The technology likely to have the greatest impact on the world for the next twenty years has arrived, and it’s not the social web, artificial intelligence, robotics, or the cloud. It’s the blockchain, the technology behind digital currencies like Bitcoin. This technology represents nothing less than the second generation of the Internet and it holds the potential to transform money, business, government and society. Let us explain.
The Intenet today connects billions of people around the world, and certainly its great for communicating and collaborating online. But because it’s built for moving and storing information, and not value, it has done little to change the way we do business. When you send information to someone, like an email, word document, PDF or Powerpoint, you’re really sending a copy not the original. It’s OK (and indeed advantageous) for people to print a copy of their powerpoint file, but not OK to print, say money. So with the Internet of information we have to rely on powerful intermediaries to establish trust. Banks, governments, and even social media companies like Facebook all do the work of establishing our identity and helping us own and transfer assets and settle the transactions.
Overall they do a pretty good job -- but there are limitations. They use centralized servers, which can be hacked. They take a piece of the value for performing this service – say 10 percent to send some money internationally. They capture our data, not just preventing us from using it for our own benefit but often undermining our privacy. They are sometimes unreliable and often slow. They exclude 2 billion people who don’t have enough money to justify a bank account. Most problematic, they are capturing the benefits of the digital age asymmetrically.
What if there was an Internet of Value - A global, distributed, highly secure platform, ledger or database where value could be stored and exchanged and we could all trust each other without powerful intermediaries. Collective self-interest, hard-coded into this new native digital medium for value, would ensure the safety security and reliability of commerce online. Trust is programmed into the technology, which is why we call blockchain the Trust Protocol.
Why should you care? Maybe you’re a music lover who wants artists to make a living off their art. Perhaps you’re an immigrant who’s sick of paying big fees to send money home to loved ones in your ancestral land. Maybe you’re an aid worker who needs to identify landowners so you can rebuild their homes after an earthquake. Or a citizen fed up with the lack of transparency and accountability of political leaders. Or a user of social media who thinks all the data you generate might be worth something—to you—and that your privacy matters. Even as we write, innovators are building blockchain-based applications that serve these ends. And they are just the beginning.
It turns out every business, institution, government, and individual can benefit in profound ways:
How about the corporation, a pillar of modern capitalism? With the rise of a global peer-to-peer platform for identity, trust, reputation and transactions, we will be able to re-engineer deep structures of the firm, for innovation and shared value creation. We’re talking about building 21st century companies that look more like networks rather than the vertically integrated hierarchies of the industrial age. The whole financial service industry already being reinvented by blockchain and others will soon follow.
How about the Internet of things? In the not-too-distant future, billions of smart things in the physical world will be sensing, responding, communicating, sharing important data, and generating, buying and selling their own electricity, doing everything from protecting our environment, charging our homes and managing our health. It turns out, this Internet of Everything needs a Ledger of Everything.
Perhaps the biggest opportunity is to free us from the grip of a troubling prosperity paradox. The economy is growing but fewer people are benefiting. Rather than trying to solve the problem of growing social inequality through redistribution alone, we can change the way wealth – and opportunity – is predsitributed in the first place, as people everywhere, from farmers to musicians, can use this technology to share more fully in the wealth they create.
As with major paradigm shifts which preceded it, the blockchain will create winners and losers. But if we do this right, Blockchain technology can usher in a halcyon age of entrepreneurship, empower us to reinvent our institutions for the better and create a more fair and prosperous world.
Reprinted from Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott and Alex Tapscott with permission of Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC. Copyright © Don Tapscott and Alex Tapscott, 2016.