The cryptonomist interviewed Massimo Moriniadvisor to the Cardano Foundation and professor of blockchain and cryptocurrencies at USI University of Lugano to talk about technology, AI and the future of DeFi.
How do you see blockchain technology evolving over the next five years and what role do you see for your work in this development?
In the coming years, perhaps less than five, blockchain technology will need to fully come into its own in order to continue to develop. Truly decentralized and increasingly usable. With the growth in size, the greatest risk is that it will only be noticed because it is at the edges of the regulated world. Salvation lies in one’s identity. Bitcoin has continued to grow because it is truly decentralized and used in its own way for precisely that reason.
Ethereum is even more interesting because it has used its increasing decentralization to give rise to a new economy, consisting of DeFi projects and the technology to make them scalable and secure, even at level two. There is still much to do, particularly in terms of governance. With Cardano, for example, we are working on the transition to decentralized governance. Cardano is embarking on this path with a determination that is still barely visible in other ecosystems. And for decentralized governance to work, the users who participate in it must know the system they govern, in its mathematical, technological and economic aspects.
What are the most promising applications of blockchain and cryptocurrencies that you see emerging, particularly in the context of the global economy?
Remember that blockchain does not really make a clear distinction between technology, investment, financing and application. The token, for example, is the unit of blockchain technology, it is a form of financing, it is an investment, it is a tool that enables other applications from DeFi to tokenization. Now I’m fascinated by how the growth of tokens has given rise to DeFi, which is driving the growth of layer two, boosting applications where data and calculations are verified with great efficiency. The world now faces what we know to be one of the greatest opportunities in history: AI. Many also consider this a big risk, but it is necessary to understand in what sense.
For me, AI is a risk to the extent that it becomes opaque, manipulated, private. This could then end almost everything we know. If, on the contrary, it remains transparent, verifiable and objective, then there is no need to be afraid. The world of blockchain has the only technology to do this: homomorphic encryption, hashing on immutable registers, proof of zero knowledge… they can ensure confidentiality and verifiability, prevent manipulation, certify algorithmic steps, and increasingly more even for complex algorithms. Who knows if it might be the application that kills… Or rather, the application that saves.
Cardano is known for its sustainable and scalable approach to blockchain. Can you explain how these features differentiate Cardano from other blockchain platforms and what advantages they offer?
Cardano is often remembered for the privacy and scalability of its e-utxo system, or for the inclusive nature of its staking system in which anyone can participate, and without costs to the environment. These are great qualities that required and still require a lot of work. But I believe Cardano is more than that. Cardano was born with a very clear and very honest plan. He recognized the difficulty of starting each blockchain and so sought to grow seamlessly, then began to truly decentralize consensus, succeeding within a few years.
Today, this is the case with governance. Meanwhile, it has used its resources consistently and reliably, because its resource management mechanisms are algorithmic and parameterized. This is almost unique in the history of blockchain, and it is necessary to truly decentralize. Right now, Cardano is handing over this living algorithm to those who will have to take care of it in the long term, the users. And it must be done well. The Cardano story is promising.
How do you think blockchain and cryptocurrencies can integrate with traditional financial institutions? Are there any specific challenges we face?
Neither the blockchain world nor institutions should miss the opportunity arising from the debate over central bank digital currencies. If these are based on blockchain-enabled technology, then we will truly see integration, and it will be faster than expected. Otherwise, integration slows down for years. But only a few years later, because if institutions forget that the idea of CBDC was born from Bitcoin and offer an even more centralized solution than those of today, they too will seize a huge opportunity.
Blockchain can make banks more reliable and efficient while maintaining their decentralization, and it can provide citizens with the only form of digital currency that can truly replace cash as the part of money we prefer to manage independently . A technology too similar to traditional technologies and even more centralized, even if well managed by the central bank and with the participation of banks, cannot achieve these objectives and will in fact increase systemic risks, managing to persist.
As a professor at USI Lugano, what are the main challenges and opportunities in teaching blockchain and cryptocurrencies? What skills do you consider essential for students who want to enter this field?
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Blockchain is not “a” technology. It is a set of disciplines. The mathematics of cryptography and algorithms, platform technology and programming, game theory economics, markets and distributed ledger accounting. It is not easy to find students who have or are ready to develop this background. Although USI, which focuses on economics and finance on the one hand, and technology and IT on the other, is off to a pretty good start in this regard. Then, each student will deepen one part and less another, and will add to this more or less in-depth knowledge, these other skills necessary for the community, communication, marketing, social, legal environment. But it’s important in this industry to keep an open mind, to never be afraid of technology or the changing regulatory framework, to know more even if you can never know everything. Indeed, this attitude is stronger in blockchain than in any other sector, and this is one of its contributions to society and individuals.
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Decentralized finance is attracting more and more attention. What are your predictions for the future of DeFi and how do you think it will influence traditional financial markets?
Traditional markets have stagnated for more than a decade, since the great financial crisis. For better or worse, they have lost the driving force they had when I entered the sector, before the crisis. Now, technology leads, and in reality, the DeFi sector is the only part of finance that is continually growing and innovating. And this against all expectations, without clear rules and without creating even half of the almost normal instabilities in finance. It’s been more than two years since the first, and to date almost the only serious problem that has arisen in the world, the case of FTX and others from the same period. But just over a year has passed since four of the biggest bank defaults on record, saved only by central banks. It’s less talked about, but banks know they are a symptom that something is wrong and are doing more than meets the eye. But to this day, they cannot escape the security of a world where everything is hyper-regulated and ultimately protected by the central bank. In the same way, blockchain is struggling to give itself the rules that it could and that could make the world understand why it can work better than traditional systems. For the moment, the two sectors communicate, but it is a dialogue between the deaf.
