Building better algorithms to build better blockchains

Matt Weinberg, an expert in economics and computation, sees decentralization as a tool, rather than an objective.

Matt Weinberg, an expert in economics and computation, sees decentralization as a tool, rather than an objective.

His research has largely focused on the design of decentralized technologies, but he hopes to also start understanding objectives that these technologies might help achieve.

“I really want to understand what might, or might not, cause ordinary users to prefer a decentralized service over a centralized one,” said Weinberg, an assistant professor of computer science and member of the DeCenter steering committee.

Weinberg is a theoretician whose research explores how algorithms create incentives for users and producers. “Blockchain protocols are algorithms,” said Weinberg. “They ask people to please behave in a certain way.”

Algorithm designers, Weinberg says, often fail to consider incentives that are embedded in their platforms, which can lead to unintended consequences. Much of Weinberg’s research in this area focuses on showing how blockchain protocols can create unexpected results — from cryptocurrency miners’ behavior, to unintended centralization, to transaction fees.

Correct incentives create a better experience for everyone, Weinberg said, optimizing choice and price for the user while increasing usage or sales for the producer. These principles can be extended to other allocation algorithms used in auctions, school matching, and voting.

Weinberg teaches undergraduates algorithm design fundamentals for all of these applications in a course called “Economics and Computing.” The course draws interest from students in computer science, operations research and financial engineering, economics and mathematics.

One new direction of Weinberg’s research is focused on looking at what services might be improved when provided through a decentralized model. Businesses that have a network effect — where more users improve the value of the service — are a natural target. These kinds of businesses are more prone to powerful centralized monopolists, which can in turn result in poor user experience through high fees, low transparency, and less openness to innovation.

The hurdles to understanding such systems are vast, however. Weinberg believes the research will take years and may not pan out at all. But it’s an exciting new frontier.

Note: This story originally appeared in EQuad News magazine as part of a series on the promise and pitfalls of blockchain technologies.

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