Don Tapscott: How the Blockchain is Changing Money and Business (Transcript)

Here is the full transcript of Canadian author Don Tapscott’s Talk: How the Blockchain is Changing Money and Business at TED conference. 

 

Don Tapscott – Canadian author

The technology likely to have the greatest impact on the next few decades has arrived. And it’s not social media. It’s not big data. It’s not robotics. It’s not even AI. You’ll be surprised to learn that it’s the underlying technology of digital currencies like Bitcoin. It’s called the blockchain.

Blockchain. Now, it’s not the most sonorous word in the world, but I believe that this is now the next generation of the internet, and that it holds vast promise for every business, every society and for all of you, individually. You know, for the past few decades, we’ve had the internet of information. And when I send you an email or a PowerPoint file or something, I’m actually not sending you the original, I’m sending you a copy. And that’s great. This is democratized information.

But when it comes to assets — things like money, financial assets like stocks and bonds, loyalty points, intellectual property, music, art, a vote, carbon credit and other assets — sending you a copy is a really bad idea. If I send you 100 dollars, it’s really important that I don’t still have the money — and that I can’t send it to you. This has been called the “double-spend” problem by cryptographers for a long time.

So today, we rely entirely on big intermediaries — middlemen like banks, government, big social media companies, credit card companies and so on — to establish trust in our economy. And these intermediaries perform all the business and transaction logic of every kind of commerce, from authentication, identification of people, through to clearing, settling and record keeping. And overall, they do a pretty good job.

But there are growing problems. To begin, they’re centralized. That means they can be hacked, and increasingly are — JP Morgan, the US Federal Government, LinkedIn, Home Depot and others found that out the hard way. They exclude billions of people from the global economy, for example, people who don’t have enough money to have a bank account. They slow things down. It can take a second for an email to go around the world, but it can take days or weeks for money to move through the banking system across a city. And they take a big piece of the action — 10 to 20 percent just to send money to another country. They capture our data, and that means we can’t monetize it or use it to better manage our lives.

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Our privacy is being undermined. And the biggest problem is that overall, they’ve appropriated the largesse of the digital age asymmetrically: we have wealth creation, but we have growing social inequality. So what if there were not only an internet of information, what if there were an internet of value — some kind of vast, global, distributed ledger running on millions of computers and available to everybody.

And where every kind of asset, from money to music, could be stored, moved, transacted, exchanged and managed, all without powerful intermediaries? What if there were a native medium for value? Well, in 2008, the financial industry crashed and, perhaps propitiously, an anonymous person or persons named Satoshi Nakamoto created a paper where he developed a protocol for a digital cash that used an underlying cryptocurrency called Bitcoin. And this cryptocurrency enabled people to establish trust and do transactions without a third party.

And this seemingly simple act set off a spark that ignited the world, that has everyone excited or terrified or otherwise interested in many places. Now, don’t be confused about Bitcoin — Bitcoin is an asset; it goes up and down, and that should be of interest to you if you’re a speculator. More broadly, it’s a cryptocurrency. It’s not a fiat currency controlled by a nation-state. And that’s of greater interest.

But the real pony here is the underlying technology. It’s called blockchain. So for the first time now in human history, people everywhere can trust each other and transact peer to peer. And trust is established, not by some big institution, but by collaboration, by cryptography and by some clever code. And because trust is native to the technology, I call this, “The Trust Protocol”.

Now, you’re probably wondering: How does this thing work? Fair enough. Assets – digital assets like money to music and everything in between — are not stored in a central place, but they’re distributed across a global ledger, using the highest level of cryptography. And when a transaction is conducted, it’s posted globally, across millions and millions of computers. And out there, around the world, is a group of people called “miners”. These are not young people, they’re Bitcoin miners. They have massive computing power at their fingertips – 10 to 100 times bigger than all of Google worldwide.

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These miners do a lot of work. And every 10 minutes, kind of like the heartbeat of a network, a block gets created that has all the transactions from the previous 10 minutes. Then the miners get to work, trying to solve some tough problems. And they compete: the first miner to find out the truth and to validate the block, is rewarded in digital currency, in the case of the Bitcoin blockchain, with Bitcoin.

And then — this is the key part — that block is linked to the previous block and the previous block to create a chain of blocks. And every one is time-stamped, kind of like with a digital waxed seal. So if I wanted to go and hack a block and, say, pay you and you with the same money, I’d have to hack that block, plus all the preceding blocks, the entire history of commerce on that blockchain, not just on one computer but across millions of computers, simultaneously, all using the highest levels of encryption, in the light of the most powerful computing resource in the world that’s watching me. Tough to do. This is infinitely more secure than the computer systems that we have today.

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