Snow Xue XIA

An MIT Student Enthusiastic about Bitcoin and Blockchain

A workshop organized by MIT Bitcoin Club

On March 7, 2018, SEC stated that it would apply securities regulations to cryptocurrency exchanges and companies that are involved. While some people worry about the risks of cryptocurrencies, some believe that cryptocurrency is the future of currency.

At MIT, students from Bitcoin Club organize weekly workshops of Bitcoin and Blockchain. Bitcoin is a new technology that cryptocurrency is based on and works like a decentralized database platform where individuals can deal with each other without any centralized institution.

Erick Pinos, the President of MIT Bitcoin Club, bought Bitcoin in 2017 and Bitcoin's price has increased about 3000 percent since then.

“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,” said Pinos, “And since I entirely move to Bitcoins, it’s easier for me to carry around my wealth when I travel to other countries. And 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. There are over 1000 kinds of cryptocurrencies on the internet.

AirFox, a startup company in Boston, has developed AirToken. This cryptocurrency is based on blockchain technology of another cryptocurrency Ethereum and 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 Initial Coin Offering to finance its microloans programs. Through ICO, companies sell their own tokens to investors without giving up any of their ownership of the businesses, which is different from Initial Public Offering (IPO).

AirFox's Chief Technology Officer James Seibel said, "At least in our company, you know, you don’t have any equity in the company, you are not investor, and really you are just getting access to the token. Whether that’s a good purchase or bad purchase, it’s up to the person who’s involved in the cryptocurrency.”

William Grimes, Associate Dean for Academic Affairs at the Frederick S. Pardee School of Global Studies at Boston University, contributed a chapter, “Cryptocurrencies and Digital Payment Rails in Networked Global Governance: Perspectives on Inclusion and Innovation,” to a recently published book, Bitcoin and Beyond: Cryptocurrencies, Blockchains, and Global Governance.

In his book, Grimes discusses that 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.

Grimes said, "It's problematic because the store of value because the price goes up and down so much being driven by speculation. And the management of the supply is also kind of arbitrary. There are a lot of ways in which Bitcoin and other cryptocurrencies are not just not good as money."

In 2017, Bitcoin soared from $1000 to $17,000. 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 has fallen 20 percent.

According to CNN News, the crackdown of cryptocurrencies by some countries like China and South Korea led to the crash.

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 what the new paradigm shift we are going to take onwards,” Pinos said, “I am really excited about market crash exactly, it’s making the space and opportunity to make it get bigger.”

At MIT Venture Capital & Innovation Conference, three investors, Jamie Goldstein, Vanessa Grellet, and Tadge Dryja participated in this panel discussion on how blockchain disrupts ventral capital investment.

Many internet companies raise cryptocurrency through Initial Coin Offering (ICO). As the amount of the money raised by Initial Coin Offering has exceeded the traditional venture capital funding, Vanessa Grellet believes that ICO has the potential to change the way startups raise money, and ICO is more efficient than venture capital funding.

However, Goldstein has a different opinion, “Most ICOs that happened over the past 18 months are totally craps. 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 is pretty cool. But it doesn’t really scale."

To answer the question that how valuable these tokens are, Grellet said 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 asset or commodity 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.

Grellet said, “Blockchain can stop institutions from controlling your personal data, and help you reclaim your control over your identities.”

Cryptocurrency has its downsides, as it is intertwined with illegal activities, such as money laundering, tax invasion, 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  — while securities are regulated, ICOs are not, which means higher possibility of fraud and scams i.

 “I think that before cryptocurrency, people buy drugs with US dollar, so the argument that people can do something sketchy with Bitcoin. So before Bitcoin, there is no crime, after Bitcoin, there is crime. That is not a relevant argument to me,” said Seibel from AirFox.