Some say this became the largest unregulated experiment in human history. But considering everything we have been through and learned we’re now on the cusp of another major new technological revolution, yes you’ve heard that phrase before, but if implemented right, this could become a real economic and social coup of sorts.
It is called blockchain, a technology commonly associated with bitcoin, the currency, yet they don’t really have much to do with each other other than the fact that blockchain acts as the ledger in which it is traded on.
The real promise here is the infinite changes and possibilities that this secure ledger, blockchain brings to many different industries and assets, from money, stocks, bonds, intellectual property, carbon credit, energy, health, our identities and cultural assets just to name a few, this will all be disintermediated and once again become ours. But governments feel a change of wind coming and that makes them nervous, as we learn from blockchain pioneer and bestselling author Don Tapscott we need to be careful about how all of this unfolds, we only have to look back and see how the first age of information turned out.
With regards to the world of blockchain, I feel like we’re in the eye of the storm right now, waiting for the hype cycle to settle. Or as one panelist recently put it we’re witnessing a type of Cambrian explosion. Your son Alex who we’ve talked to says that blockchain is akin to a revolution like the internal combustion engine, how would you describe it?
The way that we view it is that blockchain represents the second era of the internet. The first era for decades was the internet of information. Now we’re getting an internet of value. Where anything of value which including money, our identities, cultural assets like music, even a vote can be stored, managed, transacted and moved around in a secure private way.
And where trust is not achieved by an intermediary it’s achieved by collaborative cryptography through some clever code which is why Alex and I call it the trust protocol. Trust is native to the medium.
Most people in the industry would agree, that it’s still very much in its infancy stage and it has a lot of maturing to do?
Indeed, there’s is much to happen, and what we have so far is the first big app of the internet of value, Bitcoin kind of like email was the first big app of the internet of information. But now we’re seeing general purpose platforms emerge like Ethereum, Icon, Eon, Cosmos, and others that are more like the web, where you can develop any app you want on them. Analogies are always imperfect and it’s hard to describe just how fast this is all unfolding. It’s all very uneven, where one industry is plugging along and the other more quickly. There is also a combined effect happening where things are coming together very quickly to bring about change.
There is an old expression from the 1995 period, that being we tend to overestimate the impact of technology in the short term but we underestimate the impact of technology in the long term. I’m not sure that’s true now. I think that we’re underestimating all around us. In 1995 we were still using dial-up, most people didn’t use computers, there was no mobility and no mobile web, telephones were connected to the wall with a wire it was a very strange concept. Now we have six billion people with a supercomputer in their pocket. Broadband all over the place, the digital divide is closing fast, we have sophisticated users, a massive software industry globally that are building platforms on networks, not just mainframes and minicomputers. Not to mention Moore’s Law which has delivered this extraordinary processing capability, so it’s quite possible that this will all unfold in a much faster way.
If you were to walk around the streets and take a general pulse about blockchain, most people would no doubt associate it with bitcoin, can you for the sake of this chat give your overview about the speculation that is bitcoin and its associated cryptocurrencies?
Well, its started in 2008 with bitcoin. Bitcoin is an asset as are these cryptocurrencies and other crypto-assets, and they go up and down in value and that’s of interest to investors and more broadly it’s a currency that is not controlled by a nation-state. It’s a cryptocurrency, not a fiat currency and that has some interesting user cases, for example, if you are in a country with big restrictions over capital then things start to open up. But the real pony here is none of that, it’s the underlying blockchain technology, this is the new operating system for the 21st Century corporation, we’re building an innovation economy, but really it’s just the currency tail wagging the blockchain dog.
Now some people say that’s just confusing, I’m not sure that’s true, I think it’s causing people to pay attention.
So here is where I get confused, you say blockchain is a type of hail mary for our society, it will allow us to distribute in ways never seen before. But Bitcoin as an example merely proved again that we cannot seem to move beyond this exploitative capitalistic type of thinking, what if blockchain is merely exploited the same way?
Well first of all, people who buy and sell bitcoin are not necessarily capitalists they are investors and speculators, and as for capitalism, like it or not that is the nature of the economic system we have, so we have corporations that are private and they can be publicly traded, they are part of the institution of capitalism.
This technology can help them innovate, be more productive, and help build better services and customer value, not bitcoin but blockchain.
But there is a much bigger opportunity here, we do have a prosperity paradox today, that for the first time in history our economies are growing, but our prosperity is declining, we have growing wealth but a stagnant middle class, the only solution to this problem is the so-called redistribution of wealth taxing the rich and distributing the wealth. We believe what blockchain enables is a redistribution of wealth that is through blockchain we can create a more of a democratic economy where we a priori distribute the wealth through peoples direct interaction with the economy.
Secondly, blockchain enables us to bring 2 billion people into the global economy quickly, three, they can solve the problem of land titles, 75% of people in the world have land titles that are non-enforceable, that means you can’t borrow against your land and you can’t plan for the future. You put a land title on a blockchain and no corrupt dictator or corrupt clerk can mess with it.
Fourth, we can ensure that creatives of value are more fairly compensated, so songwriters who have had their revenue destroyed by the internet can now post music on the blockchain and because of a smart contract your music is now protected by intellectual property rights. So those are just a handful of ways where we can create a more democratic economy in the first place.
“Blockchain gives us another kick at the can, to rewrite the economic order of things, the power grid.”
I’ve heard you mention those applications before and yet I just want to continue on this thread a little more, you talk about 1995 as an interesting era when the internet first started there were a lot of utopians who said this will herald a new era of equality and it really didn’t turn out that way, the internet was seized on by 3-4 companies.
Well if you’re looking for technology that will solve the problems of the world, good luck. People solve problems, not technology, people & classes exploit technology for their own interests, to gain asymmetrical benefit, so there is nothing inherent in the technology that will ensure that anything positive will be done. But the way we think of that is that the internet of information ended up economically in an unhappy situation, where a small handful of companies did capture most of the value, but the blockchain we have is a new platform where the actual creation of value is more distributed and is capturable in a more decentralised way. And now blockchain gives us another kick at the can, to rewrite the economic order of things, the power grid.
A lot of institutions like banks are very nervous about this technology, what does blockchain do to the power grid in general?
Well it does challenge anyone who is an intermediary, so Western Union, is in the middle – when people from the global diaspora send their remittances back to their families in their ancestral lands, and they tax that by 25-15% or more, with blockchain you can do peer to peer payments from one country to another for a fraction of the cost. So Western Union needs to rethink its value proposition, and probably its fee structure too and if it does, it might emerge as a new player in the financial services industry and if it doesn’t it will be disintermediated and go the way of a company like Barnes and Noble who were in the middle of publishers and readers.
I recently read a fascinating quote from a bitcoin developer called Jimmy Song, he said, “One of the greatest things that Satoshi Nakamoto [supposed founder of bitcoin] did was disappear, we now have a situation where parties that don’t like each other…all have some say in how the network is run.” Do you agree?
Yes, but in the case of Linux, Linus Torvalds did not abandon his operating system, and parties still have a say in how the network is run. I think the fact that Satoshi did disappear is interesting though, because when Alex and I were promoting the first edition of the book, Craig Wright was saying he was Satoshi, and one day on television Alex and I were asked if he was the creator of bitcoin and we turned to each other and said, “I guess it’s time”, and we announced we are Satoshi Nakamoto. Everyone in the studio gasped. Because in essence Satoshi created this thing and unlike Linus did disappear, now the vast majority of the code is created by this community so we are all Satoshi.
For the sake of conspiracy theories, who do you think Satoshi was?
I have my own views and I never speculate on them publicly.
“I have my own views [on who Satoshi Nakamoto is] I never speculate on them publicly.”
It was funny because recently John Oliver parodied an analogy of yours about the incorruptibility of blockchain, where you said ” if you wanted to hack the blockchain, it’d be like turning a Chicken McNugget back into a chicken,” but it touches on a very important idea which is that unlike the internet of information this really is about a highly ‘distributed protected asset’ you would have to hack pretty much every computer on earth. It’s unprecedented?
Well first of all John Oliver’s ditty on my analogy was hysterical I loved it, he actually said it was a helpful analogy, but funnily he did say if someone did turn a Chicken McNugget back into a chicken that would be one messed up chicken suffering from PTSD.
But absolutely it is a very hard process to hack because that block is connected to a previous block with a digital wax seal. You would have to hack the entire chain in the case of bitcoin, that means bitcoins entire history. Not just on one computer but millions all using the highest level of cryptography whilst the most powerful computing resource in the world is watching making sure you don’t mess around, good luck with that.
So let’s go through examples of blockchains capability, firstly identification, 2 billion people don’t have an identity and in the future, there will be a virtual you and you will want to own that data, and that is starting to become a serious issue. So can you talk a little about that?
Well right now data is the new asset of the digital age and we create this data but it’s expropriated, it’s like digital feudalism where we work the land and we grow this data and we get to keep a cabbage or two but the owner of the land meaning the social media platforms, the banks, the search engines keep most of our hard work and this is a big problem because the virtual you is not owned by you. Your data knows more about you than you do, because you can’t remember what you bought or ate or sold a year ago or your exact location, or medication you took or what diagnoses you had or what you got on a test, and the virtual you are owned by the landlord, and we want our identities back so we can manage them responsibly. We want to use this data to plan our lives or monetise it, should we wish to and importantly protect our privacy as it is the foundation of freedom. Don’t listen to people who say it’s dead get over it, its dying and we need to resuscitate it.
So blockchain can enable this by creating a portable identity that’s owned by you, in a black box. If you sell me something you don’t actually need to know who I am, you just need to have cryptographic proof that you paid.
Let’s talk about smart contracts, there are two states in the US right now that have started to acknowledge these blockchain based contracts such as Tennessee and Arizona, do you think this will now start to set a precedent?
Well everyone likes the idea of the smart contracts unless you’re in the business of dumb contracts because they speed up the metabolism of things, they reduce costs, and they enable people to collaborate together in lots of new exciting ways. There’s a musician called Imogen Heap who is changing the discussion around song rights, with her company mycelia, she’s aiming to have artists post their music on a blockchain platform, where it can be protected inside a smart contract, you also all have smart contracts that can be inserted into the $50 trillion supply chain industry and transform it fundamentally.
“Transparency is the great disinfectant.” – Don Tapscott on cleaning up politics
Word has it that in May a study will begin to train a cancer-detecting algorithm using mammogram data shared via a blockchain, allowing people fine-grain control over who can see which parts of their health record. Talk to us a little about the health ramifications?
Well, the foundation is really the patient’s record, which is a part of their overall identity. So some hospitals are building a system where say, for instance, you leave the hospital, after an X-ray, your radiology report remains in your identity and you can move it to another hospital, you can get a second opinion, you can move it to a data broker, you can do whatever you like. The one hospital system we’re working with believes that patients should own their data this makes it more usable, more secure, more portable and more interchangeable. That to me is the foundation of the transformation of health. So ultimately we’re able to move towards a citizen-centered model of health as opposed to the provider centered model we have today.
As a side question, do miners apply to all blockchain applications?
(miners: the gatekeepers who validate transactions for people, usually associated with bitcoin)
It’s only for platforms that use proof of work as the consensus mechanism and proof of work involves miners, but there are other consensus mechanisms, Ethereum is moving towards something called proof of stake, Cosmos has a consensus mechanism called Byzantine fault tolerance. So again, because of Bitcoin being high profile everyone thinks that all blockchains have miners. For that matter, a lot of blockchains don’t even operate with currencies. Most of the applications being built on Hyperledger, that comes from the Linux Foundation do not use a currency.
What about politics, I read somewhere that blockchain has the ability to create tamper-proof audit trails, how do you see blockchain cleaning up the very messy world of politics?
Well, the ability to audit is very powerful and transparency is the great disinfectant if you need to clean something up. We have a crisis of legitimacy, our democratic institutions are in deep trouble all around the world, and the alternative is not very savory. But blockchain can enable electronic voting, not the old type of electronic voting systems which are pretty much not workable right now. Because they don’t solve the double spend problem and no one is going to vote on a system unless they know that their vote is not going to be counted again. So only blockchain does it enable other opportunities that are much bigger. For example, we can create smart votes, imagine a world where your smart vote ties itself to a politician and makes them accountable, and not to the big money that funded them.
As blockchain matures where do you see the biggest limitations in terms of implementation?
Well, it turns out a major one is that we have governments that fear what they don’t understand. Now, there is a public interest and we do need governments to help steward this blockchain revolution but with the internet of information it was wise for governments to leave it alone, but with the internet of value, we’re talking about assets, votes, identities and so forth. Unfortunately, many governments approach the patient on the table with a chainsaw rather than a scalpel or microsurgery and so we spend a lot of time with regulators trying to inform them and update them appropriately. This is about working with regulators of the future closely and explaining them the concept of microsurgery.
Blockchain Revolution: How the Technology Behind Bitcoin and Other Cryptocurrencies is Changing the World will be available on paperback on June 14th.