By Allen ScottDon Tapscott is one of the world’s leading experts on innovation and the economic and social impact of technology. He’s a respected advisor to many businesses and government leaders across the globe, which is why his recent statements to Bloomberg about Bitcoin’s underlying blockchain technology could be a hint of what’s to come.
Tapscott explains that while the internet of information in the past 40 years has been “great,” it has nevertheless been “limited” thus far. With the advent of blockchain technology, we’re now finally getting what he calls “the internet of value.” This new type of internet, he says, can generate even more wealth for the coming generations and give rise to a slew of new companies.
Tapscott, however, drives a wedge between Bitcoin “the asset” and its underlying blockchain technology. Bitcoin, he explains, is a digital currency that’s not created by any nation state, which he admits “has a whole bunch of interesting use cases, especially for countries that have unstable currencies and limitations on capital flow and so on.” (Think Venezuela, China etc.) He continued:
But the real big innovation here is the underlying technology — the blockchain. And basically what this is a distributed ledger, a big global database that runs on millions of computers and it enables something extraordinary. It enables people to do transactions and to store and manage digital assets without a powerful intermediary like a bank or credit card company or a social media company or a government.
‘Room for Both’
When asked whether this blockchain must be open in order to match the impact of today’s public internet, Tapscott replied that there’s room for both. Additionally, while the “smart” leaders of big banks understand the risk this technology poses to their existence, they also recognize it as a big opportunity with private ledgers, he says.
Today’s financial institutions are admittedly inefficient and while they do a satisfactory job, their “metabolism” is very slow. This is where distributed ledger technology can help banks reduce costs, speed up transactions, and make the infrastructure “more responsive” for the digital age, he explains.
“There would be no three day settlement, because everyone’s looking at the same database,” adds Tapscott. “We’re talking about tens of billions of dollars here that can be reduced from the back office costs of banks.”
At the same time, he sees the anticipated disruption of blockchain technology having the biggest impact on those businesses that are positioned firmly in the middle. So while he expects the bigger banks to adapt like many telecoms did to the internet age, smaller fee-siphoning intermediaries could indeed be ripe for disruption.
“If you’re in the middle, and you can take a tax simply because of your historical role of being in the middle, it’s time to do some serious thinking,” he says. “You’ve got to create real value.”
Bitcoin: Internet of Value
However, while Tapscott’s draws many parallels between the blockchain and today’s open internet, he fails to acknowledge Bitcoin as the current frontrunner to become this new open internet of value.
Banks’ private ledgers can certainly be useful for banks in the pursuit of automation, efficiency and cost-cutting. Many bank intranets have “disrupted” and displaced office pneumatic tubes, but these did not extend to the outside world.
Bitcoin, on the other hand, is not only open-access without central control, but also has the most powerful blockchain in existence due to its proof-of-work protocol, which gives it an edge over closed blockchains in terms of security and immutability.
In other words, they cannot match the computational power of a global, open and distributed network. This, in turn, makes Bitcoin more resilient to attack and more like the public and global internet we’ve all come to know and love.
Bitcoin expert Andreas Antonopoulos comments on the myopia of many forecasters who tend to focus on the blockchain — a component of Bitcoin — without seeing the bigger picture.
“Was the real opportunity to be able to do packet switching networks or is the real power of the internet the fact that it is open, global, transnational, borderless, censorship resistant, open-access, and anyone can innovate without permission?” he asks rhetorically.
Tapscott, nevertheless, sees much more promise in the blockchain itself.
“It’s all about the blockchain,” he replied chuckling, when asked if he will remain focused on this nascent industry. “This is it … we have an opportunity to change many, many institutions in society and everybody should care.”