May 12, 2016
Editor's Choice: Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World
Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott & Alex Tapscott, Portfolio, 368 pages, $30.00, Hardcover, May 2016, ISBN 9781101980132
Nearly a decade ago, Don Tapscott (along with Anthony D. Williams) gave us the definitive book on the myriad ways in which mass collaboration is being made possible by new technology and the Internet. That book, Wikinomics, still has a lot to teach businesses and individuals about the potential of wikis to bring together communities large and small, near or far, to work together and accomplish great things. But there is now a new technology frontier, and Tapscott is once again out exploring it.
Don Tapscott, along with his son Alex, have now turned in the first (and, being so definitive, perhaps the last—barring their own updated editions) must-read book on a new revolution—blockchains. The most well known blockchain is Bitcoin , but this is not a book about Bitcoin or other cryptocurrency. It is about “the underlying technological platform” that they are built on. Because, though Bitcoin had a shadowy beginning and has been used in some of the darker aspects of the Internet, the technology it uses is built for one overriding reason—trust. And that is where its true potential lays.
The Tapscotts offer a clear-eyed critique of the Internet’s effect on society and business. Although some of the promises of wikinomics have come to pass, they clearly believe the great promise of the Internet is still largely unmet, or has in fact been squandered. Rather than lead to a more level playing field, more transparent businesses, and more robust democracy, it has led to increased income inequality, more entrenched institutions, and increased corporate hegemony. As they see it…
Despite the promise of a peer-to-peer empowered world, the economic and political benefits have proven to be asymmetrical—with power and prosperity channeled to those who already have it, even if they’re no longer earning it. Money is making more money than many people do.
In their view, it is a situation that even the new, so-called sharing economy companies are currently exasperating:
Pundits often refer to Airbnb, Uber, Lyft, TaskRabbit, and others as platforms for the “sharing economy.” It’s a nice notion—that peers create and share in value. But these businesses have little to do with sharing. In fact, they are successful precisely because they do not share—they aggregate. … Uber is a $65 billion corporation that aggregates driving services. Airbnb, the $25 billion Silicon Valley darling, aggregates vacant rooms.
In the coming blockchain revolution, however, “Today’s big disruptors are about to get disrupted.”
Says Vitalik Buterin, founder of the Ethereum blockchain: “Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. Instead of putting the taxi driver out of a job, blockchains put Uber out of a job and let the taxi drivers work with the customer directly.”
So what is a blockchain, exactly? Well, a blockchain is essentially a widely distributed, openly accessible ledger, a decentralized system of accountability housed within the computers of anyone who agrees to host it, and accessible to all. I'll let those interested in the technological minutiae discover the details in the book, but it is essentially a way to store information on the ownership of goods, assets, or property, and account for and transfer value from one place to another instantaneously.
As mentioned, the most widely recognized example at the moment is Bitcoin . But there are many others, and more being built all the time. (“In 2014 and 2015 alone,” we’re told, “more than $1 billion of venture capital flooded into the emerging blockchain ecosystem, and the rate of investment is almost doubling annually.”) One of them, Abra, is cutting out the middle man in the process of sending remittances to relatives living in other countries—and the inconvenience and exorbitant fees associated with companies like Western Union. Rather than taking a week to transfer, and up to 7 percent of the money being sent in the process, Abra moves funds in an hour and takes just 2 percent to do so.
Because of this ease, similar blockchains could help move foreign aid and individual donations to crisis spots more quickly. And because of the transparency in its movement, it would allow you to track your donation from the time you give it all the way to its end use, to the persons or processes it benefits. And blockchains can do much more than simply transfer money in an emergency. They also provide a decentralized, open, and transparent ledger for keeping records on, and transferring, property rights. That is important because, in the aftermath a major disaster, one of the first things that has to be determined is who owns what, and that delays the work. In the future, one could simply consult a blockchain. And property rights are often a sticking point in economies around the world even in the best of times. The authors cite Hernando de Soto, president of the Institute for Liberty and Democracy, who suggests that "as many as five billion people in the world are barred from participating fully in the value created by globalization because they have tenuous rights to their land.” Blockchains, with their ability to account for and record the proper rights to any good, asset, property, or even idea, could solve that problem and so many more, restoring economic and property rights to some who have lost it, and providing them to many for the very first time.
Douglas Rushkoff, in his book Throwing Rocks at the Google Bus, lamented the fact that Internet entrepreneurs, after building great tools and companies around them, after enacting great change and disruption, tend to very literally sell out to the oldest institutions and most entrenched industry on planet—Wall Street. “Distributed ledger technology” (as bankers tend to call blockchains) has a chance to “liberate many financial services from the confines of old institutions.” And with its built-in transparency, it has the additional benefit of eliminating and/or streamlining the regulations needed to oversee them. But the technology offers great promise to those very institutions if they can just reimagine their role and move from the center to the periphery of relationships, and work toward ensuring enduring liquidity instead of propriety:
[I]ncumbent institutions can transform themselves around blockchain technology, if they can find the leadership to do it. The technology holds great promise to revolutionize the industry for the good—brokerages, microlenders, credit card networks, real estate agents, and everything in between. When everyone shares the same distributed ledger, settlements don’t take days, they occur instantly for all to see. Billions will benefit, and this shift could liberate and empower entrepreneurs everywhere.
Just as previous advances in economics were predicated on new technologies or accounting systems, the Tapscott’s predict that blockchains could provide the accounting system we need for a global economy and age in which everyone and everything is connected online. The internet of everything, the authors believe, needs a ledger of everything, and blockchains can provide that ledger.
Like the World Wide Web of information, it’s the World Wide Ledge of value—a distributed ledger that everyone can download and run on their personal computer.
Some scholars have argued that the invention of double-entry bookkeeping enabled the rise of capitalism and the nation-state. This new digital ledger of economic transactions can be programmed to record virtually everything of value and importance to humankind: birth and death certificates, marriage licenses, deeds and titles of ownership, educational degrees, financial accounts, medical procedures, insurance claims, votes, provenance of food, and anything else that can be expressed in code.
Blockchains hold out the promise of a new system of accountability, an almost universal liquidity and open, transparent markets for it that are accessible to billions of people around the world that are excluded from the financial system today. They could also provide a blackbox to protect our identity and own our own data. Indeed, Don and Alex Tapscott insist, “a global ledger of truthful information can help build integrity into all our institutions and create a more secure and trustworthy world.”
About Dylan Schleicher
Dylan Schleicher has been a part of the 800-CEO-READ claque since 2003. Even though he's stayed on at the company, he has not stayed put. After beginning in shipping & receiving, he joined customer service and accounting before moving into his current, highly elliptical orbit of duties overseeing the ChangeThis and In the Books websites, the company's annual review of books, and in-house design. He lives with his wife and two children in the Washington Heights neighborhood on Milwaukee's West Side.