Required Reading: Promises—and Pitfalls—of the Blockchain Revolution
The Internet has done wonders to accelerate the flow of information between people, but to date, the Web hasn’t exactly been ideal for conducting transactions of monetary value, argue father-son duo Don and Alex Tapscott in their new book, Blockchain Revolution. Associate Editor Oren Smilansky caught up with Alex to explore how a global blockchain network—brought together by a combination of “raw computing power, very clever code, and massive collaboration”—has the potential to redefine digital commerce as we know it.
CRM: Why would you say that blockchain transactions—like the ones enabled by Bitcoin—are preferable to those in systems that rely on intermediaries?
Alex Tapscott: [Blockchain] makes transactions faster, cheaper, and more secure. To hack a network is actually harder than it is to hack an intermediary. We’ve seen intermediaries like JP Morgan, Home Depot, Target, and so many others who have got centralized computer systems that have proven vulnerable to attacks.
The Bitcoin network has never been attacked to the point where people have been able to [kick] Bitcoin off the network. And the reason for that is that there’s more computing power in the Bitcoin network than there is in basically all the server farms of all the biggest technology companies combined. The Bitcoin network harbors, or marshals, about twenty times the computing power Google has running in its entire operation. So that makes it more secure than any one single intermediary, because it’s distributed across a variety of computers, and there’s no central point of attack. So if we can take an understanding of how Bitcoin works and apply it to other kinds of virtual assets, that’s where we get into the opportunities and implications for businesses, and for business models.
Is there a specific industry that will be most strongly affected by a blockchain makeover?
The sector people focus on the most, and for good reason, is financial services, because right now most financial assets actually trade on their own medium. If you think about information, everything from music to journalism to movies to books to content of all kinds has moved to digital media. You used to get newspapers, records; you used to read physical books. Now it’s been moved to a common platform. Things of value—everything from dollars and cents to stocks and bonds—all trade on different mediums. So the opportunity here is to move anything of value that moves through the financial services industry onto one common platform, and that will have the same implications for [financial services] as the Internet did for publishing, music, business, and other areas in the 1990s and 2000s.
How will other businesses be affected?
This technology has the potential to cause a huge disruption and dislocation of businesses, but it also presents a once-in-a-generation opportunity...for business. I think there are at least as many opportunities for disruption as there are for value creation.
There are some companies whose roles have been, in the most general sense, [challenged] and it’s because of their [historical role as] intermediaries. Those kinds of companies, I think, are at risk. Because what blockchain does is not so much intermediate as allow people to sever the value of an intermediary. So if you are an intermediary and you’re doing something useful—let’s say you’re a bank and extending a loan or offering a suite of investment products or whatever—there’s no reason to think that blockchain will automatically [eliminate you]. You might be able to use the technology to improve how you run your business. But if you’re an intermediary who’s one of the five different third parties in a credit card transaction that gets paid for basically just sitting there, I think that your business is at risk, and there are a lot of companies like that that are going to have to accept this new reality and adapt or risk becoming obsolete.
What will these changes mean in terms of the kinds of customers companies will be able to reach?
By many estimates, smartphone technology and Internet connectivity will be pretty ubiquitous in the next five years. And yet, despite that, so many people in the world don’t have access to basic banking. And what is basic banking, really? It is a way to store value, move value, invest value, get access to credit, et cetera.
New business models will emerge to enable people to get those services without the need for a bank or a traditional intermediary, and that’s a very good thing, because right now there are trillions of dollars that are basically dead money, in the markets of the developing world, that don’t really circulate through the economy.