In January 2019, in the Stanford class, Susan Athey, a professor of economics at the Ripple Board of Directors and a well-known professor at the Stanford University School of Business, gave a guest lecture entitled “Blockchain and the Future of Finance.”
Among the hundreds of students who listened carefully, there was an ordinary, seemingly inconspicuous student. He frowned and became more and more disappointed.
This is the story’s founder, Conner Brown. The story is simple but profound: Professor Susan Athey is wrong!
In Brown’s opinion, Professor Athey’s speech contained a number of misstatements about the basics of Bitcoin, with some interest-driven.
Shilling XRP in an academic environment she said:
“…all of those problems can potentially be addressed, and indeed startups are working on all of them within the Bitcoin community. However, it made me wonder whether there wasn’t a simpler way to solve this problem, one that still took advantage of the fundamental innovation from Bitcoin, a secure ledger. As I was grappling with these questions, I learned about the Ripple protocol. I realized that it addressed all of these problems.”
And the worst of that according to the storyteller twitter this is not the first time. After the speech, Brown was very dissatisfied with Professor Athey’s mention of bitcoin in his speech. Considering that most of the beginners in the classroom are unfamiliar with the basic concepts behind Bitcoin, he thinks it is necessary to reflect this to the school. So he sent an email to the school board, which fully revealed his current concerns.
He waited hopefully for the school’s reply. But for more than a month, he did not receive a “looking decent” response.
Posted below is an email that I sent to the Stanford GSB after a presentation in one of my classes. My professors refused to talk in person after bringing this to their attention. Over a month later I still have heard no response, other than “we will get back to you on this.”
— Conner Brown ⚡️ (@_ConnerBrown_) February 24, 2019
On February 23, Brown complained on Twitter that the only response he has received from the school so far is an e-mail with a concise and imaginative space. “We will contact you about this”
Where is the Stanford Professor wrong?
Professor Athey mentioned in his speech that Bitcoin is controlled by a small group of miners in China and wastes a lot of power to solve useless math problems. Bitcoin is an “economically secure, not encrypted” currency.
In the speech, Professor Athey dissuaded Bitcoin. In her opinion, Ripple XRP is a better solution than Bitcoin. She pointed out that exchange rate fluctuations, trust crisis with exchanges and long trading hours are obvious drawbacks of Bitcoin. At the same time, Professor Athey detailed the Ripple XRP, xRapid API, and consensus mechanisms, arguing that Ripple XRP is faster, cheaper, safer, and more energy efficient.
In contrast, Brown expressed his thoughts in the mail. He believes that certain views and opinions about Bitcoin are subject to “high-level discussions and rigorous review by peers.” It also elaborated on the mistakes of Professor Athey’s speech.
When talking about “Bitcoin is controlled by a small group of miners in China,” Brown believes that Athey confuses the mining node with the entire node and throws the idea that “XRP is a better alternative to Bitcoin.” He also countered that miners can pool their resources in a pool, but there are many miners in these pools, and no one can fully control bitcoin.
Speaking of Professor Athey’s belief that “bitcoin is economically secure, not an encrypted currency,” Brown believes that Athey once again confuses two different concepts: “stealing funds by stealing wallet keys” and “using computing power against bitcoins.” The network is 51% attacked.”
Is academic ignorance? Or is it driven by interest?
Soon, this incident was exposed on Twitter and spread quickly. Some netizens revealed that as early as April 2014, Professor Athey joined the Ripple Labs Board of Directors and still plays an important role.
Brown said that regardless of whether Athey was malicious in his speech, it didn’t matter to him.
“It concerns me that my classmates’ first introduction to Bitcoin contained severe factual errors along with strong anti-Bitcoin rhetoric. The academy is not a place for marketing, but rigorously testing ideas. If a professor has a potential conflict of interest, they should be held to the highest standards of scrutiny and peer review.
“That being said, Bitcoin is a creature of the internet. Its properties are difficult for academics to appreciate due to its deeply interdisciplinary and evolutionary nature. This makes it difficult for developing a curriculum because of the siloed design of academic disciplines and the slow pace of the peer review process. The internet will always be the best place to pursue a Bitcoin education.”
Full Browns message text
During the presentation from Dr. Athey there were multiple misstatements that were concerning to me. I understand that she is a respected professor at Stanford and that these may have been accidental; however I also believe that it is in the best interest of our academic environment that we ensure high caliber discussion and peer review.
My concerns revolve around misstatements around Bitcoin in comparison to Ripple’s token called XRP. I would also like to raise concerns about potential conflicts of interest in a professor making false statements while simultaneously promoting a product that claims to solve these problems and being paid by that company.
- Conflating mining nodes and full validating nodes on the Bitcoin network and thus claiming that Bitcoin is “controlled by a small group of miners in China”.
In her talk, Prof. Athey claimed that mining has become centralized and Chinese miners are able to control the Bitcoin network. This claim was made to promote the Ripple network as a better alternative to Bitcoin. This is factually incorrect on several levels. First, mining nodes do not determine which transactions are valid, each node on the network fully validates the cryptographic signatures of a transaction before propagating that to other nodes. Therefore even if a miner with many computers attempted to send an invalid transaction to a node, that block would be automatically rejected as cryptographically incorrect. If a computer attempts to send multiple invalid transactions, then the Bitcoin network will block that miner from sending more transactions. For a nice visualization and more in-depth analysis of this concept, here is a great article on the topic. The point here is that regardless of how much computing power a single entity possesses, they will not be able to submit a transaction that is invalid. Therefore, Bitcoin can never be “controlled by miners” based on the design of the network. It is protected through full nodes across the world. A chart for all public full nodes can be found here.
Second, mining is not centralized in the hands of a few miners. Miners are able to pool their resources together in order to get a more consistent payout. Here is a current look at the distribution of those pools (below). Each of those pools are further divided into hundreds or thousands of individual miners from across the globe. Recent research has put this number into the hundreds of thousands of individual miners that are using these pools. Far from the picture of one massive controlling entity.
- Claiming that Bitcoin accounts are “secured economically and not cryptographically”.
Prof. Athey claimed that the funds in Bitcoin are not secured cryptographically, but economically due to mining. She argued that mining means your funds are only secured by profits of miners. She went on to claim that Ripple has solved this problem by removing miners from the picture. This is false. She is conflating two different things 1) stealing funds by cracking the encryption of the wallet 2) using mining power to 51% attack a network.
When holding funds in a Bitcoin wallet, that wallet is secured though SHA256 encryption and ECDSA cryptography. As long as you do not tell anyone what your private key is, this key is physically impossible to crack in order to steal your funds. In order to do so would require a computer larger than the milky way galaxy running for the history of the universe. For more resources on how mind-boggling secure Bitcoin is, see this article and this video. The security on this encryption has nothing to do with the “economics of the protocol”.
When referencing “economics of the network” she may have been referring to the fact that mining power can be used in an attempt at an attack. However, this is a long debunked threat. Here is a great video from a distributed computing expert Andreas Antonopolous that concisely explains why this is not a threat. Essentially this only involves those who are attempting to spend their coins more than once in two different places and cheat the network. This is next to impossible practically speaking and does not involve stealing a users funds.
- Claiming that “Bitcoin wastes electricity by stealing from rivers to solve useless math problems”.
This is another claim that is based on inaccurate factual narratives promoted by alternatives to Bitcoin. Prof. Athey levied this argument against Bitcoin in order to claim Ripple as a “greener” solution. The specifics of this debate are quite detailed. Although I think that this can also be addressed pretty simply. Bitcoin is proven to actually be creating renewable energy sources, far from “stealing from rivers”. As outlined in this research paper, Bitcoin miners are using nearly 77% renewable energy to power their mining operations. The reason behind this is that Bitcoin mining creates strong incentives to create new renewable energy and use the surplus for mining. For a great breakdown of this report and the myth of Bitcoin “stealing from rivers”, this article here is a good start. This has been debunked for several years now.
For a more detailed review of Bitcoin’s implications for energy production, this article by researcher Dan Held does a great job of explaining how Bitcoin can create the proper incentives for large scale development of more green and efficient energy sources.
- Claiming that Mexican financial institutions are using Ripple technology.
In her presentation, Prof Athey gave the example of Mexican banks that are using XRP technology to exchange funds between dollars and pesos. She also showed a slide with an image of a Mexican bank exchanging pesos into dollars using XRP. This comes from a statement by Ripple in 2018 ” Cuallix became the first worldwide institution to use xRapid to reduce the cost of sending cross-border payments from the U.S. to Mexico.”
However, looking a little bit deeper, this does not appear to be the case. The company reportedly using the technology is called “Caullix” however, there is no record of this company actually existing. The only evidence of the company is a website that was created one year ago. They list multiple addresses on their website but those addresses are not owned by any company and are currently up for lease.
I called the company that Ripple has publicly stated uses the technology and asked them if they use “xRapid” or any services provided by Ripple, their response was “No.” I’ve attached the audio clip below. This is really concerning, the one company that they advertise as using their blockchain technology is denying that claim. They even have a “quote” on their website from Cuallix, this brings that quote into question as well. You can see that statement here.
- Claiming that Ripple does not sell XRP, they only “routinely disperse” the token.
During her presentation I asked Prof Athey why their company sells this token to retail investors if this is supposed to be for bank liquidity. Athey denied my comment and said they merely “routinely disburse the token”; but this is the same thing as selling it. In fact, Ripple holds over 80% of their token and sells millions of dollars of the token every month to investors. Ripple’s latest report is that they sold 535 million to retail investors in the past year.
Additionally, there have been concerns that Ripple is engaging in millions of dollars of wash trading in order to overstate their market cap. A report was released just two days ago calling attention to this. That report can be found here https://messari.io
There were other elements of her presentation that, while not direct misstatements, were still quite misleading.
- Showing Bitcoin wallets from 2013 without explaining that wallet infrastructure has changed and can now be accessed through a variety of user friendly mobile apps (i.e. Zap as a desktop application and a mobile wallet, bluewallet for mobile payments, and Joule for a google chrome extension)
- Claiming that Bitcoin has slow transactions without mentioning how Lightning technology has upgraded the Bitcoin network to allow instant, free, and cryptographically secure transactions. Despite failing to mention this, one of her slides explicitly cited the Lightning network Whitepaper by Joseph Poon.
- Claiming that if you enter the incorrect Bitcoin address, the funds disappear. This is incorrect because you do not enter the number of the address you would like to send it to, modern wallets use QR codes to prevent this.
I understand that no one is perfect, but these are pretty basic concerns about fairness of information and the quality of discussion that we have here at Stanford. I’m not sure about what to do about this, but I just wanted to bring these concerns to your attention.
End of the story
This blatant promotion in an academic environment not only bring in question Athey integrity but also the Stanford academic integrity.