HARI SREENIVASAN: I’m walking on Wall Street with author Don Tapscott. He’s written a dozen books on technology and sees one that could change everything around us. He’s not the only believer. While the Dow Jones Industrial Average is up about 20 percent in the past year, Bitcoin, a digital currency, is up more than 700 percent, with a total value of near $80 billion. That’s more than American Express. The surge has people wondering whether Bitcoin is in a bubble.
For Tapscott, that question is missing the real story.
DON TAPSCOTT, AUTHOR “BLOCKCHAIN REVOLUTION”: The real pony here is the underlying technology called the “blockchain.”
HARI SREENIVASAN: Tapscott and his son co-wrote a book called Blockchain Revolution, named after the technology that supports bitcoin and other so-called cryptocurrencies. They’re called that because of the cryptography, or computer code, that makes them secure.
Tapscott says the technology is the key to creating trust in peer-to-peer transactions, like sending or receiving money without a bank or a credit card company in between.
DON TAPSCOTT: Trust is achieved not by a big intermediary; it’s achieved by cryptography, by collaboration and by some clever code.
HARI SREENIVASAN: Here’s how the blockchain works: when you send or receive an asset, the transaction is recorded in a global, public ledger. A network of millions of computers store copies of that ledger and work to validate new transactions in “blocks.” When each “block” is verified, it’s sealed and connected to the preceding block, which in turn is connected to every block that has ever been validated, creating a secure “blockchain.”
DON TAPSCOTT: There is now an immutable record of that transaction. And if I wanted to go and hack that transaction, say to use that money to pay somebody else, I’d have to hack that block, plus the previous block, in the entire history of commerce on that block chain, not just on one computer, but across millions of computers simultaneously all using the highest level of cryptography while the most powerful computing resource in the world is watching me. The way I like to think of it is that is a blockchain is a highly processed thing sort of like a chicken nugget, and if you wanted to hack it, it’d be like turning a chicken nugget back into a chicken. Now someday someone will be able to do that. But for now, it’s going to be tough.
HARI SREENIVASAN: Tapscott predicts these global ledgers, or blockchains, could affect several parts of the economy during the next decade, in particular, the financial industry.
HARI SREENIVASAN: In a blockchain future, what happens to the New York Stock Exchange?
DON TAPSCOTT: Well, a likely scenario is it becomes a fabulous museum, and it is a beautiful building when you think about it. But buying and selling a stock can be done peer-to-peer now using new blockchain platforms.
HARI SREENIVASAN: He says routine transactions, like using a credit card or making online payments with PayPal or Venmo, could be replaced with instant, peer-to-peer blockchain transactions, speeding up how long it takes and shrinking the costs.
DON TAPSCOTT: Think about something like you tap your card in a Starbucks and a bunch of messages go through different companies. Some of them using, you know, 30-year-old technology, and three days later, a settlement occurs. Well, if all of that were on a blockchain there would be no three-day delay. The payment and the settlement is the same activity. So it would happen instantly and in a secure way. So that’s either going to disintermediate those players, or if those players are smart, they’ll embrace this technology to speed up the whole metabolism of the financial industry.
HARI SREENIVASAN: Beyond upending financial transactions, Tapscott imagines a future where a blockchain could be used to transfer any kind of asset, from a user’s personal data to intellectual property.
Some of that has already begun. This is Consensys, a technology start-up in Brooklyn, New York. Joseph Lubin founded Consensys and helped develop the Ethereum blockchain, the second biggest blockchain in the world after Bitcoin. Ethereum launched in 2015.
JOSEPH LUBIN, CONSENSYS: Ethereum is by far the most powerful blockchain platform out there. It has the most expressive programming language.
HARI SREENIVASAN: Meaning Ethereum can do something pretty radical: it allows for what are known as “smart contracts” to be built into the code. So it can also transfer a set of instructions or conditions.
DON TAPSCOTT: It’s kind of like what it sounds like — it’s a contract that self-executes, and it has a payment system built into it. Sort of like a contract that has built in lawyers and governments and a bank account.
HARI SREENIVASAN: At Consensys, one project applies this idea to music.
JESSE GRUSHAK: Click buy album…
HARI SREENIVASAN: Jesse Grushack is the founder of ujo, a music platform for artists to distribute their music through the blockchain. Artists decide what price to sell their music and pocket more from their intellectual property.
JESSE GRUSHAK, UJO MUSIC: We’re looking at how to make the music industry more efficient, but at the end of the day, our top level goal is getting artists paid more for their work and all their creative content.
HARI SREENIVASAN: But ujo is not yet easy to use. There is only one album on the platform, and it requires users to buy music with ether, the cryptocurrency used on the Ethereum blockchain.
JESSE GRUSHAK: The blockchain is still in its infancy right now. It’s still kind of in the Netscape phase, really, of the internet. You don’t have that AOL, you don’t have that landing page that opens the world up to you. It’s still a little nerdy, it’s still a little technical but we’re working really hard to kind of make it usable, make the user experience seamless because really this technology we want to be in the hands of everyone.
HARI SREENIVASAN: When he said, “a little nerdy,” he wasn’t kidding. In order to get an idea, I went out and bought some crypto-currencies online and the process was not easy. Certainly not as easy as going to the bank to get cash or calling a stockbroker to buy a stock. But then, using my first email account in the early ‘90s, that wasn’t easy either.
DON TAPSCOTT: I think we’re in 1994. And in ‘94, we had the internet and most people were using it for a single application, email. And that’s kind of like Bitcoin is today. The application is called a currency, but we’re starting to see the rise of the web as we did in ‘94. A general purpose platform for building applications that changed many, many industries.
HARI SREENIVASAN: You’ve literally written the book on the blockchain. How do you know that this is actually working, that people are believing in this, investing in this, understanding the potential in this?
DON TAPSCOTT: In every single industry now, companies are starting to implement pilots to explore how this technology can change their operations.
HARI SREENIVASAN: Tapscott points to retailer Walmart, which has done a pilot using a blockchain to track food safety, and manufacturer Foxconn, which is experimenting with using a blockchain to track its supply chain.
Still, this blockchain believer acknowledges it has a lot left to prove.
HARI SREENIVASAN: There’s several critics out there that kind of look at this and say, ‘This is like tulip mania.’ This cryptocurrency stuff, this is a bubble, bigger than I’ve ever seen before. There’s a bunch of people that don’t know a thing about what’s going on that just want to see something go up.
DON TAPSCOTT: Well, for sure there’s a hype cycle that we’re into now. But the biggest impact will be that blockchain itself is going to change the fundamental operations of banks, of retail companies of supply chains, of manufacturing companies, of governments, and of every institution in society.