point is contrary to what Bitcoin claims.

This is because public blockchains expose information to everyone, and anyone can track the information recorded on the public chain - this is good from an audit perspective. For example, anyone can verify public chain transactions. On the other hand, this also raises concerns that the technology used by Bitcoin to evade governments may become a regulatory tool.

The DCI has a project called Auditable Ledger, which explores how to build a ledger that can act as a bridge to communicate banking services.

Narula likened the project to a system like Confidential Assets or Confidential Transactions, where user privacy is preserved but auditors can still see enough information to verify overall system details — for example, no one can increase the money supply because it is fixed.

She also said the MIT team is “expanding this concept” to banks, which could use distributed ledgers to issue transactions.

Narula said:

"We can use this system to see the overall situation. If the real estate market falls by 20%, we can find out which banks are secretly involved, which banks are good, etc."

3. Create central bank currency

Another big project at MIT is central bank cryptocurrency, Narula said.

Robleh Ali, a DCI research scientist who previously worked at the Bank of England, is now said to be building a prototype of a central bank cryptocurrency as a way of testing the role that cryptocurrencies could play in this space.

Narula noted that she hopes this will lead to further exploration of how privacy and auditability can be combined.