NR:After The Digital Economy and Wikinomics, why write about Blockchain?
DT:The Digital Economy was one of the first bestsellers about the Internet. I believe that the Blockchain technology is the second generation of the Internet that can enable the true, peer-to-peer exchange of value. An immutable, unhackable distributed database of digital assets, it is a platform for truth and trust. The insinuations are overwhelming, not just for the financial-services sector but virtually every facet of society. We wanted to ensure that it reaches its full potential and I was fortunate to team up with the brilliant Alex Tapscott to write a book that seems to have made a difference.
NR:Bitcoin was the visible face of Blockchain for a while. Did it help or hurt the spread of the technology?
DT & AT:Bitcoin was helpful as it was the first scaled version of the technology, and a great tool to demonstrate the security and stability of distributed ledger technology. Bitcoin is also the only Blockchain that is widely used by the general public. Of course, when there are problematic entities that use Bitcoin, like the Silk Road or Mt Gox, many people are inclined to throw out the babies (Bitcoin and Blockchain) with the bathwater (failed or illegal applications). But, overall, that doesn’t matter. While the underlying Blockchain technology is more important, Bitcoin is still critical to the story.
NR:Does the world need a cryptocurrency?
DT & AT:While Blockchain is the technology that drives Bitcoin and other digital currencies, the underlying framework has the potential to go far beyond these and record virtually everything of value to humankind, from birth and death certificates to insurance claims and even votes. In short, it’s a new medium for value–and the world definitely needs that. As for crypto- currencies, these are critical for most Blockchains today. Moreover, these have some extraordinary use cases. Companies like Abra or Paycase use blockchains to enable the global diaspora to pay their remittances back to their ancestral lands, for 2 per cent rather than 15 per cent transaction and fx fees. Companies like Factom and Bitfury enable people to store their land titles on a Blockchain, so that no corrupt government officials can take their land from them. In fact, we can expect many digital assets to have a token associated with them.
NR:Why do you call Blockchain the 'Internet of Value'?
DT & AT:The first generation brought us the ‘Internet of Information’. The second generation, powered by Blockchain, is bringing us the ‘Internet of Value’. The first generation allowed every person to have a printing press for information, enabling them to publish PowerPoints, PDFs, and photos to a universally accessible platform. However, when it comes to anything of value, such as money, stocks, bonds, loyalty points, or votes, sending a copy is a very bad idea. With Blockchain, we enable the Internet of Value—the ingeniously simple, revolutionary protocol that allows transactions to be simultaneously anonymous and secure, peer-to-peer, instant and frictionless. It does this by distributing trust from powerful intermediaries to a large global network, which through mass collaboration, clever code and cryptography, enables a tamper-proof public ledger of every transaction that’s ever happened on the network.
NR:How can transparency and trust accelerate the adoption of the Digital Age?
DT & AT:It will have a profound impact. Maybe you’re a music lover who wants artists to make a living off their art. Perhaps you’re an immigrant who’s sick of paying big fees to send money home to loved ones in your ancestral land. Or a Saudi woman who wants to publish her own fashion magazine. Maybe you’re an aid worker who needs to identify land titles of landowners so you can rebuild their homes after an earthquake. Or a citizen fed up with the lack of transparency and accountability of political leaders. Or a user of social media who values your privacy and thinks all the data you generate might be worth something–to you. Or an entrepreneur looking for a new platform to build a business. Blockchain promises to radically simplify many business processes, reducing risk and boosting transparency. That’s a good thing. And this is really the tip of the iceberg: Personal and commercial lending, risk management, investment banking, treasury services, global markets, insurance, technology, operations and asset management will all feel the effect.
NR:Which traditional value chains are the ripest for disruption by Blockchain?
DT & AT:There will always be disruption in the case of new technologies. Older traditional companies will have to take a hard look at their practices, and reassess if those practices have a place in the Blockchain economy. If not, they stand to be left behind. Business leaders need to be asking themselves: ‘Do I want to disrupt my own business from within or wait for someone else to do it first?’ I think the latter, however painful short term, is the right strategy. This is already happening in several industries. Financial services companies like Western Union are starting to have their entire business model challenged. The music industry is long overdue for change–the kind of change that can enable songwriters and artists to be fairly compensated for the value that they create. But pick any industry and you can see the contours of deep disruption in the making.
NR:Where should leaders look for the biggest changes?
DT & AT:Many people focus on financial services and to be sure that the industry will probably be unrecognizable in a decade. But that’s just the tip of the iceberg. Perhaps the most enticing for business leaders everywhere is that Blockchain could empower us to re-architect the corporation, one of the pillars of modern capitalism. One of the main reasons we have corporations is because of transaction costs: So long as it’s cheaper to organize capability inside the boundaries of a company rather than contracting on the open market, companies will get bigger. I wish this was an original idea, but it was coined by Ronald Coase, who won the Nobel Prize for his pioneering work on the corporation. Henry Ford recognized this principle, which is why the Ford Motor Company had a rubber plantation, timber mill, steel plant and assembly line–it was easier and cheaper to be vertically integrated than contract in an open market. The Internet helped a little bit by dropping the cost of search, communication and coordination, but if you look at the company today, it doesn’t look dramatically different from the companies of the past. It still costs a lot to contract, bargain, and enforce and police agreements between counterparties. Blockchain could change all of this. With the rise of a global peer-to-peer platform for identity, trust, reputation and transactions, we will be able to re-engineer deep structures of the firm for innovation and shared value creation. This doesn’t mean smaller firms in terms of revenue or impact. On the contrary, we’re talking about building 21st century companies that look more like networks rather than the vertically-integrated hierarchies of the industrial age.
NR:Tell our readers how Blockchain can make politics more transparent and politicians more accountable
DT:Most Americans think their Congress is dysfunctional and deeply corrupt. And for good reason: As in many countries, US politicians are beholden to wealthy contributors and interest groups, and many members of Congress go on to become lobbyists. Case in point: 92 per cent of Americans want background checks of people buying guns, but the rich and powerful National Rifle Association thwarts any legislation to effect change. So much for a ‘government of the people, by the people, for the people.’ That’s where Blockchain comes in. The design principles of the Blockchain technology should drive this transformation as it supports and enables higher levels of Integrity, Power, Trust, Privacy, Security, and Inclusion. With Blockchain, you could enable politicians to be beholden to the citizens, where they are not compensated until they do what they said they were going to do. In addition, with time and development, the Blockchain technology might be the impetus that allows e-voting to transform democratic elections and institutions by effectively and reliably bringing them into voters’ hands. Politicians will need to adapt to a transparent world where smart contracts ensure their accountability to electorates.
NR:What’s holding businesses back from large scale adoption? Maturity of the technology? Risk? Or Vision?
DT & AT:The Blockchain industry itself is immature and needs better coordination and leadership. There is a nascent governance network emerging to address the many challenges this new industry faces. Indeed, there are many people and organizations working on this very thing. To name but a few: Perianne Boring and the Chamber of Digital Commerce, Jamie Smith and the BitFury Group, and Tomicah Tilleman and the New America team, are all working on framing the conversation to policymakers, technology advocates and politicians, to ensure that the revolution reaches its full potential. We see the potential, and have made it our aim to see it through.
But that's just the tip of the iceberg. Perhaps the most enticing for business leaders everywhere is that Blockchain could empower us to re-architect the corporation, one of the pillars of modern capitalism.
NR:Can Blockchain solve the privacy problem and rebuild trust between businesses and their customers?
DT & AT:In Blockchain Revolution, Alex and I explain how this technology can enable us to get our digital identities back from the powerful companies and governments that currently own them–and in doing so, recover our privacy. Businesses and consumers alike will benefit from this. As Blockchain-centered identity systems will allow you to own and monetize your own data, you control it in your own personal black box. Firms may have to pay just to query a prospective customer’s black box, to see whether that customer meets a firm’s target audience. That customer may decide globally to with-hold certain data, such as gender, because a ‘no answer’ is still valuable. But in doing so, the firm will learn nothing more about the prospect beyond the yes/no results of the query. This allows you to control what data you release, and it allows you to take it back. Identity is the foundation of freedom and we need to be able to control it and manage it responsibly in our own interests.
NR:How can Marketing use Blockchain to build more trusted brands?
There are enormous implications for Blockchain and Marketing. For example, say you are walking down the street and your mobile device advises you that the dress you love is available at the Gap. Walk into the store and the dress, in your size, is waiting for you. After trying it on, you scan it and the payment is complete. But you’ve got other things to do, so the dress finds its way to your house before you get home. In addition to operational efficiencies and environmental monitoring, retailers will be able to personalize products and services to identifiable customers as they walk or drive by, based on their location, demographics, known interests, and purchasing history, provided that those customers opened their black boxes to retailers on the Blockchain.
"The Blockchain industry itself is immature and needs better coordination and leadership"
NR:How can Blockchain help build a more sustainable society?
DT & AT:Maybe you live in Germany and own solar panels. At some point, you would like to sell energy not back to the grid at a cheap price, but to your neighbor at a market rate. Well, now you can enter into a peer-to-peer transaction using Blockchain. In the book, we argue for a Blockchain carbon trading system, not just for organizations but for individuals. It’s important to remember that Blockchain is not a panacea for the world’s problems. Technology does not create prosperity; people do. Leadership and stewardship–everyone’s personal opportunity–will be required to ensure a fair, thriving and prosperous future for all.
NR:Is it too early for the regulation of Block chain? Can it throttle innovation in its infancy?
A big topic of debate amongst government agencies, start-ups, and larger companies. How do we spur innovation and keep everyone in line without hindering growth? And, in the book, we identified 10 showstoppers. How do you govern it? How do you ensure that governments do not stifle it? What happens if it becomes a job killer? What if criminals use it? These are all big issues. Do these risks mean that Blockchain is a bad idea? Or are these just implementation challenges? Is the opportunity great enough that we try to solve them? It turns out that with the right kind of leadership, they can be solved. As for regulation, we argue that there be a slow, considered and cautious approach. Laws already exist to cover most of the concerns–such as criminal behavior.
NR:How will the ‘Ledger of Things’ create faster adoption of the ‘Internet of Things’?
DT & AT:In the not-too-distant future, billions of smart things in the physical world will be sensing, responding, communicating, sharing important data, and generating, buying and selling their own electricity, doing everything from protecting our environment and charging our homes to managing our health. Cities and regions will be profoundly transformed by this revolution, as everything from public transit systems and healthcare to power-generation stand to be disrupted. This ‘Internet of Everything’ needs a ‘Ledger of Everything’, powered by Blockchain. With potentially millions of distributed devices, the system needs to continuously track everything, including the ability to authenticate each node in the network–to ensure its reliability.
"This 'Internet of Everything' needs a 'Ledger of Everything' powered by Blockchain. With potentially millions of distributed devices. the system needs to continuously track everything, including the ability to authenticate each node in the network-to ensure its reliability."
About the Authors
Don Tapscott is the CEO of the Tapscott Group and one of the most influential living theorists about business and society. In November 2013, Thinkers 50 named him the 4th most important business thinker in the world. A June 2013 Forbes.com analysis of social media identified him as the most influential management thinker in the world. He is the author or co-author of 15 widely-read books about new technologies and new media, including Wikinomics and The Digital Economy. His TED Talk on Blockchain has received over a million views.
Alex Tapscott is a chartered financial analyst, working in New York and Toronto as vice president of institutional equities, at the investment bank Canaccord Genuity. He is on the faculty of the Global Solutions Network Program conducted by the Martin Prosperity Institute, Rotman School of Management, University of Toronto. He is author of the book, To the Breaking Point: The Law and Political Emergency.