I always find it interesting when people who are highly accomplished in their respective fields start turning their heads around cryptocurrencies. One such case is Catherine Tucker, a distinguished professor of management at Sloan College and professor of marketing at MIT. I came across her excellent paper: Antitrust Verification and No Cost: An Optimistic and Pessimistic View of the Implications of Blockchain Technology, which was way ahead of her time, being written in 2018, but still highly relevant today. In fact, she surmises that, at the time, her academic colleagues thought that digital currencies were just “a flash in the pan”. Sitting down to interview Catherine about the paper, as well as the changes in the landscape since it was written four years ago, I got some answers on a few topics that made me curious.
CoinJournal (CJ): It was too early to write academic papers on cryptocurrencies in 2018 – how did you get into cryptocurrency and decide to write the article? What was the initial reaction of your professional colleagues?
Catherine Tucker (CT): As a researcher, I started working on cryptoeconomics issues in 2014 when I was part of the team that helped run the MIT Bitcoin experiment, where we gave $100 worth of Bitcoin to each MIT graduate student. At the time, my academic colleagues thought of digital currencies as a flash in the pan.
CJ: Have your views on the impact of blockchain technology changed since 2018?
CT : No. Although I think more people are understanding that blockchain is not Bitcoin.
CJ: Would you expect that in 2018 formal regulation of cryptocurrencies would have progressed further at this stage, both in terms of antitrust and other areas?
CT : I think regulation has been slow and backward so far. I think we have work to do when we create laws that reflect the nature of cryptography, rather than being laws that try to make cryptographic technologies work like previous crops of technologies.
CJ: One area that I immediately think of when reading your (excellent) article is Central Bank-issued digital currencies (CBDC’s). The power this would grant to a large company (say Apple, Google) or a government could be enormous – do you have any thoughts on that, especially from an antitrust perspective?
CT : Well, central banks are already in charge of fiat currencies! And we trade any market power due to stability and credibility trade-off. I don’t think it will be any different here. I also think that, in general, due to low switching costs, any cryptocurrency sponsored by a tech company is unlikely to have substantial market power in the traditional economic sense.
CJ: Big tech companies have become even more powerful in recent years. Do you still believe that blockchain alternatives could theoretically offer more democratic platforms and impact rising antitrust as discussed in the 2018 article?
CT : Blockchain making things less physical and more digital, reduces switching costs that are the traditional source of market power. So I remain optimistic.
CJ: You have written about open source code and how it is a key factor regarding blockchain and antitrust platforms, but do you believe that many pump-and-dumps or scams are a result of simple copy-paste forks of existing blockchains being so easy? to configure?
CT : I think cryptography as a technology area has been unusual in terms of the amount of scams there have been. I think this is the combination of so much investment, new untested technologies and that there have been remarkably high returns relative to other sectors of the economy. This combination, unfortunately, has led to fraud. I don’t think it’s necessarily a reflection of the ease of striking in particular.
CJ: Since you wrote this article, decentralized finance (DeFi) has exploded onto the scene in 2020. Could this have major impacts on potential antitrust and the control these large institutions currently have over financial markets?
CT : I’m excited about decentralized finance. If you think about it, especially in non-US economies, the banking industry tends to be extraordinarily concentrated and there are huge switching costs to leaving a bank. Decentralized finance as a movement promises to change this pattern of concentration.
CJ: You wrote in peper that “while the market is nascent and currently no cryptocurrency or blockchain project has achieved any significant market power, at scale some of the projects will have enough market share to influence prices and consumer welfare”. Do you believe that Bitcoin’s great leadership in terms of influence and market cap does not constitute significant market power, given its ability to move the markets of all other cryptocurrencies?
CT : No. I think Bitcoin as a pioneer in an industry where there are untested technologies has had an advantage in terms of attracting attention. I am not aware of any switching costs that particularly mean that their large market share implies monopoly power. As many traders know, switching between bitcoin and other competitors is easy.
