How the Blockchain is Changing Money and Business | Don Tapscott

00:12 The technology likely to have the greatest impact

What is the Blockchain?

If you don’t know, you should; if you do, chances are you still need some clarification on how it actually works.

Don Tapscott Demystifying Blockchain

The world is changing. Blockchain is a trust-building technology which, he says, represents nothing less than the second generation of the internet and holds the potential to transform money, business, government and society.

00:16 on the next few decades 00:18 has arrived. 00:19 And it’s not social media. 00:22 It’s not big data. 00:23 It’s not robotics. 00:25 It’s not even AI. 00:27 You’ll be surprised to learn 00:29 that it’s the underlying technology of digital currencies like Bitcoin.

00:34 It’s called the blockchain. Blockchain. 00:38 Now, it’s not the most sonorous word in the world,

00:42 but I believe that this is now 00:44 the next generation of the internet, 00:47 and that it holds vast promise for every business, every society

00:51 and for all of you, individually. 00:54 You know, for the past few decades, we’ve had the internet of information. 00:59 And when I send you an email or a PowerPoint file or something,

01:03 I’m actually not sending you the original,

01:05 I’m sending you a copy. 01:07 And that’s great. 01:08 This is democratized information. 01:12 But when it comes to assets — 01:15 things like money, 01:17 financial assets like stocks and bonds, 01:20 loyalty points, intellectual property, 01:23 music, art, a vote, 01:26 carbon credit and other assets — 01:29 sending you a copy is a really bad idea. 01:32 If I send you 100 dollars, 01:34 it’s really important that I don’t still have the money —

01:37 (Laughter) 01:38 and that I can’t send it to you. 01:40 This has been called the “double-spend” problem

01:42 by cryptographers for a long time. 01:45 So today, we rely entirely on big intermediaries —

01:50 middlemen like banks, government, 01:53 big social media companies, credit card companies and so on —

01:56 to establish trust in our economy. 01:59 And these intermediaries perform all the business and transaction logic 02:04 of every kind of commerce, 02:06 from authentication, identification of people,

02:09 through to clearing, settling and record keeping.

02:13 And overall, they do a pretty good job. 02:15 But there are growing problems. 02:17 To begin, they’re centralized. 02:19 That means they can be hacked, and increasingly are —

02:22 JP Morgan, the US Federal Government, 02:25 LinkedIn, Home Depot and others 02:26 found that out the hard way. 02:28 They exclude billions of people from the global economy,

02:32 for example, people who don’t have enough money

02:34 to have a bank account. 02:36 They slow things down. 02:38 It can take a second for an email to go around the world,

02:42 but it can take days or weeks 02:44 for money to move through the banking system across a city.

02:48 And they take a big piece of the action —

02:50 10 to 20 percent just to send money to another country.

02:54 They capture our data, 02:55 and that means we can’t monetize it 02:57 or use it to better manage our lives. 03:00 Our privacy is being undermined. 03:03 And the biggest problem is that overall, 03:06 they’ve appropriated the largesse of the digital age asymmetrically:

03:11 we have wealth creation, but we have growing social inequality.

03:17 So what if there were not only an internet of information,

03:21 what if there were an internet of value —

03:24 some kind of vast, global, distributed ledger

03:28 running on millions of computers 03:30 and available to everybody. 03:32 And where every kind of asset, from money to music,

03:36 could be stored, moved, transacted, exchanged and managed,

03:42 all without powerful intermediaries? 03:45 What if there were a native medium for value?

03:50 Well, in 2008, the financial industry crashed

03:54 and, perhaps propitiously, 03:57 an anonymous person or persons named Satoshi Nakamoto

04:03 created a paper where he developed a protocol for a digital cash

04:10 that used an underlying cryptocurrency called Bitcoin.

04:14 And this cryptocurrency enabled people to establish trust and do transactions

04:20 without a third party.

04:21 And this seemingly simple act set off a spark

04:25 that ignited the world, 04:27 that has everyone excited or terrified or otherwise interested

04:33 in many places.

04:34 Now, don’t be confused about Bitcoin — 04:36 Bitcoin is an asset; it goes up and down, 04:39 and that should be of interest to you if you’re a speculator.

04:43 More broadly, it’s a cryptocurrency. 04:45 It’s not a fiat currency controlled by a nation-state.

04:49 And that’s of greater interest.

04:51 But the real pony here is the underlying technology.

04:54 It’s called blockchain. 04:57 So for the first time now in human history,

05:01 people everywhere can trust each other

05:03 and transact peer to peer. 05:07 And trust is established, not by some big institution,

05:11 but by collaboration, by cryptography 05:14 and by some clever code. 05:16 And because trust is native to the technology,

05:20 I call this, “The Trust Protocol.” 05:22 Now, you’re probably wondering: How does this thing work?

05:25 Fair enough. 05:28 Assets — digital assets like money to music and everything in between — 05:33 are not stored in a central place, 05:35 but they’re distributed across a global ledger,

05:37 using the highest level of cryptography. 05:40 And when a transaction is conducted, 05:43 it’s posted globally, 05:45 across millions and millions of computers.

05:49 And out there, around the world, 05:51 is a group of people called “miners.” 05:53 These are not young people, they’re Bitcoin miners.

05:57 They have massive computing power at their fingertips —

06:00 10 to 100 times bigger than all of Google worldwide.

06:05 These miners do a lot of work. 06:08 And every 10 minutes, 06:09 kind of like the heartbeat of a network, 06:11 a block gets created 06:14 that has all the transactions from the previous 10 minutes.

06:17 Then the miners get to work, trying to solve some tough problems.

06:22 And they compete: 06:24 the first miner to find out the truth and to validate the block,

06:28 is rewarded in digital currency, 06:30 in the case of the Bitcoin blockchain, with Bitcoin.

06:34 And then — this is the key part — 06:36 that block is linked to the previous block

06:38 and the previous block 06:40 to create a chain of blocks. 06:43 And every one is time-stamped, 06:44 kind of like with a digital waxed seal. 06:47 So if I wanted to go and hack a block 06:49 and, say, pay you and you with the same money,

06:54 I’d have to hack that block, 06:55 plus all the preceding blocks, 06:57 the entire history of commerce on that blockchain,

07:00 not just on one computer but across millions of computers,

07:04 simultaneously, 07:06 all using the highest levels of encryption,

07:09 in the light of the most powerful computing resource in the world 07:12 that’s watching me. 07:13 Tough to do. 07:15 This is infinitely more secure 07:17 than the computer systems that we have today.

07:20 Blockchain. That’s how it works. 07:23 So the Bitcoin blockchain is just one. 07:25 There are many. 07:26 The Ethereum blockchain was developed by a Canadian named Vitalik Buterin. 07:31 He’s [22] years old, 07:33 and this blockchain has some extraordinary capabilities.

07:38 One of them is that you can build smart contracts.

07:41 It’s kind of what it sounds like. 07:43 It’s a contract that self-executes, 07:45 and the contract handles the enforcement, the management, performance 07:50 and payment — the contract kind of has a bank account, too, in a sense — 07:55 of agreements between people. 07:57 And today, on the Ethereum blockchain,

08:00 there are projects underway to do everything

08:02 from create a new replacement for the stock market

08:05 to create a new model of democracy, 08:07 where politicians are accountable to citizens.

08:10 (Applause) 08:14 So to understand what a radical change this is going to bring,

08:18 let’s look at one industry, financial services.

08:21 Recognize this? 08:23 Rube Goldberg machine. 08:25 It’s a ridiculously complicated machine that does something really simple, 08:28 like crack an egg or shut a door. 08:31 Well, it kind of reminds me of the financial services industry,

08:35 honestly. 08:36 I mean, you tap your card in the corner store,

08:39 and a bitstream goes through a dozen companies,

08:42 each with their own computer system, 08:45 some of them being 1970s mainframes 08:47 older than many of the people in this room,

08:50 and three days later, a settlement occurs.

08:53 Well, with a blockchain financial industry,

08:57 there would be no settlement, 08:58 because the payment and the settlement is the same activity,

09:01 it’s just a change in the ledger. 09:04 So Wall Street and all around the world,

09:06 the financial industry is in a big upheaval about this,

09:09 wondering, can we be replaced, 09:11 or how do we embrace this technology for success?

09:15 Now, why should you care? 09:18 Well, let me describe some applications.

09:21 Prosperity. 09:23 The first era of the internet, 09:25 the internet of information, 09:26 brought us wealth but not shared prosperity,

09:30 because social inequality is growing. 09:32 And this is at the heart of all of the anger and extremism

09:36 and protectionism and xenophobia and worse

09:40 that we’re seeing growing in the world today,

09:43 Brexit being the most recent case. 09:46 So could we develop some new approaches to this problem of inequality? 09:52 Because the only approach today is to redistribute wealth,

09:56 tax people and spread it around more. 09:58 Could we pre-distribute wealth? 10:01 Could we change the way that wealth gets created in the first place

10:04 by democratizing wealth creation, 10:07 engaging more people in the economy, 10:09 and then ensuring that they got fair compensation?

10:13 Let me describe five ways that this can be done.

10:16 Number one: 10:18 Did you know that 70 percent of the people in the world who have land 10:23 have a tenuous title to it? 10:25 So, you’ve got a little farm in Honduras, some dictator comes to power,

10:29 he says, “I know you’ve got a piece of paper that says you own your farm, 10:32 but the government computer says my friend owns your farm.”

10:36 This happened on a mass scale in Honduras,

10:39 and this problem exists everywhere. 10:42 Hernando de Soto, the great Latin American economist,

10:45 says this is the number one issue in the world

10:47 in terms of economic mobility, 10:48 more important than having a bank account,

10:50 because if you don’t have a valid title to your land,

10:53 you can’t borrow against it, 10:55 and you can’t plan for the future. 10:57 So today, companies are working with governments

11:01 to put land titles on a blockchain. 11:03 And once it’s there, this is immutable. 11:06 You can’t hack it. 11:08 This creates the conditions for prosperity

11:11 for potentially billions of people. 11:14 Secondly: 11:16 a lot of writers talk about Uber 11:18 and Airbnb and TaskRabbit and Lyft and so on

11:21 as part of the sharing economy. 11:24 This is a very powerful idea, 11:25 that peers can come together and create and share wealth.

11:29 My view is that … 11:31 these companies are not really sharing. 11:35 In fact, they’re successful precisely because they don’t share.

11:39 They aggregate services together, and they sell them.

11:43 What if, rather than Airbnb being a $25 billion corporation,

11:48 there was a distributed application on a blockchain, we’ll call it B-Airbnb, 11:54 and it was essentially owned by all of the people

11:58 who have a room to rent. 12:00 And when someone wants to rent a room,

12:03 they go onto the blockchain database and all the criteria,

12:07 they sift through, it helps them find the right room,

12:09 and then the blockchain helps with the contracting,

12:12 it identifies the party, 12:14 it handles the payments 12:15 just through digital payments — they’re built into the system.

12:19 And it even handles reputation, 12:20 because if she rates a room as a five-star room,

12:24 that room is there, 12:26 and it’s rated, and it’s immutable. 12:29 So, the big sharing-economy disruptors in Silicon Valley

12:34 could be disrupted, 12:36 and this would be good for prosperity. 12:38 Number three: 12:40 the biggest flow of funds from the developed world

12:42 to the developing world 12:44 is not corporate investment, 12:46 and it’s not even foreign aid. 12:49 It’s remittances. 12:52 This is the global diaspora; 12:54 people have left their ancestral lands, 12:56 and they’re sending money back to their families at home.

13:00 This is 600 billion dollars a year, and it’s growing,

13:03 and these people are getting ripped off. 13:06 Analie Domingo is a housekeeper. 13:09 She lives in Toronto, 13:11 and every month she goes to the Western Union office

13:16 with some cash 13:18 to send her remittances to her mom in Manila.

13:21 It costs her around 10 percent; 13:23 the money takes four to seven days to get there;

13:26 her mom never knows when it’s going to arrive.

13:28 It takes five hours out of her week to do this.

13:31 Six months ago, 13:32 Analie Domingo used a blockchain application called Abra.

13:37 And from her mobile device, she sent 300 bucks.

13:40 It went directly to her mom’s mobile device

13:42 without going through an intermediary. 13:45 And then her mom looked at her mobile device —

13:47 it’s kind of like an Uber interface, there’s Abra “tellers” moving around. 13:51 She clicks on a teller that’s a five-star teller,

13:54 who’s seven minutes away. 13:56 The guy shows up at the door, gives her Filipino pesos,

13:59 she puts them in her wallet. 14:01 The whole thing took minutes, 14:03 and it cost her two percent. 14:06 This is a big opportunity for prosperity. 14:09 Number four: the most powerful asset of the digital age is data.

14:14 And data is really a new asset class, 14:17 maybe bigger than previous asset classes,

14:20 like land under the agrarian economy, 14:23 or an industrial plant, 14:24 or even money. 14:26 And all of you — we — create this data. 14:29 We create this asset, 14:31 and we leave this trail of digital crumbs behind us

14:34 as we go throughout life. 14:35 And these crumbs are collected into a mirror image of you,

14:38 the virtual you. 14:40 And the virtual you may know more about you than you do,

14:43 because you can’t remember what you bought a year ago,

14:45 or said a year ago, or your exact location a year ago.

14:48 And the virtual you is not owned by you —

14:51 that’s the big problem. 14:53 So today, there are companies working 14:56 to create an identity in a black box, 14:59 the virtual you owned by you. 15:01 And this black box moves around with you

15:05 as you travel throughout the world, 15:07 and it’s very, very stingy. 15:09 It only gives away the shred of information

15:12 that’s required to do something. 15:13 A lot of transactions, 15:15 the seller doesn’t even need to know who you are.

15:17 They just need to know that they got paid.

15:20 And then this avatar is sweeping up all of this data

15:24 and enabling you to monetize it. 15:28 And this is a wonderful thing, 15:29 because it can also help us protect our privacy,

15:33 and privacy is the foundation of a free society.

15:36 Let’s get this asset that we create 15:38 back under our control, 15:40 where we can own our own identity 15:42 and manage it responsibly. 15:45 Finally — 15:46 (Applause) 15:52 Finally, number five: 15:53 there are a whole number of creators of content

15:57 who don’t receive fair compensation, 15:59 because the system for intellectual property is broken.

16:02 It was broken by the first era of the internet.

16:05 Take music. 16:07 Musicians are left with crumbs at the end of the whole food chain.

16:10 You know, if you were a songwriter, 25 years ago, you wrote a hit song,

16:15 it got a million singles, 16:18 you could get royalties of around 45,000 dollars.

16:21 Today, you’re a songwriter, you write a hit song,

16:23 it gets a million streams, 16:25 you don’t get 45k, 16:27 you get 36 dollars, 16:29 enough to buy a nice pizza. 16:32 So Imogen Heap, 16:34 the Grammy-winning singer-songwriter,

16:36 is now putting music on a blockchain ecosystem.

16:40 She calls it “Mycelia.” 16:42 And the music has a smart contract surrounding it.

16:46 And the music protects her intellectual property rights.

16:50 You want to listen to the song? 16:51 It’s free, or maybe a few micro-cents that flow into a digital account.

16:54 You want to put the song in your movie, that’s different,

16:57 and the IP rights are all specified. 16:59 You want to make a ringtone? That’s different.

17:02 She describes that the song becomes a business.

17:05 It’s out there on this platform marketing itself,

17:08 protecting the rights of the author, 17:10 and because the song has a payment system

17:12 in the sense of bank account, 17:13 all the money flows back to the artist, 17:16 and they control the industry, 17:18 rather than these powerful intermediaries.

17:21 Now, this is — 17:22 (Applause) 17:27 This is not just songwriters, 17:29 it’s any creator of content, 17:30 like art, 17:32 like inventions, 17:34 scientific discoveries, journalists. 17:37 There are all kinds of people who don’t get fair compensation,

17:40 and with blockchains, 17:42 they’re going to be able to make it rain on the blockchain.

17:46 And that’s a wonderful thing. 17:48 So, these are five opportunities 17:53 out of a dozen 17:54 to solve one problem, prosperity, 17:57 which is one of countless problems 18:00 that blockchains are applicable to. 18:03 Now, technology doesn’t create prosperity, of course — people do. 18:07 But my case to you is that, once again, 18:11 the technology genie has escaped from the bottle,

18:15 and it was summoned by an unknown person or persons

18:18 at this uncertain time in human history,

18:22 and it’s giving us another kick at the can,

18:25 another opportunity to rewrite the economic power grid

18:30 and the old order of things, 18:32 and solve some of the world’s most difficult problems,

18:37 if we will it. 18:39 Thank you. 18:41 (Applause)