From the internet of information to the internet of value
Blockchain technology will have a dramatic impact on business and society, says digital visionary Don Tapscott, by providing a secure, direct way of exchanging money, intellectual property and other rights and assets without the involvement of traditional intermediaries like banks, utility companies and governments.
The predictions for blockchain technology — the distributed ledger originally created to underpin the bitcoin digital currency but now tipped for much wider application — often ring with hyperbole, if not hysteria. But many of the voices now joining in that evangelism of blockchain carry so much weight and draw on such depth of perspective that they are impossible to ignore.
Venture capitalists and technology analysts, management gurus and tech academics, plus a growing number of IT leaders, are all getting caught up in the excitement.
Just listen to Marc Andreessen, the pioneer of modern browser technology and angel investor in Facebook, Twitter and Pinterest, among other digital heavyweights, who told The Washington Post last year: “This is it. This is the thing we’ve been waiting for. The distributed trust network the internet always needed and never had.”
Or former enterprise IT executive-turned-venture capitalist William Mougayar: “The blockchain is the second significant overlay on the internet, just as the web was the first layer back in 1990. It is advancing like a tsunami, enveloping everything along its way.”
Alongside those, one of the more considered and credible voices in this period of pilots and early adoption of blockchains is that of Don Tapscott, the business strategist and author on the impact of digital technology on business and society, whose highly influential books over the past two decades have included The Digital Economy, Growing Up Digital, Wikinomics and most recently Blockchain Revolution, written with his son, Alex, a former investment banker.
As Tapscott outlines in our exclusive Big Thinker video interview series: “The underlying technology of blockchains might actually represent a second era of the internet. For the last 40 years we’ve had the internet of information; now, with blockchains, we’re getting the internet of value.”
That’s because blockchains enable the peer-to-peer exchange of assets, something that has been largely absent from the information publishing nature of today’s web-dominated internet.
He illustrates the point: “When I send you some information I’m not actually sending you the information, I’m sending you a copy, whether that’s a spreadsheet or a PowerPoint file or a Word document or an email.”
The information-centric medium of the web, which after all is based on an interlinked page model and publishing language (HTML), was never designed to handle the exchange of actual value. Anyone transferring money online, for example, is not actually moving the value directly. Instead they are sending instructions to an intermediary — whether through a bank, a credit card company, PayPal or Western Union — to pass on the value. Even when someone hires out a spare room via the sharing-economy platform Airbnb, they are still not doing so directly over the internet but via a third-party broker. And the involvement of such third parties in the exchange of value naturally comes at a cost.
“The internet of information was great but it did have a big weakness,” says Tapscott. “You couldn’t store, move, transact value without a powerful intermediary. And that’s what blockchains solve.”
The peer-to-peer exchange facilitated by blockchains has its basis in some pretty complex but powerful IT architecture. In essence, blockchains are cloud databases distributed over large numbers of devices that maintain a global distributed ledger of transactions (encapsulated in blocks), whose integrity, permanence and non-reputability is assured by the running of regular comparisons across chains of those interconnected blocks. The underlying technology is open source, leaving companies free to innovate; and it maintains security through the use of heavy-duty encryption.
The power to disintermediate
Blockchain advocates are certainly not disputing that the ability to move information around is a good thing. But, as Tapscott points out: “When it comes to assets — things that are of value to somebody, like money, stocks, votes, frequent flyer points, securities, intellectual property, music, scientific discoveries — publishing those is not a good idea.”
If someone wants to send a €100 to another person or business, then it’s important that they no longer have that €100 or indeed a copy of it. Or if an artist distributes an original piece of work, then it’s important that its commercial value is not undermined by that distribution.
“For decades the only way we’ve solved this problem is by having powerful intermediaries to authenticate who the various parties are in a transaction and to establish trust,” says Tapscott. “And, overall, these intermediaries do a pretty good job but they do have some big limitations.”
World Wide Ledger
First of all, intermediaries slow things down a lot. A customer tapping their payment card in a coffee shop, for example, can expect the settlement to take several days to show up in a bank statements — especially as many intermediaries are still reliant on 1970s or 1980s-era mainframes. In effect, Tapscott argues, such intermediaries “tax the system.”
He believes the powerful role of these big institutions also prevents progress in other ways. “They keep a couple of billion people [in the developing world] out of the global economy because they don’t qualify to participate [in those trust systems]. They also capture our data, whether they’re big banks, credit card companies, big technology companies or even governments.”
Not only does that mean people — from farmers to musicians — can’t fully monetize the assets they create, but it also adds ineffectively to the organizational structures of business and society and, through the centralization of information, threatens privacy.
“What if,” Tapscott postulates, “there was a global distributed internet of value that enabled us to establish trust and to store assets, to communicate them and to do transactions with them on a global basis without a powerful intermediary? This would be a revolutionary force. And that’s what blockchain is,” says Tapscott.
Tapscott acknowledges there are “showstoppers” that still need to be overcome if the technology is to enter the mainstream. Its sheer power could scare some governments into regulating its use, especially as the centralized data processed by intermediaries slips beyond their scrutiny. There are technical issues to be addressed too, around increasing the size of the block, for example. And there are security concerns about letting smart agents loose in such a peer-to-peer world, where a malicious agent would essentially be “a virus with a bank account,” says Tapscott.
But none of these are reasons not to pursue this, he concludes. As with the World Wide Web, the benefits for business and society of this second overlay on the internet are simply too compelling to ignore — notwithstanding the hype and overstatement that will prevail for the next few years.
• Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World by Don Tapscott and Alex Tapscott is out now.
• Photography: Emmanuel Fradin