Tokenization & Defi
4 months ago
When blockchain expert and bestselling author Don Tapscott speaks, the world listens. Speaking at Davos 2020, he reviewed blockchain’s rise and its potential to give people control of their data.
Don Tapscott chairs the Blockchain Research Institute in Canada. The organization is working on 120 projects about what is currently happening in the blockchain space. Don is also the author of many important books on the topic, and a sought-after speaker at events. Blocks99 attended his presentation in Davos during the World Economic Forum 2020.
“Let’s start with a reality check on what’s happening with this whole blockchain revolution. If you ask people who ought to know, like analysts, it sounds like this whole blockchain thing isn’t happening.” He points to the fact that this is incorrect. Large organizations are adopting blockchain. “Fred Smith, CEO of FedEx, said to me in front of 5000 people at ConsenSys, ‘We invented the chain of custody. And now we’re doing it again with blockchain, starting with the logistics industry.’ So the 50 trillion-dollar supply chain is being transformed.”
Don began writing forward-looking books in the 1980s. But, he says, they were studies in bad timing, and nobody bought them. They were about the Internet. “My mother was a big purchaser of books, so she came through for me. They did OK.” In the 1990s, he wrote his first bestsellers. These included “Paradigm Shift” (1993), about business in the age of information technology, “Digital Economy” (1995) and “Grown up Digital” (1997), about the new generation of digital natives, the millennials.
The second era of the digital age
Asked to write an update of “Digital Economy” after 20 years, Don Tapscott came to the conclusion that we had already gone through a first era of the digital age. Now we’re entering a second era, where technology becomes part of everything. “Billions and trillions of inert objects become smart communicating devices. Technology does things that it wasn’t programmed to do. I was surprised to conclude that the foundation of the second era of the digital age was in fact the underlying technology of crypto: blockchain.”
To put this in perspective, Don describes how we currently use digital technology to share information. “If I send you a PDF or a brochure, an e-mail or something, I’m actually not sending you the information. I’m sending you a copy. Even with a Website, I retain the original information. And that works great for information. But when it comes to things that really matter in the global economy – assets, things of value like money or securities or the data in our identities or intellectual property or even cultural assets like art or music, something of value that belongs to somebody – when it comes to these things, copying them is a bad idea. If I send you a thousand francs, it’s really important that I don’t still have the money.”
The double-spend problem
What Don Tapscott describes is what cryptographers call the “double-spend” problem – if there is an identical copy of an asset, it can potentially be transacted more than once. Up to now, societies have relied on intermediaries like banks, stock exchanges or credit card companies to prevent double-spending. These third parties identify the asset, clear and settle the transaction and keep records. “They do a pretty good job,” says Don. “But there are growing problems. Why does it take seven days for money to go from a Filipino housekeeper in Toronto to her mom in Manilla? And why is she charged 11% by Western Union for that transaction?” He also points to the issue of security. “There are two kinds of middleman: those that have been hacked and those that will be hacked.”
This is where blockchain enters the picture. “What if there was not just an Internet of information? What if there was an Internet of value? Some kind of vast, global distributed ledger, interconnected ledgers, where anything of value, from money, stocks to our identities, could be managed, stored and transacted in a secure and private way. That’s what Satoshi did in 2008 with the paper. That paper solved the double-spend problem. To me it was the biggest innovation in computer science in a generation.”
Coinciding with the financial and economic crisis that hit in 2008, the Bitcoin white paper was released under the pseudonym Satoshi Nakamoto. The world’s first blockchain-based cryptocurrency was born in 2009. The timing couldn’t have been better, coming just as trust in the global banking system had crumbled during the financial meltdown. Instead of relying on middlemen for verification, Bitcoin used cryptography and collaboration across a distributed ledger to validate transactions. This highly sophisticated cryptography and the fact that there was no central authority to attack made the currency extremely difficult to hack into.
“Like turning a Chicken McNugget back into a chicken”
“I had this really great analogy of why a blockchain was so much more secure,” Don recalls. Late-night comedian John Oliver had some fun with it in an episode dedicated to technology, including blockchain. “I don’t use that anymore.”
In a further analogy, Don compares the current financial industry with a Rube Goldberg Machine, a comically overcomplicated system of chain reactions that accomplishes something very simple. He points out that a Visa transaction in a retail store triggers an exchange of information with six different companies, each one having to trust the next one. Three days later, a clearing and settlement occurs and the retailer gets paid. A look at the many different things the current financial system does reveals the Goldbergian complexity Don refers to. The system authenticates value and identifies the owner – that’s a dollar and you are who you are. Financial institutions also store value, enabling them to move and exchange value in the form of currency and other assets. They handle funding and investing, insure value, analyze, account for and audit. As we saw in 2008, placing so many interconnected financial services in the hands of intermediaries is not only inefficient, but also risky.
In a transaction based on distributed ledger technology (DTL), the payment and settlement become a single event. “There would be no counterparty risk – and that’s what almost got us in 2008. There would be no cost. There would be no delay.”
Digital identity ownership
When we interact in the digital sphere, our personal data are collected by third parties. As has been said many times, data are the oil of the 21st century. “All this data represents our identities,” Don says. “We’ve got to get this stuff back so we can manage it responsibly for ourselves, our families and our own lives. How do we do that? Some people think government should do it.” The problem with relying on the government is of course that a state might have its agenda in using our data. “Sheryl Sandberg on a panel in Davos last year said, ‘We’re going to provide Facebook users with some of their data.’ Well you don’t just need protection, and you don’t just need access, you to OWN the data! What the heck, you created it, why shouldn’t you own it? Is this such a radical idea? The notion of a self-sovereign identity.”
A good example of how blockchain can enable data sovereignty is in healthcare. Many modern hospitals allow patients to access their medical records online. With blockchain, the entire dataset can be placed in the sole possession of the patient. Don gives the example of Toronto’s University Health Network. “They have a thing called ‘My UHN.’ Before you leave the hospital after an X-ray, your radiology report is in your health record, which you have full access to. Now the next step is – they have a big blockchain initiative – is to make that record portable and owned by you. So you can not only look at your radiology report, you can get a second opinion, you can anonymize it and give it to science. You can say, ‘I’m going to bundle up all my health data and sell it, anonymously, to providers.’”
Source: Don Tapscott’s presentation in Davos
The same concept applies to data collection of all types. It’s not hard to imagine how the freedom to monetize data could be a game-changer, especially for low-income populations. But Don sees the current lack of control over personal digital as a pressing problem. “It’s not up there with climate change, because climate change wipes us all out if we don’t solve that problem right away, but it’s right up there in terms of building a civilization for the next century and beyond that’s going to be one we all want to live in.”
In closing, Don likened the efficiency of blockchain technology to swarm intelligence, the natural behavior that enables animals to move in large groups very close together. Each responds to the movement of those surrounding it, and the swarm moves as one with great efficiency. The phenomenon, termed “murmuration” in starlings, is a fascinating example of a beautifully functioning system with no leader – a decentralized system.