Nobel Laureate Paul Romer: The Best is Yet to Come for Bitcoin and Cryptocurrencies Innovations
The Best is yet to Come for Cryptocurrencies, Innovations and Cryptography
While cryptos may be reaching their respective bottoms and lower supports, innovation and potential for institutional use and application are nowhere near that. Speaking to Bloomberg, the Nobel Laureatte Paul Romer shared his insights on the application of Cryptography for the money of the future.
So where does this application of blockchain technology come into the world of finance and the movement of money? The answer includes a number of attribues, one among them, according to Romer – Cryptography.
“First thing that we have to consider is that Cryptography is considerably important, and it's something that we'd need to beef up our use of cryptography if we want to keep things safe and secure.”
Cryptography, for those otherwise uninitiated, is a means of securing data necessary for it and, by extension, the transaction of money. The value? Encrypting and securing data means that it is far harder to unsolicited third parties to intercept and use that information.
and consists of four major attributes:
- Confidentiality – Refers to the protection of data/information from third parties and unauthorized access
- Privacy – This refers to the protection of information from individuals.
- Non-Repudiation – This means the inability to deny a specific action took place, allowing it to be a completely objective system.
- Integrity – This refers to an intrinsic assurance for users that manipulation can't and won't happen to their information.
Simply going into superficial depth as to what cryptography is, the value of Blockchain can be made apparent. This need for cryptography, Romer explains, is down to the sheer diversity that exists with financial transactions.
“There's lots of ways to have digital, financial transactions. The best way to think of this is as an accounting system of exchange, and credit cards are an example of this.”
So where does blockchain technology come into this? Two words – Trustless Technology, as Romer explains.
“Some entity [for systems of exchange] working with some banks works to keep track of all of these transactions, and who owes what to whom,” Romer contines.
“The difference with Bitcoin is [that] it's trying to create an accounting system of exchange like that, but with nobody [that] you have to trust. There's a bunch of wholly independent people who have a reason, based on this idea of mining, to keep track of the Ledgers [Distributed Ledgers].”
While this year has been one of uncertainty for the cryptocurrency market, it's been an even more telling one for the stock market, and centralised banks as well. The latter of which, having been embroiled in a number of controversies, such as laundering activities perpetrated by Danske Bank, and more recent activity with Goldman Sachs.
Trust is something that centralized systems and governments are fast losing, as one Bloomberg host responds in percieved nervousness towards a trustless cryptographic ecosystem.
“In fairness, it should make you a bit nervous if you have a government that is otherwise profligate with its money and expands its deficit as a consequence. A lot of the theory behind Bitcoin and Cryptocurrencies is that people don't want to trust a government to backstop a currency.”
While some of this hesitation is well-deserved by those that are attentive of news reports, Romer argues that governments and banks have, at least, managed to create more stability during boom and bust cycles of inflation.
“This idea that the government can't handle it or can't do it right, I believe is overstated.”
But Romer is certainly a staunch advocate for innovation as a means of market growth, and he regards Blockchain technology as one of those innovations, but we're just at the tip of the iceberg when it comes to real-use cases, according to Romer.
“We haven't yet seen the full application of technologies that have been invented. Cryptography, for example, there are ways to secure all of our communications and keep our secrets secret, but they're not being used,” Romer continues.
The Invisible, Long Hand of Application
Whether its for supporting the logistics, or level of information regarding a food supply chain, to the high-power world of finance, Romer expresses an understanding that there's a wide scope for blockchain to be applied.
“Being able to trace a product on a supermarket shelf right back to the supplier would be a fantastic thing. Whether on Blockchain or not.”
Tip of the iceberg or not, at this point in time, Romer appears to regard blockchains early decentralized methods as interchangeable with centralized solutions, and the former's youth and lack of use-cases may very well be the reason for that.
This is a state of affairs that will not last long, as Kelly brought up with CNBC. With a far higher rate of institutional interest, both in blockchain technology and in the cryptocurrency market, we are already seeing major companies like Amazon playing with blockchain in order to put it to work as a service tool.
Dollar Diplomacy? Is the Bitcoin a Threat to the Dollar?
While we can argue that blockchain technology has created a number of winners, those that were early adoptors or investors, to the companies involved in taking a high stake in cryptocurrency mining or equipment manufacture, Romer believes that Blockchain has, in its own way, generated a certain degree of inequality, which is hard to agree with.
Early adoptors and investors in this technology can't be regarded as the beginnings of an unequal system, just that there were early adoptors. As it reaches a point of mass adoption, the market will no longer be dictated by those who are technologically literate enough to put it to use.
But other than the kind of market that Bitcoin is involved with right now, Romer was intrigued by the prospect of Bitcoin as a rival to the US Dollar. It was an intriguing question, but one that he percieved as having no immediate imposing force on the American currency.
“I'd predict that in a hundred years, there will be at least a second alternative to the Dollar and the Fed [Federal Reserve] as a clearing bank for the world… And that is still up for grabs right now.”