The Republic of the Marshall Islands is a country of around 50,000 people spread across more than 1,000 islands in a remote part of the Pacific Ocean. The country relies heavily on cross-border finance and trade, and the complexities of that system can make it difficult for citizens to get certain goods and financial services efficiently.
Now the federal government is seeking to become the first to issue a national digital currency using blockchain technology. Officials hope the move helps citizens avoid high transaction fees, simplifies compliance with international partners, and protects against inflation (the currency will have a fixed supply rate).
The new currency will be based on blockchain technology developed by Silvio Micali, the Ford Professor of Engineering in MIT’s Computer Science and Artificial Intelligence Laboratory (CSAIL), and commercialized by Micali’s startup, Algorand.
There has been considerable hype around the potential for blockchain technology and associated cryptocurrencies to disrupt the way money and other assets move around the world. Skeptics of that vision say blockchain technologies are not sustainable or efficient enough for mass adoption.
Algorand believes it has solved those problems with a unique, scalable architecture that doesn’t sacrifice traditional benefits of blockchain technology like decentralization and security.
An increasing number of people are using Algorand for a wide range of applications, from creating carbon credit marketplaces to expediting real estate transactions and, in the case of the Marshall Islands, creating new legal tender.
“The advent of blockchain technology has opened up a world of opportunity for small nations like ours,” Marshall Islands Minister-in-Assistance to the President David Paul said when the country announced its plans. “By issuing a currency that is not physically embodied in cash, that can travel the globe instantly, and that is tamper-proof and completely secure, the Marshall Islands will finally be connected to the global financial system on its own terms.”
Micali has long been recognized for his work in cryptography and security. He’s been a member of MIT’s faculty since 1983, and in 2012 was awarded the Turing Award with his collaborator and fellow MIT professor, Shafi Goldwasser.
Working with others, Micali’s achievements include a new way for distributed parties to agree on a value or strategy even if some of the parties are corrupt (reaching so-called byzantine agreement), and a method for parties to securely send information to each other in a way that can later be verified by the public (called verifiable random functions).
Much of Micali’s work occurred long before the rise of modern cryptocurrencies and hype around blockchain. In the case of verifiable random functions, Micali says he knew they’d be useful somehow, but couldn’t figure out the application.
Still, Micali put off learning about blockchains for years after the creation of the first blockchain-linked cryptocurrency, bitcoin, in 2008. One day he finally walked into his lab and asked some of his graduate students to explain it to him.
“I had two main reactions,” Micali remembers. “One was it’s a beautiful idea. Two was it’s a very inelegant solution.”
Of particular interest to Micali was a problem put forth by the founder of another blockchain, Ethereum. The founder said blockchains can guarantee at most two of the following: decentralization, security, and scalability.
“The notion that something was impossible really attracted my attention, because in cryptography, and MIT more generally, our business is to prove the impossible possible,” Micali says.
Micali also credits MIT’s ecosystem with helping him start Algorand. Of his first 10 hires, eight were from MIT.
“It’s not only the tech, it’s also the entrepreneurial spirit at MIT and the fact that we don’t shy away from challenges,” Micali says.
