Susan Athey On How Digital Currency Could Transform Our Lives

This article is the first installment in a three-part series on digital currencies, such as Bitcoin, Litecoin, Ripple and others.
Insofar as this is possible, Susan Athey is a rockstar economist.
At age 36, the Stanford Graduate School of Business professor became the first woman to receive the prestigious John Bates Clark Medal, awarded to an American economist under age 40 who has made the most significant contribution to economic thought and knowledge. The former MIT and Harvard professor has a whole host of other accolades to her name: member of the National Academy of Sciences, member of the American Academy of Arts and Sciences, plus many more. She also was the first chief economist hired at Microsoft, as a consultant, and she now serves on the board of Ripple Labs, the creator of the Ripple protocol, a more bank-friendly alternative to Bitcoin.
Her work has focused on the cutting edge of technology. One theme in particular has been how complex platforms and marketplaces, such as internet search advertising and online advertising auctions, can be designed to make them work more efficiently – for instance, using big data to predict how advertisers would react if online ad prices were changed and how that would change the users’ experience of and interaction with ads.
She also has concentrated on how technology enables the creation of new platforms, and how that affects the industries involved – for instance, how the internet has affected news media. ‘This is a new frontier of statistics and econometrics – the statistics of economics: to try to combine tools that are geared toward large data sets with lots and lots of covariates and not a lot of structure with the ability to answer very structured questions,’ she says.
Because of her interest in the effect technology has on our lives, cryptocurrency immediately piqued her interest for its potential to disrupt financial services. I recently met with her at her office at Stanford GSB to talk about what digital currency is, its potential, the hurdles it faces and other related issues, including an exciting new project involving Bitcoin. Because of the length of our interview, I’ve separated them into individual stories in a series. In this first installment, we discuss what Bitcoin is and applications for digital currencies.

This post was published at Forbes on 11/24/2014.