This is the final installment in a three-part interview with Stanford Business School professor and economist Susan Athey on digital currencies. In part 1, we discussed what Bitcoin is and what potential applications are, and in part 2, we looked at the security pros and cons of cryptocurrencies, plus hurdles to adoption.

Today, we talk about who will benefit from digital currencies and a new Bitcoin experiment Athey is helping to conduct in which each MIT undergrad willreceive $100 in Bitcoin.

Tell me about the experiment you are conducting with Bitcoin at MIT. What do you hope to find?

One of the questions thats still an open question is whether, if all your friends had Bitcoin, if you would find it useful to use Bitcoin too. Right now, people dont use Bitcoin to split checks, because for every person who has Bitcoin, most of their friends dont. But if you had a whole community of people who all had Bitcoin, would they find this to be more convenient than using cash or other options?

Stanford Business School professor Susan Athey (Peter Tenzer)

By seeding an entire community with Bitcoin, we can test the hypothesis that its lack of community adoption thats keeping people from using Bitcoin. Another hypothesis is that maybe it just doesnt provide that much value above cash or other alternatives. One of the challenges the experiment will face is that, though this isnt as broadly used in the general population, theres a service called Venmo thats been bought by Paypal that allows people to send money through mobile phones quickly and cheaply. So, for a lot of MIT students already using Venmo, the benefits of Bitcoin might be lower.

You asked earlier, why dont banks make your money available immediately [when making person-to-person transfers], but if you use Venmo, you can send money between your friends free and instantly. Venmohas made the business decision to make the money available to you even though it takes time for the money to actually move, because its verified both of you and authenticated your bank accounts, and it can see you have the money in you bank account. Venmo isnt taking much of a risk in doing that.

One hypothesis is that MIT undergrads might think that Venmo and cash are perfectly fine for their money transfer needs, and they dont really need a digital currency. The other hypothesis is that digital currency does provide a lot of value and if a lot of your friends have it, youll find it even more convenient to use. One of the issues with Venmo is that you still have to get the cash in and out of Venmo [into or out of your bank account]. Now, with Bitcoin thats also a problem, but if a lot of your friends have bitcoins, they can buy and sell them from each other. Imagine just sitting in your dorm room, looking on the internet and seeing what the exchange rate is and saying, I could use some bitcoin. I might respond, Oh, I have some bitcoin to sell, so I could just sell you some bitcoins and get cash right away. You could hand me a $100 bill and I can use my phone to scan the QR code of your bitcoin wallet and I push a button and send you some bitcoin. So if all my friends have it, it becomes easy and costless for me to move in and out of it and I dont need to use these middlemen.

What if they want to use bitcoin to buy a coffee?

The other aspect of the experiment is that since the Kendall Square businesses knew the MIT students were getting bitcoin and would want something to spend them on, a lot of the Kendall Square businesses are now accepting bitcoins. A merchant can accept bitcoin very easily, because there are these services that allow you to accept bitcoin as a merchant but then will just pay you in cash. So a coffee shop links its bank account to a service like Bitpay, and the student pays with bitcoin, and Bitpay will immediately transfer dollars to the coffee shops bank account, so it doesnt actually need to touch bitcoin. It doesnt have to worry about losing its relationship with its bank or exchange rates or anything like that. Bitpay takes care of all of that. The merchant likes this better than credit cards, because Bitpay would take a lower fee than credit cards, and there would be no fraud and no chargebacks. After the person sends the bitcoin, the transactions done. So its a very merchant-friendly solution, whereas credit cards are a consumer-friendly solution, because the credit cards allow you to call up later and say, no, that wasnt me, and the merchants out the money.

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Who Will Benefit From Digital Currency? Bitcoin Experiment Gives A Glimpse