MIT’s Micali Talks Algorand, Bitcoin & Society’s “Honest Majority”
Silvio Micali says he mistimed his first two technology startups. But the renowned MIT professor thinks he’s hitting the market at the right moment with his latest company, Algorand, which plans to launch a blockchain-based virtual currency and transactions system this year.
Micali, a cryptographer who has won the prestigious A.M. Turing Award, previously co-founded Peppercoin, a micropayments startup, and CoreStreet, which developed software for authorizing and validating transactions, signed communications, and other activities. Both companies got acquired, but it sounds like Micali thinks they didn’t achieve their full potential.
“Those were great technologies, but they were ahead of the market,” Micali (pictured) says in an interview.
Micali says he did things differently with Algorand.
“I really took the time to make sure the market was there to work on the problems the [blockchain] community really wants to be solved,” Micali says. Algorand “stealthily developed the technology … until it was ready for prime time.”
Micali thinks the time is right for Algorand, which on Thursday announced it had secured $4 million in seed funding from Pillar Companies and Union Square Ventures. Micali co-founded the company and co-authored the open-source software protocol that underpins its planned cryptocurrency and transactions network.
Algorand aims to solve some of the technological drawbacks of Bitcoin and other popular digital currencies, including their use of massive amounts of computing resources and electricity, high transaction costs, and criticisms that the networks aren’t as decentralized as they’re purported to be.
“The [blockchain] community realizes these are problems,” Micali says. “We’re offering a solution.”
It’s too early to tell whether Algorand will effectively solve those problems, and whether its platform can attract enough users to rival the likes of Bitcoin and Ethereum. But Algorand’s 10-person team will give it a shot.
The startup will initially launch a cryptocurrency payments system using a new digital currency created by the company. Micali says Algorand will add more features and enable “more sophisticated transactions” in the future. He declined to share more details about what Algorand might create. (Separately, Algorand is also working with another blockchain company, California-based TodaCorp, to develop a system for providing loans in developing countries, Micali says.)
Algorand’s software will validate each transaction in the blockchain using an approach called “proof of stake,” which doesn’t require solving complicated cryptographic puzzles, unlike the “proof of work” approach used by Bitcoin, Ethereum, and others. (Ethereum is also reportedly working on a proof-of-stake-based blockchain system called Casper.)
Here’s a bit more on how Algorand’s system will work: To validate transactions, a small group of users are randomly selected to verify and agree on each block in the blockchain, according to Algorand’s website. The system is structured so that, as long as the majority of the verifiers are honest, they will agree on each proposed block.
“If the majority of the money is in honest hands, the system works,” Micali says.
But how can he guarantee that the majority of users will act benevolently?
“If a society doesn’t have an honest majority, it no longer exists,” Micali replies. “In our society, do we have criminals? Absolutely,” but it’s a relatively small percentage, he adds. “If nobody follows our rules, there is no society.”
Back in the virtual currency world, Bitcoin has the early lead in the market. Micali thinks it will “maintain some position” in the sector over the long term, although perhaps not in the way it was originally envisioned.
“I see Bitcoin as an asset, not as a medium of transactions,” he says. “It doesn’t scale.”
There are currently about 1,500 cryptocurrencies, Micali estimates, which he says is too many. He predicts there will be a thinning of the herd.
“There [are] going to be a few winners,” Micali says. “We certainly believe and hope to be one.”