Overcome the challenges of Bitcoin. In this interview, Don Tapscott explains why blockchain, the technology behind cryptocurrencies, could revolutionize the global economy.
What impact can the technology behind Bitcoin have?
According to Don Tapscott, CEO of Tapscott Group, blockchain, the technology behind cryptocurrency, has the potential to revolutionize the global economy. In this interview with McKinsey’s Rik Kirkland, Tapscott explains how blockchains, an open source decentralized database using the latest cryptographic technology, can facilitate collaboration and tracking of all types of events and interactions. Tapscott, author of the new book Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World, also believes the technology can provide real privacy protections and “a platform for truth and trust.” The following is an edited and expanded transcript of Tapscott’s comments.
How the blockchain works
Blockchain is basically a distributed database. He thinks of a giant global spreadsheet running on millions and millions of computers. It is shared. It’s open source, so anyone can edit the underlying code and see what happens. It’s really peer support; it does not require efficient intermediaries to authenticate or transact.
It uses the latest encryption technology, so if we have a global, distributed database that can store the fact that we made this transaction, what else could it store? Well, it can store all the structured information, not just who paid who, but also who married whom, or who owns what land, or what light bought energy from what energy source. In the case of the Internet of Things, we need a blockchain under the settlement system. Banks can’t handle trillions of real-time transactions between things.
So this is something great. Immutable and un hackable decentralized digital asset database. This is the platform for truth and this is the platform for trust. The effects are staggering, not just in the financial services industry, but in virtually all walks of life.
Most blockchains — and Bitcoin is the largest — are what you would call a permission less system. We can conclude agreements and meet each other’s financial needs without knowing who the other party is and independently of the central authorities. These blockchains all have some form of digital currency associated with them, which is why everyone talks about Bitcoin as a blockchain in the same breath, because the Bitcoin blockchain is the largest.
But to me, blockchain, the technology behind it, is the greatest innovation in computing: the idea of a decentralized database where trust is built through mass collaboration and intelligent code, rather than an efficient institution performing authentication and settlement.
The way it works is, if I owe you $20, we close the deal. There is a huge mining community and they have a powerful computing resource. Some people have estimated that Google’s total computing power would be 5 percent of this blockchain computing power on the Bitcoin blockchain. This platform solves this big, big problem called the double payment problem. If I send you an mp3 file and I send it to someone else, it’s a problem for the record industry, but it’s not a big deal. If I send you $20 and send the same file to someone else, that’s a big deal. It’s called fraud and the economy stops if you base a monetary system on it. What happens is I send you $20 and these miners, in short, try to verify that the transaction happened.
Every miner is motivated to be the first to find the truth, and when you find the truth, it’s a test for everyone else. If you find the truth and solve a complicated math problem, you get money, some Bitcoins. Hacking me and trying to send the same money to someone else or breaking in and trying to steal your $20 worth of Bitcoin is basically impossible because I would have to hack that ten minute block. That’s why it’s called a blockchain and that block is connected to the previous block and the previous block i.e. the chain. This blockchain runs on countless computers. I would have to commit fraud in light of the world’s most powerful computing resource, not just for that ten-minute block, but for the entire history of trading on a decentralized platform. This is not possible in practice.
So there have definitely been a lot of problems with Bitcoin. Have you had great trades like Mt. Gox failed. There was the Silk Road, where Bitcoin was the payment system for all kinds of heinous and illegal activities. But don’t get confused. Well, it’s an asset. Should I invest? Is it going up or down?” Well I don’t care, just like speculating on gold I don’t care.
Something more interesting is Bitcoin as a digital currency that allows us to make such transactions. A cryptocurrency that is not based on nation states. The main thing we focus on in our work is the much bigger question, this underlying distributed database technology that allows us to have a true, immutable record of everything.
How malfunctions can occur
The financial services industry is facing major disruption or change depending on how it tackles this issue. In the Blockchain Revolution study, we looked at and identified eight different things the industry does: move money, store money, borrow money, exchange money, try money, liquidate money, etc.
Each of them can be challenged.
Pick any industry and this technology has huge potential to disrupt that by creating a more prosperous world where people can contribute the value they create. For example, the music industry is a mess, at least from the musician’s point of view. They had the most value of the major labels. Then along came the tech companies who claimed a lot of value and songwriters and musicians ended up with crumbs. What if the new music industry was a decentralized application on the blockchain where I, as a songwriter, could submit my song to the blockchain with a smart contract determining how it should be used?
Maybe as an artist who publishes my music on a blockchain music platform I say, “Listen to the music, it’s free. Do you want to put it in your movie? It’s going to cost you so much, and that’s how it’s going to work. Put it in the movie, the smart contract will pay me.” ” Or how would you use it as a ringtone? There’s a smart contract for that.
This is not a dream. Imogen Heap, a big songwriter in the UK, a successful artist, has now co-created Mycelia and they are working with a big company called Consensus Systems, which is blockchain developers all over the world. , using the Ethereum platform; Ethereum is a single blockchain. He has already published his first issue on the Internet. I fully expect many great artists to seriously explore a whole new paradigm where musicians are rewarded for the value they create.
What could go wrong?
I’m not a futurist. I think the future cannot be predicted, it must be achieved. We argue that this technology is revolutionary and has enormous potential to transform society.
What could go wrong? We have identified ten obstacles and covered them in detail in our research and in our book. There are examples of the energy that goes into this, which is huge. Another example is that this technology will be the platform for many intelligent agents which will leave many people out of work. Perhaps this brand new platform is the latest job killer.
However, the biggest problems are administrative. All the controversies you read today revolve around these governance issues. This new community is in its infancy. Unlike the internet, which has a developed governance ecosystem, the entire blockchain and digital currency world is a wild west.
It is a place of recklessness, chaos and misfortune. This could spell the end if we don’t find the leadership to come together and create similar organizations that we have to run the internet. We have an Internet Engineering Task Force that creates standards for the web. We have the Internet Governance Forum, which makes policy for governments. We have the W3C Consortium, which creates standards for the web. There is the Internet society; it is an advocacy group. There is the Internet Corporation for Assigned Names and Numbers (ICANN), a functioning network that only provides domain names. There is a structure and a process to figuring things out. There is currently a big discussion about block size. We need a bigger block size to handle all the events that happen. There are big differences. There are legitimate viewpoints, but the problem is that there is no process for finding the optimal solution.