Two weeks ago, University of Pennsylvania instructors Kevin Werbach, professor at the Wharton School, and David Crosbie, lecturer in the School of Engineering and Applied Science, welcomed students to a brand-new course entitled Blockchain, Cryptocurrency, and Distributed Ledger Technology. In what may well be a first for a college course, students are getting a small amount of money to purchase cryptocurrencies, which they’ll use in a series of class exercises. (Funding comes courtesy of Ripple, as part of the crypto company’s $50 million University Blockchain Research Initiative.)
A member of Wharton’s Department of Legal Studies and Business Ethics since 2004, Werbach is the author of The Blockchain and the New Architecture of Trust, out in November via MIT Press. He also has experience well beyond academia, having worked as FCC counsel for new technology policy in the Clinton administration and later as part of the Obama administration’s presidential transition team.
BREAKER recently spoke to Werbach about his new blockchain course, the Trump administration’s tech strategy (or lack thereof), and, naturally, CryptoKitties.
What’s your new course going to cover, exactly?
This is intended to be an introduction to this field, which is relevant both for students who come to it with no prior knowledge or technical skills, as well as for students who are already interested and engaged with cryptocurrencies. We’re trying to get beyond the basic outlines that you can find lots of places online. So we’re going to start with the foundations, as opposed to saying, “There was this white paper that came out in 2008” and “How does bitcoin work?” We’re going to start with “What’s the need for these kinds of systems?” Which means looking at foundations of the nature of trust, the nature of money, the nature of cryptography, and other technical mechanisms for security, and building up from there.
The other thing we’re doing is really trying to make this an active-learning course. We want to find ways for the students to experience directly what it means to buy and use cryptocurrency. But beyond that, to engage with the questions of what makes these projects successful or not successful.
Will students be required to buy cryptocurrency for the course?
We are hoping to make that happen. We want to make sure that we do everything by the book.
What are the hurdles for instituting that?
One set of hurdles is when you’re in an Ivy League school like the University of Pennsylvania, [the school] wants to make sure it understands what it means to be asking students to buy cryptocurrency. There’s no particular legal problem, but we just want to make sure that we talk to the right people and reassure them and don’t create some situation where someone gets a misimpression about what’s happening. We also want to make sure to distinguish between the various, perfectly legal avenues to purchase cryptocurrency and some of the things out there that are legally problematic.
Will you be recommending they buy a particular currency, like bitcoin or ether? Will you steer them clear of scammy ICOs?
It’s valuable for the students to be able to assess for themselves, as any good investor should, what they’re buying. And with something that’s a scam, there’s no legal problem with them buying it, it’s just that they may lose their money. In the course, we’re going to talk about ICOs and we’re going to talk about the scams and fraud in the space, so I would hope that students would take that into account.
What kind of students do you anticipate you’ll attract?
Many more than we will be able to enroll the first time through. We’re doing this as an experiential course where students are going to work together on projects—they’re going to be actually doing some coding and making purchases and things like that—as opposed to 300 people sitting in a lecture hall and just listening to the professors talk. So it’s going to be no more than 60 students.
Blockchain, as we both know, is extremely complicated. How hard is it going to be to get an A in this class?
[Laughs.] We haven’t done the class yet, so we’ll see. Your grade should reflect the level of effort and the level of learning. We want to make it so that it’s not just, you know, answer 50 questions correctly and then you get an A. It’s really the quality of the analysis that’s going to be important.
"A lot of students are excited because they really think [the class is] going to be a big opportunity for their careers and they’re going to have a competitive advantage coming into the workforce."
And how many students do you think will take the course to become bitcoin billionaires?
[Laughs.] We have a very active blockchain club at the University of Pennsylvania. There are a good number of students who are trading cryptocurrency in their spare time already, but I think a larger percentage of them probably are interested in getting jobs through this. A lot of students are excited because they really think it’s going to be a big opportunity for their careers and they’re going to have a competitive advantage coming into the workforce.
You have a book coming out called The Blockchain and the New Architecture of Trust. What is the book’s central argument?
The central argument is that blockchain is a new form of trust. It’s not the antithesis of trust. It’s a decentralized form of trust that in order to succeed has to convince people that it’s possible to have trustworthy interactions on a foundation of mutual mistrust. And that doesn’t happen automatically because you have a cryptographically secure consensus algorithm. It actually requires engaging with a whole set of legal and regulatory governance questions, as well as an understanding of the strategic and business dimensions about what’s the real value proposition for these kinds of approaches.
I understand that your book covers potential assassination markets. So what’s your take on the Augur assassination markets controversy?
I talked to some of the Augur people well before Augur launched. The so-called assassination markets on something like Augur are an example of a larger issue, which is that if you take the pure version of decentralized cryptocurrency that’s immutably recorded on a public blockchain, inevitably it’s going to come into conflict with legal enforcement. There will be things that you cannot legally do under the rules of an applicable jurisdiction but that this technology seems to make it impossible to stop.
The reality is that it’s not that simple. It turns out, inevitably, that systems that are claimed to be unstoppable are typically very stoppable. At a basic level, there’s a trade-off that if the goal of the designers and users of a system is to have something that is widely adopted by the mainstream, then that often pushes back on the pure decentralization and the additional effort it takes to avoid legal enforcement.
For example, pre-crypto, people said, “The combination of basic encryption and peer-to-peer technology means it’s going to be impossible to stop copyright infringement.” And there are lots of places in the world where I can get any movie or any piece of music or piece of content for free, and yet most people don’t. And in fact, there now are these massive, multibillion-dollar legal marketplaces where people pay for those things because there’s a difference between something that’s in the sunlight, in the mainstream, and something that’s in a dark corner hiding from law enforcement.
There’s the same trade-off here. The experimentation with people creating a market saying “Will Donald Trump still be alive in a year?” is different from a large market that’s putting a contract on killing him. Conceptually, they’re the same thing, but in practice they’re not, and law enforcement understands that. My sense is there is cause for concern here, but ultimately the people in organizations who want these kinds of mechanisms like prediction markets to succeed for legitimate reasons are going to make the right kinds of trade-offs, as opposed to designing something with a primary intent of escaping legal accountability.
What in your mind are the biggest ethical issues surrounding blockchain? Is there anything that keeps you up at night?
There clearly is a great deal of fraud and theft being perpetrated on users of cryptocurrencies. Those are not ethical problems with the blockchain technology itself.
You look at, for example, the ICO market again: On the one hand, there’s a tremendous amount of innovation and valuable capital formation happening. But on the other hand, there’s all kinds of fraud and theft. I don’t think about that as an ethical issue in terms of “Am I ethically concerned about me or someone else getting involved in this world?” but those are challenges that are going to have to be addressed. As I described before, the ethical challenge of cryptocurrencies is how to use something that can be employed to avoid legal accountability in ways that don’t focus in that direction. And that’s not all that different from some of the issues that people have had to confront for a long time on the internet.
You’ve written and taught a lot about gamification, which is the application of gameplay elements to other areas. How can gamification be applied to the blockchain?
I wrote a Medium post back in 2014 about how bitcoin mining is a great example of gamification. Crypto-economic systems that are about aligning incentives and motivations in a way that encourage people to voluntarily collaborate are essentially examples of gamification. And then many gamification systems use digital tokens, which in the gamification world we call things like “points” and “badges,” and obviously, games have had virtual currencies and virtual goods for a long time. The potential of marrying gamification expertise, in terms of designing experiences, with crypto-economic expertise, to create a truly decentralized underlying technology for it, is where the I think the exciting potential is.
Speaking of gamificaton, what is your take on the CryptoKitties phenomenon?
CrytpoKitties is an example of a unique valuable collectible asset. [The video game] Fortnite made something like $300 million last month almost entirely on selling virtual goods. Now, those aren’t unique, nonfungible goods—there are differences between that and CryptoKitties—but most people who are not engaged with the video game world have no idea just how big that phenomenon already is.
It stands to reason that if you can improve on that virtual goods model by using cryptocurrency tokens, that’s going to be a big area of opportunity. I am certain that all the major games companies, who have tremendous expertise building massive virtual goods businesses, are looking at this really carefully.
You served on the Obama administration’s presidential transition team. What was it like working for Obama at the very beginning?
It was an extraordinarily exciting time, especially being involved with technology policy. We saw the next wave of the internet as being part of what helped Obama get elected, and we had a team of people at the senior levels of the administration who were very supportive of technology, innovation, and science, so it was a great opportunity to really think about how government could both get out of the way but also help facilitate applications of technology to address society’s problems. Obviously, it was a very different time in the United States.
"The [Trump] administration doesn’t have a [tech] strategy as such. There’s no coherent agenda."
And how do you see the current administration’s embrace of technology?
The biggest difference is that the current administration doesn’t have a strategy as such. There are individual people in the administration who make statements about various kinds of technologies, but there’s no coherent agenda. The people at the agency level, where the rubber meets the road, are for the most part doing their job as well as they can. For example, the SEC has been very thoughtful and systematic in their engagement with issues around ICOs. Generally speaking, they’re good people who are trying to get it right.
But during the Obama administration, when there were issues like the significance of AI on the nature of work, or questions about privacy or bias in the growth of machine learning, there was a tremendous amount of effort to bring together experts in government and outside government and to identify the issues, work through them, and come up with strategy. And I think the United States does not have a strategy about the blockchain and cryptocurrency phenomenon, while some of our major competitors do. And in the long run, that will be a real problem for the United States.
Because you need to know where you want to go if you want to get there, and there’s a lot that government can do to facilitate the development of technology. There will be governments that tokenize their currency in various ways. There are governments funding R&D and supporting a lot of activity in the community. And then there are all these issues we’ve talked about, like what’s necessary to protect investors in token offerings, as well as what are we to do about these so-called assassination markets? Those are all questions that governments need to have a considered view on. The governments that do, and also appreciate how aspects of this phenomenon will contribute to their global economic leadership, are going to be the most successful.
What country in your mind is doing the best job?
It’s hard to say. The European Union has been very engaged with this. The other issue is it’s a very different thing for a small territory, like Dubai or Estonia or Malta, to come up with a blockchain strategy than for the United States or France or Russia to do so. I suspect that China is leading the world in terms of having a blockchain strategy, but because China is so opaque I can only speculate about it. And the Chinese approach is obviously going to be different than the U.S. approach would be, so that’s part of why I think it’s a problem that we don’t really have a strategy. If there’s only one side that has a view, then that’s going to be the one that wins.
Donald Trump is one of Wharton’s most famous alums. What do you think he could gain from your blockchain course?
[Laughs.] Well, he graduated in 1968, so he’s no longer a student.
But were he to take it now?
Look, I don’t want to make a political statement, but again, the goal of the course is to be valuable and accessible to everyone. And to identify why this is a foundational technology advance which has tremendous promise but also raises tremendous difficulties and challenges. I wouldn’t comment specifically on whether the president would get value from taking the class. But the other people around him in the White House—I think it’s important that they appreciate what’s going on in this world.
What is your hope for this course?
I want the students to come out of it feeling like they’ve learned more than what they could have gotten through just studying on their own. I want to get to the point where we’re a little bit closer to this subject being something that is regularly taught in most business schools and universities.
The easy way to teach this class would be to come up with a bunch of lectures and just go through them and explain on the board how these technologies work. We’re not taking the easy road because we don’t think it’s the best road for learning for the students and for us. So that means things may fail. We’re going to hopefully convince the students to join us in an experiment, because we’re excited about this whole world probably as much as they are.
This interview has been edited and condensed. Photo courtesy Kevin Werbach.