The new digital, decentralized economy needs academic validation

It is a pivotal moment in the development of the new digital economy. Interest in all things crypto keeps growing exponentially, and investment follows closely. There has arguably never been so much money poured into a product class that was so poorly understood, both by the wider public and by most investors. In lieu of actual understanding, stakeholders in the crypto space have to operate on reputation and trust instead. This necessity has given rise to a dangerous new con. 

Unlike blatant scams like OneCoin or Bitconnect, today’s blockchain opportunists and confidence tricksters often play the faux science card. “Read our white paper here,” “Look at this research report we uploaded to arXiv,” “Download our dataset” — sounds legit, right? There is just one crucial element missing: academic validation.

Not all papers are created equal

Anyone can put together a “white paper” and make it available to download. In 2018, the United States Securities and Exchange Commission taught gullible crypto investors a valuable lesson. It set up a fake initial coin offering for the fictitious “HoweyCoin” that prominently featured a white paper as a token (pun intended) of trustworthiness. By contrast, only a trained researcher, most likely with a Ph.D. and extensive knowledge in the field, can have a paper published in a peer-reviewed journal. This is the gold standard to which the distributed ledger technology, or DLT, space should aspire.

You would not put a vaccine into your arm that was developed by college dropouts who did not let experts in biochemistry and immunology verify their work. So, why should you put your finances, your personal data and your automated devices into DLT solutions that were not rigorously vetted?

Academic validation starts with peer review

Peer review is a key aspect of academic validation. It describes the practice of experts in a scientific field checking each others’ research findings for flaws and inconsistencies, pre- and post-publication. On the one hand, peer review is a crucial step in academic publishing, and it increases transparency, reliability and trust. To allow for independent validation, authors open their data, methods and results to expert scrutiny, first by anonymous reviewers. On the other hand, once it passes initial review and gets published, research can be revisited, revised or even retracted at any point in time, based on new information from the wider scientific community. Academic validation is, thus, a perpetual process.

Working within a system of peer review and academic validation ensures continuity in innovation and knowledge generation. Good scientific publications embed their unique contributions into a rich legacy of previous achievements. They systematically review what has been done before, build upon it and chart the way forward for future innovation. Pseudoscience publications, by contrast, often reinvent the wheel and give it a few sharp corners for good measure.

Last but not least, peer review brings with itself a code of academic integrity and conduct. In popular culture, many supervillains hold advanced degrees. In real life, the vast majority of academics are well-intentioned, highly ethical people whose actions are guided by the pursuit of facts and knowledge. Though not a perfect antidote to human errors or moral slip-ups, we can say the academic validation system has largely succeeded in keeping scientific development on a righteous path. That observation also holds true for many industry spinoffs, such as in the biotech sector.

Biotech as the poster child for peer review in the industry

One industry where peer review has long been successfully integrated and widely accepted is biotechnology. Recent rising stars like BioNTech and Triumvira Immunologics regularly publish in top journals and stand up to painstaking peer review. Nobody would have it otherwise. The field has learned its lesson after several spectacular bouts with pseudoscience, and none of them looms larger than Theranos.

Between its founding in 2003 and its forced shutdown in 2018, blood-testing biotech unicorn Theranos amassed roughly $700 million in funding. CEO Elizabeth Holmes and chief operating officer Ramesh “Sunny” Balwani charmed investors with rosy descriptions of technologies that their company never actually developed. The two blood-testing devices Theranos brought to market — the Edison and the miniLab — were prominently not peer-reviewed.

Eventually, the pressure for validation from investors, researchers and the media became too high to ignore. Under independent scientific scrutiny, the Edison proved to be practically unusable as a diagnostic tool. Badly burned, Theranos did not even open the miniLab to independent examination. Soon enough, partners and investors cried foul, and the company’s top executives now face charges on what the SEC characterized as elaborate fraud on a massive scale.

What the whole biotech industry learned from the Theranos debacle was the inherent value of peer review and the transparency and trust that come with it. In a field that is fraught with complexity and high technology that very few truly understand, the peer review system is now a universally accepted gatekeeper. It keeps the Elizabeth Holmeses and Ramesh Balwanis the world out and makes sure innovation follows a verifiable path of truth.

It’s time to put “Ph.D.” and “DLT” together

So, why does the blockchain space not rely on peer review much more heavily? A negligibly small group among the major actors in the space care to publish their innovations academically. The field has had its fair share of Theranos-sized cons. Instead of verified fact, the promise of profit seems to be the dominant incentive to invest — a poor and possibly dangerous status quo.

Related: Did you fall for it? 13 ICO scams that fooled thousands

Perhaps one explanation lies in the tech industry’s fascination with college dropouts — Steve Jobs, Steve Wozniak, Bill Gates and Jack Dorsey spring to mind. Yet, every innovative "dropout-preneur" stands on the shoulders of countless giants in lab coats and thick glasses. As a testament to that, keep in mind that in 2017, 30% of Google’s engineers held a doctorate, and Apple, Microsoft, Facebook and Twitter each hired a majority of university graduates, too.

We are building an all-new digital economy here. Our current system would be unthinkable without sound academic processes with knowledge at its heart. Think of contributions of John Hicks and Kenneth Arrow to economic equilibrium theory, analyses of trade theory by Paul Krugman, or insights of Ronald Coase into transaction costs and property rights. They are merely a few among other Nobel laureates and many, many more rank-and-file researchers whose collective efforts have shaped the global economic system as we know it. The new digital economy deserves — nay, requires — the same amount of academic rigor.

The crypto revolution is driven by “rockstars,” visionaries who often lack an academic background. Their ideas of decentralization and openness are refreshingly anti-systemic and optimistic. Still, these visions are only possible thanks to the work of generations of scientists who laid down the foundations of current crypto protocols decades ago, and continue developing them today. The shape and form that the crypto revolution takes will be the product of dreams and ideologies on the one hand, and peer-reviewed research and development on the other — in equal measure.

The opinions expressed are the author’s alone and do not necessarily reflect the views of the University or its affiliates.