Reprinted from BLOCKCHAIN REVOLUTION: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott and Alex Tapscott with permission of Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC. Copyright © Don Tapscott and Alex Tapscott, 2016.
The last few decades — the Internet of Information — has created many wonders but overall the benefits have been captured by powerful companies and governments. Prosperity is on the decline, there is growing social inequality, our privacy is being undermined and the dream of a more democratic peer-to-peer world has not been realized.
What if there were an Internet of Value emerging?
Enter the blockchain — a vast, global distributed ledger or database running on millions of devices and open to anyone, where not just information but anything of value — money, titles, deeds, music, art, scientific discoveries, intellectual property, and even votes — can be moved, stored and managed securely and privately — and where trust is established, not by powerful intermediaries like banks, governments and technology companies, but rather through mass collaboration and clever code.
The blockchain is the first native digital medium for value just as the Internet was the first native digital medium for information. We are convinced that this new platform will help us reshape business and transform the old order of human affairs for the better.
For sure, blockchain technology has profound implications for many institutions. Which helps explain all the excitement from many smart and influential people. Ben Lawsky quit his job as the superintendent of financial services for New York State to build an advisory company in this space. He told us, “In five to ten years, the financial system may be unrecognizable . . . and I want to be part of the change.” Blythe Masters, formerly chief financial officer and head of Global Commodities at JP Morgan’s investment bank, launched a blockchain-focused technology start-up to transform the industry. The cover of the October 2015 Bloomberg Markets featured Masters with the headline “It’s All About the Blockchain.” Like- wise, The Economist ran an October 2015 cover story, “The Trust Machine,” which argued that “the technology behind bitcoin could change how the economy works.” To The Economist, blockchain technology is “the great chain of being sure about things.”
Banks everywhere are scrambling top-level teams to investigate opportunities, some of these with dozens of crackerjack technologists. Bankers love the idea of secure, frictionless, and instant transactions, but some flinch at the idea of openness, decentralization, and new forms of currency. The financial services industry has already rebranded and privatized blockchain technology, referring to it as distributed ledger technology, in an attempt to reconcile the best of bitcoin — security, speed, and cost — with an entirely closed system that requires a bank or financial institution’s permission to use. To them, blockchains are more reliable databases than what they already have, databases that enable key stakeholders — buyers, sellers, custodians, and regulators — to keep shared, indelible records, thereby reducing cost, mitigating settlement risk, and eliminating central points of failure.
Investing in blockchain start-ups is taking off, as did investing in dot-coms in the 1990s. Venture capitalists are showing enthusiasm at a level that would make a 1990s dot-com investor blush. In 2014 and 2015 alone, more than $1 billion of venture capital flooded into the emerging blockchain ecosystem, and the rate of investment is almost doubling annually. “We’re quite confident,” said Marc Andreessen in an interview with The Washington Post, “that when we’re sitting here in 20 years, we’ll be talking about [blockchain technology] the way we talk about the Internet today.”
Regulators have also snapped to attention, establishing task forces to explore what kind of legislation, if any, makes sense. Authoritarian governments like Russia’s have banned or severely limited the use of bitcoin, as have democratic states that should know better, like Argentina, given its history of currency crises. More thoughtful governments in the West are investing considerably in understanding how the new technology could transform not only central banking and the nature of money, but also government operations and the nature of democracy. Carolyn Wilkins, the senior deputy governor of the Bank of Canada, believes it’s time for central banks everywhere to seriously study the implications of moving entire national currency systems to digital money. The Bank of England’s top economist, Andrew Haldane, has proposed a national digital currency for the United Kingdom.
These are heady times. To be sure, the growing throng of enthusiasts has its share of opportunists, speculators, and criminals. The first tale most people hear about digital currencies is the bankruptcy of the Mt. Gox exchange or the conviction of Ross William Ulbricht, founder of the Silk Road darknet market seized by the Federal Bureau of Investigation for trafficking illegal drugs, child pornography, and weapons using the bitcoin blockchain as a payment system. Bitcoin’s price has fluctuated drastically, and the ownership of bitcoins is still concentrated. A 2013 study showed that 937 people owned half of all bitcoin, although that is changing today.
How do we get from porn and Ponzi schemes to prosperity? To begin, it’s not bitcoin, the still speculative asset, that should interest you, unless you’re a trader. This book is about something bigger than the asset. It’s about the power and potential of the underlying technological platform.
This is not to say that bitcoin or cryptocurrencies per se are unimportant, as some people have suggested as they scramble to disassociate their projects from the scandalous ventures of the past. These currencies are critical to the blockchain revolution, which is first and foremost about the peer-to-peer exchange of value, especially money.
It is possible, although we believe unlikely, that this new technology may be delayed, stalled, or underutilized. But we believe that the economy works best when it works for everyone, and this new platform is an engine of inclusion. It drastically lowers the cost of transmitting such funds as remittances. It significantly lowers the barrier to having a bank account, obtaining credit, and investing. And it supports entrepreneurship and participation in global trade. It catalyzes distributed capitalism, not just a redistributed capitalism.
The blockchain and cryptocurrencies, particularly bitcoin, already have massive momentum, but we’re not predicting whether or not all this will succeed, and if it does, how fast it will occur. We’re arguing that it should succeed, because it holds the key to unleashing the next era of prosperity. Everyone should stop fighting it and take the right steps to get on board. Rather than predicting the future of the blockchain, we are advocating for it — that we should harness this force not for the immediate benefit of the few but for the lasting benefit of the many.
Today, both of us are excited about the potential of this next round of the Internet. We’re enthusiastic about the massive wave of innovation that it is being unleashed and its potential for prosperity and a better world. This book is our case to you to become interested, understand this next wave, and take action to ensure that the promise is fulfilled.
So hang on to your seat and read on! We’re at one of those critical junctures in human history.
Don Tapscott and his son Alex Tapscott are authors of BLOCKCHAIN REVOLUTION: How The Technology Behind Bitcoin is Changing Money, Business and the World May 10. Alex Tapscott is the CEO and Founder of Northwest Passage Ventures, an advisory firm building industry-leading blockchain businesses. He tweets @alextapscott . Don is author of 15 books including Paradigm Shift, The Digital Economy, Growing Up Digital and Wikinomics. He is an Adjunct Professor at the Rotman School of Management and is the Chancellor of Trent University. He tweets @dtapscott .
The views expressed in this article are not those of Reuters News.