For a long time, people have missed the blockchain wood for the bitcoin trees. But the father-and-son writing team of Don and Alex Tapscott are betting they can change that and show why the blockchain is the main event here, not just one element of the controversial cryptocurrency.
In their new book Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business and the World, bestselling author Don Tapscott and his chartered financial analyst son Alex take on the daunting task of revealing to a general audience why the blockchain – the digital public ledger technology underlying the bitcoin – is revolutionary and as potentially globally disruptive as the internet itself.
In a phone interview, Tapscott snr says that the joint writing of the book “was a joyous experience” and that even though he has now written 15 books, he “can’t think of a better or more important one”.
The blockchain could be used to enable any kind of transaction – between individuals, businesses and governments – in a mindboggling array of ways, spanning finance, retail, public records or even just the sale of an item in the small ads.
This public ledger process was defined in an ingenious 2008 paper by a mysterious individual (or perhaps group) known only as Satoshi Nakamoto.
Through a complex process of mathematical equations verified independently by numerous sources, a transaction is submitted and locked chronologically into the publicly accessible ledger. Anyone can connect to the ledger to verify that a transaction took place. Anyone can send new transactions to it to create new digital packets of information called blocks. Protected by strong encryption, the record is virtually unassailable and unchangeable.
By independently and reliably recording a transaction, the blockchain removes the “double send” problem connected to a digital exchange of information over the internet – such as a purchase – in a democratic way.
[CROSSHEAD]Growing problems [/CROSSHEAD]“If I send you €100 it’s really important that I don’t still have the money and that I can’t send it to somebody else,” Tapscott says. “So the way that we fix this problem is through large intermediaries, like banks, social media companies, credit card companies, governments.”
They provide the transaction and business logic and enable people to establish trust between each other.
“Overall they’ve done a pretty good job but there are growing problems. They’re centralised so they can be hacked, they still exclude a couple of billion people from the economy, they slow things down, and they tax the system and take a lot of value for just being in the middle and doing hardly anything. The biggest problem is they’re capturing all our data. So the benefits of the digital age have been asymmetrical. We have wealth creation, but growing social inequality.”
Hence the importance of the blockchain, which steers right around those intermediaries and makes them unnecessary. “So the real pony here is the underlying [blockchain] technology. It took a while for people to figure that out, that it’s not just about money . . . but it’s about the capacity of this ledger to do all kinds of other things.”
And that’s where the revolution comes in.
“The way I would describe it is this way: you have an old paradigm and not just in financial services but many institutions. I mean, Uber is the old paradigm. It’s a centralised set of servers and it’s a $65 billion corporation in the middle between the driver and the customer. And what’s in the middle could be a blockchain app instead of a $65 billion company.”
Get rid of such intermediaries and the world could be transformed, Tapscott says.
“Some of the ways in which this technology can help are bringing a couple of billion people into the global economy who are not going to be able to get bank accounts but who can participate fully as financial agents with blockchain applications, exchanging stuff, selling stuff, borrowing, whatever.”
[CROSSHEAD]Music ecosystem [/CROSSHEAD]The blockchain would also create immutable land titles. “Seventy per cent of the people in the world who own land have a tenuous title and this is a massive problem affecting tens of millions of people. If you don’t have a valid title for your land, you can’t borrow against it, you can’t plan for the future.”
And the blockchain could be used to ensure that creators of value are fairly compensated, such as writers, musicians, artists or scientists. He cites British musician Imogen Heap’s Mycelium as an example: “A new music ecosystem. Music gets posted with a smart contract specifying the intellectual property rights and the song has a payment system built into it. She describes it that the song is like a business, out there protecting rights and collecting money. “
Or the blockchain could be used to end “the remittance ripoff. The global diaspora sending money back to their families at home are being ripped off and charged outrageous fees to move money, and that’s going to end with tools like [blockchain platform] Agora.”
A key plus for Tapscott is that the blockchain could enable people to control and, if they wish, monetise their own data. Companies and governments do not need most of the information they gather and hold on individuals, he says.
“The virtual [you] is this massive amount of data that knows much more about you than you do . . . that’s not owned by you. It’s owned by big social media companies, by banks and by governments. Well, we can get this back. It will be [you] in a black box that you control. And it collects data for you and it will only give out that shred of data the other party needs for that transaction. The other party doesn’t even need to know who you are. They just need to know they got paid.”
The entrepreneurship opportunities for smaller businesses are also enormous, Tapscott says. “Little companies can have the capabilities of big companies, but without the liabilities,” he says.
[CROSSHEAD]Biggest impediment [/CROSSHEAD]What could go wrong? First, there are the problems that come with a paradigm shift. “When you get a new paradigm, they’re often received with coolness and the leaders of the old have difficulty in embracing the new.”
Already established companies may baulk at introducing leaner services that take business away from more financially rewarding older services. “No one wants to cannibalise their revenue.”
But the biggest barrier he sees is the issue of governance. What managing frameworks will create the facilitating infrastructure and stewardship for a blockchain-based transaction world?
“It’s the single biggest mitigating factor, the single biggest impediment to this moving forward,” he says.
The internet "has about nine different types of multistakeholder networks, and in each type there's more than one organisation involved in ensuring this resource fulfils its potential". These include advocacy, standards, engineering, and policy groups such as the World Wide Web Consortium, the Internet Society and the Electronic Frontier Foundation.
“When it comes to this second era of the internet, none of that’s in place. So that means that there’s no language, let alone some kind of methodology to resolve problems.”
This angle is a major focus for Tapscott and his son. He notes that they will shortly be holding a retreat “for some of the leaders of the ecosystem to come up here and talk about this issue”.
How long might it take for the revolution to take place, if at all?
“There’s lots of good momentum now, but there are lots of problems too. There’s some people who are incapable of understanding that this is a good idea. We have super-techies that dig into their own little technical perspective on something. But overall this is not irresistible force meets immovable object. This is resistible force meets movable object,” he says, laughing.
The author, who in 1994 presciently wrote The Digital Economy: Promise and Peril in the Age of Networked Intelligence, says: "In general, I would say I think it's happening faster than the first era. In 1993, the first time I looked at a graphic browser on the web, it took a minute for single page to load up on my screen. We now have broadband and wireless and mobility and geo-spatiality and intelligent objects and the internet of things. Things are already in place. So the main determining factor here is human curiosity and the ability to explore and innovate."