You don’t hear so much about Bitcoin these days. For its committed adherents the cryptocurrency is the future of money, set to undermine central banks and free us from having to deal with other financial institutions. Yet while its value has recovered after a massive slump in 2014, the currency’s reputation as a tool of cyber criminals is hard to shake.
But blockchain, the technology that allows Bitcoin to function, has been the source of much excitement of late. Every bank and their mum has been experimenting with it and the World Economic Forum says blockchain will ‘fundamentally alter the way financial institutions do business around the world.’
Some go even further, arguing that it has the potential to totally reshape the way we do business. Two such prophets are Don Tapscott, author of the well-regarded 1995 book The Digital Economy, and his son Alex. Their latest tome, Blockchain Revolution, spells out the ways this nascent tech could change the way we live and work by getting rid of middlemen and allowing companies and people to interact more effectively online.
‘I basically think blockchain is the second generation of the internet,’ the younger Tapscott tells MT. ‘For forty years we’ve had the first generation of the internet, which is the internet of information, and it’s changed the way we communicate and share information. But it’s actually not that good for business.’
That’s because at the moment we have to rely on intermediaries like banks, governments and big tech companies to be able to trust each other online. ‘Intermediaries have serious limitations. They’re costly, they’re slow, they can be hacked, they capture our data, they exclude billions of people from the global economy, they capture an asymmetric amount of the value.’
Enter the blockchain, which eliminates the need for intermediaries by helping us trust each other more. By this point you might be wondering exactly what blockchain actually is. MT will spare you the gory (and quite frankly bamboozling) details. But essentially it’s a kind of database, one that’s organised into ‘blocks’ of information that form (you guessed it) a chain. Each block refers to the previous one, which makes the blockchain extremely difficult to edit or alter after a transaction has taken place and been recorded. And crucially there is no central pot of data; all of the information is hosted on thousands, millions, of computers at the same time in a ‘distributed ledger’.
‘Imagine instead of an intermediary controlling transactions by providing access to the information between parties, all of that information was shared on a global database that ran not on one or two computers but on every single computer around the world,’ says Tapscott. ‘And where not just the typical information like email, PDFs or websites but anything of value – money, stocks, bonds, titles and deeds, scientific discoveries, even votes in an election, can be moved, stored and managed securely and privately.’
The Tapscotts believe this ‘internet of value’ could pave the way for radical new business models that are more collaborative and transparent. Sharing economy companies like Uber and Airbnb claim to ‘remove the middle man’, but blockchain could make them redundant too. And it could also change the way businesses organise themselves. The book highlights the case of Consensys, a blockchain tech firm that runs most of its operations – from project management to hiring and payroll – through Ethereum, a blockchain platform. This blurs the boundaries of the company, whose cofounder Joseph Lubin describes it as a ‘collective of closely collaborating entrepreneurlike agents.’
The book is unashamedly optimistic about the potential of blockchain and the Tapscotts aren’t alone in that. It has won plaudits from the likes of Apple co-founder Steve Wozniak, PepsiCo CEO Indra Nooyi and WEF founder Klaus Schwab, whose testimonials sit with dozens of others in the book’s opening pages.
But no technology is without its limitations, as Blockchain Revolution’s tail-end acknowledges. It’s extremely complicated and hard to explain, it could become a powerful tool for criminals and there is a danger that meddling governments could intervene and wreck it – or use it to entrench their own power. But the authors see these as challenges to be overcome rather than fundamental flaws and are working with other enthusiasts to develop a system of governance for the technology.
‘I think there are reasons to think that blockchain, this time it could be different – that we can learn from the experience of the first generation of the internet,’ says Tapscott.’ And also intrinsic in this technology are a set of principles- openness, decentralisation, privacy, that could ensure some of those things don’t happen.
‘But I always say technology is not a panacea – it definitely doesn’t have any moral agency. Technology doesn’t create prosperity, people create prosperity. You need individuals who step up and build this technology in a positive way. We’re trying to play an active role in helping achieve a better future but there are a lot of unknowns and it’s anyone’s guess basically.’