Cryptocurrency has been a controversial topic in global finance since Satoshi Nakamoto published a white paper which made Bitcoin, a digital currency, a plausible reality in 2008. For the past fifteen years, the value of Bitcoin and other similar cryptocurrencies has been volatile and unpredictable, leaving many investors wary of them.
Cryptocurrency initiatives are gaining a larger presence on campus. At the University of Michigan, there are three student organizations dedicated to investment and research in cryptocurrency and related technologies: the Michigan Cryptocurrency Investment Club, Wolverine Blockchain and Blockchain at Michigan.
LSA Sophomore Evan Solomon, co-founder and president of MCIC, spoke with The Daily on how cryptocurrency may be gaining legitimacy. He cited cryptocurrency's institutional use in large, accredited financial institutions like investment banks. The fact that these banks trust cryptocurrency assets enough to invest in them, Solomon said, may be a signal that cryptocurrency can be reliable.
"We had the (vice president) of Onyx, (J.P. Morgan's) blockchain solution, come to campus for an event," Solomon said. "(People) think that the banks aren't using Blockchain yet, but that's not really true … Once the student body understands that even the big banks are starting to pick up blockchain, they'll start realizing how wide scale the industry really is and how, at this point, it's kind of too big to fail."
Solomon said MCIC works with companies to conduct technical or market research for them. One of the projects MCIC is currently working on is for a mapping company called Hive Mapper. Solomon said the company rewards users with their own proprietary cryptocurrency.
"One of the companies we're researching is called Hive Mapper." Solomon said. "(It) is a competitor like Google and Apple maps, where people will be able to drive around and video the landscape of different areas and actually build out their own mapping solution. And, the people that are doing so will get rewarded and specific tokens for this product."
Business freshman Namhoon Lee, a member of MCIC, also spoke with The Daily about how the club does financial research for cryptocurrency. He said much of cryptocurrency research, like other kinds of financial asset analysis, requires context. According to Lee, understanding the market helps investors minimize their losses and protect themselves.
"We try as best as possible to take preventive measures," Lee said. "That could be reducing whatever risk we have, or whatever exposure we have, and also (beginning) to think about what would be the (long term) effects."
Some of the technical research that is being pursued more by U-M faculty regards in cryptography, which uses advanced mathematical structures to safeguard information. Cryptography is used by cryptocurrencies like Bitcoin, which require secure financial networks to transfer currency. In an interview with The Michigan Daily, Chris Peikert, professor of computer science and electrical engineering at the University of Michigan, explained the development and use of modern cryptography.
"The basic idea of cryptography from the beginning was how to communicate with somebody in a secure way so that your enemy or your attacker, or your adversary, can't understand what you're saying," Peikert said. " 'Crypto' means secret and 'graph' means writing, so it literally means secret writing."
One of the main problems cryptography researchers at the University focus on is the "quantum apocalypse," which refers to the use of incredibly powerful quantum computers to break through all encrypted security systems that are being currently used. Peikert explains why this kind of computing is "apocalyptic."
"In the early 1990s, it was shown that if you had a big enough large scale quantum computer, you could use it to break all of the most popular crypto systems that were out there," Peikert said. "The quantum crypto apocalypse is (when) somebody eventually builds that quantum computer and uses it to break all the cryptography that we've been using for 40 years."
This poses threats to national security and intellectual property, and is applicable to conversations about cryptocurrency, as shown by the recent fall of FTX. A breach of a cryptocurrency ledger would mean an attacker could steal or counterfeit hundreds of millions of dollars in digital assets. Peikert and other U-M researchers are focusing on counter-measures to the quantum apocalypse to protect against these worst-case scenarios.
We want to design crypto systems that can run on today's hardware, but will be secure against quantum attacks in the future," Peikert said.
Peikert explained that computer science theory and research is often different from traditional lab-based research.
"Computer science theory is really all about what computers can and can't do in a fundamental sense," Peikert said. "What can they do with certain resources, within a certain amount of time or with a certain amount of space? What kind of tasks are solvable, and what kind of tasks maybe aren't solvable, or (are believed to be) not solvable?"
Peikert then spoke on how cryptography and cryptosystems — sets of algorithms implemented to provide information security — are explored to develop obstacles for cyber-attackers.
"In cryptography, we use problems that we think are not feasibly solvable as the basis for the security of cryptosystems," Peikert said. "So, if we need to, we use some problem that we think is hard (for attackers) to solve."
Creating "hard" problems — the kind that require a lot of computation to solve — is useful in cryptocurrency, which can use cryptography to secure the identities of people holding, transacting and verifying cryptocurrency. It also makes sure that cryptocurrencies cannot be counterfeited or stolen by legitimate users.
Daily Staff Reporter Amer Goel can be reached at amergoel@umich.edu.
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