Blockchain Revolution (updated)

by Don Tapscott

  As we enter this second generation of the Internet, it’s time for a Manifesto for the Digital Age. Call it a Declaration of Interdependence. Digital age citizens have Rights—access to digital infrastructures, literacy, media literacy, lifelong learning, and renewed freedom of speech online without the fear of surveillance.

  The digital economy and society should be governed according to Principles. Surely, those who work should share in the wealth they create. If computers can do the work, then the workweek, not our standard of living, should be reduced. In fact, Satoshi’s implicit design principles for the blockchain revolution should serve us well—we need institutions that act with integrity, security, privacy, inclusion, rights protection, and distributed power. Let’s work to distribute opportunity and prosperity at the point of origin, rather than simply redistributing wealth after it’s been created by traditional class structures.

  Blockchain technology may reduce the costs and size of government, but we’ll still need new Laws in many areas. There are technological and business model solutions to the challenges of intellectual property and rights ownership. So we should be rewriting or trashing old laws that stifle innovation through overprotection of patents. Better antitrust action must stem the trend toward monopolies so that no one overpays for, say, basic Internet or financial services. Eighty percent of Americans have no choice when it comes to Internet service providers, which might help explain why bandwidth is one of the slowest and most expensive in the developed world. Criminal fixers who manipulate everything from foreign exchange to diesel emissions should be prosecuted and punished appropriately.

  We’ll need Institutional Transformation across the board. Central banks will need to change their role in currency management and monetary policy and collaborate multilaterally with more stakeholders in the economy and society. We need schools and universities with student-focused, customized collaborative mastery of information on the blockchain, freeing up students and teachers alike to participate in small group discussion and projects. We need a universal patient record on the blockchain, to ensure collaborative health when we can manage our own wellness outside of the system. When we enter the health care system, we should not suffer because of ignorance-inspired drug interactions or medicine not based on evidence. Politicians will need to adapt to a transparent world where smart contracts ensure their accountability to electorates. How do we manage the disruption after digital currencies upend the $500 billion remittances market?

  Blockchain technology can enable new Physical Infrastructures requiring new partnerships and understandings among stakeholders. What happens to the millions of Uber drivers when SUber wipes out their jobs? What can cities do to ensure that in 2025 citizens think positively about intelligent transportation systems? How do we effectively move to a distributed blockchain-enabled electrical power grid where home owners are contributors rather than just customers of electricity? How will we find the leadership to implement a blockchain-enabled personal carbon trading system?

  THE TRUST PROTOCOL AND YOU

  Will the law of paradigms kick into effect—that leaders of the old have the greatest difficulty embracing the new? Consider the leaders who endorsed Don’s 1994 book The Digital Economy: the CEOs of Nortel Networks, MCI, Nynex, Ameritech, and GE Information Services, all of which are gone. At least he didn’t include the CEOs from Kodak, Borders, Blockbuster, or Circuit City. (Another cautionary note for the kind jacket endorsers of Blockchain Revolution.)

  Why didn’t Rupert Murdoch create The Huffington Post? Why didn’t AT&T launch Skype, or Visa create PayPal? CNN could have built Twitter, as it is all about the sound bite, no? GM or Hertz could have launched Uber, and Marriott, Airbnb. Gannett could have created Craigslist or Kijiji. eBay would have been a natural play for the Yellow Pages. Microsoft had the resources to create Google or any number of business models based on the Internet rather than the personal computer. Why didn’t NBC invent YouTube? Sony could have preempted Apple’s iTunes. Where was Kodak when it was time for Instagram or Pinterest to be invented? What if People or Newsweek had come up with BuzzFeed or Mashable?

  As we wrote at the beginning of this tome, “It appears that once again the technological genie has been unleashed from its bottle . . . now at our service for another kick at the can—to transform the economic power grid and the old order of human affairs. If we will it.” Like the first generation of the Internet, the Blockchain Revolution promises to upend business models and transform industries. But that is just the start. Blockchain technology is pushing us inexorably into a new era, predicated on openness, merit, decentralization, and global participation.

  We expect a period of volatility, speculation, and misuse. We also expect a strong and steady barreling forward, a plowing aside of the sacred cows on the tracks. No one knows yet what impact this train will have on financial services. Is Ben Lawsky right—that the industry could be unrecognizable in five to ten years? Tim Draper said, “Bitcoin is to the dollar as the Internet is to paper.”74 Could it be that blockchain’s most ardent supporters are actually underestimating the long-term potential here? Will the blockchain be the biggest boon to industry efficiency and value since the invention of double-entry accounting or the joint-stock corporation? Hernando de Soto said blockchain holds the potential to bring five billion people into the global economy, change the relationship between the state and citizens (for the better), and become a powerful new platform for global prosperity and a guarantor of individual rights. To him, “the whole idea of peace through law, the whole idea of one family humankind is that we reach agreement on common standards. We should consider how the Universal Declaration of Human Rights could be better served with blockchain.”75 How can we achieve this better future?

  Most of the people leading the revolution are still unknowns, except for veterans like Netscape’s progenitor Marc Andreessen. You’ve likely never heard of most of the people quoted in this book. Then again, who’d heard of Iranian immigrant Pierre Omidyar or Wall Street programmer Jeff Bezos in 1994? Much depends on how the leaders of the industry get on board. Is a blockchain alternative to Facebook or Twitter really achievable or will the incumbents respond by addressing user concerns about data ownership and privacy? Doesn’t matter. Consumers win either way. Will Visa wither or will it change its business model to embrace the power of blockchain? How will Apple respond to an artist-centered music industry? What will tin-pot dictators think about a decentralized Internet that they can’t turn off or control? Can the blockchain make technology accessible to the world’s two billion unbanked people?

  The failure rate of start-ups is high, and so we expect a good number of our case studies to fall by the wayside, not because blockchain technology is a bad idea, but because—for each one of our examples—there are many competing start-ups. All of them can’t survive. We believe those that follow Satoshi’s principles have a better shot than those that don’t.

  These are exciting and perilous times. As a business leader, use Blockchain Revolution as your playbook, sure, but realize also that the rules of the game themselves are changing. Think about your business, your industry, and your job: How will I be affected and what can be done? Do not fall into the trap brought about by many paradigm shifts throughout history. Today’s leaders cannot afford to be tomorrow’s losers. Too much is at stake and we need your help. Please join us.

  NOTES

  Chapter 1: The Trust Protocol

  1. https://www.technologyreview.com/s/419452/moores-outlaws/.

  2. https://cryptome.org/jya/digicrash.htm.

  3. “How DigiCash Blew Everything,” translated from Dutch into English by Ian Grigg and colleagues and e-mailed to Robert Hettinga mailing list, February 10, 1999. Cryptome.org. John Young Architects. Web. July 19, 2015. https://cryptome.org/jya/digicash.htm. “How DigiCash Alles Verknalde” www.nextmagazine.nl/ecash.htm. Next! Magazine, January 1999. Web. July 19, 2015. https://web.archive.org/web/19990427/http://nextmagazine.nl/ecash.htm.

&
nbsp; 4. http://nakamotoinstitute.org/the-god-protocols/.

  5. Brian Fung, “Marc Andreessen: In 20 Years, We’ll Talk About Bitcoin Like We Talk About the Internet Today,” The Washington Post, May 21, 2014; www.washingtonpost.com/blogs/the-switch/wp/2014/05/21/marc-andreessen-in-20-years-well-talk-about-bitcoin-like-we-talk-about-the-internet-today/, accessed January 21, 2015.

  6. Interview with Ben Lawsky, July 2, 2015.

  7. www.economist.com/news/leaders/21677198-technology-behind-bitcoin-could-transform-how-economy-works-trust-machine.

  8. www.coindesk.com/bitcoin-venture-capital/.

  9. Fung, “Marc Andreessen.”

  10. www.coindesk.com/bank-of-england-economist-digital-currency/.

  11. Leigh Buchanan reports on the Kauffman Foundation research in “American Entrepreneurship Is Actually Vanishing,” www.businessinsider.com/927-people-own-half-of-the-bitcoins-2013-12.

  12. This definition was developed in Don Tapscott and David Ticoll, The Naked Corporation (New York: Free Press, 2003).

  13. www.edelman.com/news/trust-institutions-drops-level-great-recession/.

  14. www.gallup.com/poll/1597/confidence-institutions.aspx.

  15. Interview with Carlos Moreira, September 3, 2015.

  16. Don Tapscott is a member of the WISeKey Advisory Board.

  17. Don Tapscott has been one of many authors to write about the dark side potential of the digital age, for example in The Digital Economy: Promise and Peril in the Age of Networked Intelligence (New York: McGraw Hill, 1995).

  18. Interview with Carlos Moreira, September 3, 2015.

  19. Tom Peters, “The Wow Project,” Fast Company, Mansueto Ventures LLC, April 30, 1999; http://www.fastcompany.com/36831/wow-project.

  20. Interview with Carlos Moreira, September 3, 2015.

  21. “The Virtual You” is a term popularized by Ann Cavoukian and Don Tapscott in Who Knows: Safeguarding Your Privacy in a Networked World (New York: McGraw-Hill, 1997).

  22. Scott McNealy, then CEO of Sun Microsystems, was the first in 1999.

  23. Interview with Andreas Antonopoulos, July 20, 2015.

  24. Interview with Joe Lubin, July 30, 2015.

  25. Eventually sophisticated personal data query services will not even be able to read that data because it will be given to them encrypted. Still they will be able to answer questions regarding that data by asking those questions of the encrypted data itself using homomorphic encryption techniques.

  26. Leading thinkers have a broad view of prosperity that goes beyond GDP growth. Harvard’s Michael Porter has created a social progress imperative http://www.socialprogressimperative.org. Economist Joseph Stiglitz and others have researched measures beyond GDP—http://www.insee.fr/fr/publications-et-services/dossiers_web/stiglitz/doc-commission/RAPPORT_anglais.pdf. There are other efforts that try to improve GDP but stay closer to home—http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/.

  27. Interview with Vitalik Buterin, September 30, 2015.

  28. Luigi Marco Bassani, “Life, Liberty and . . . : Jefferson on Property Rights,” Journal of Libertarian Studies 18(1) (Winter 2004): 58.

  29. Interview with Hernando de Soto, November 27, 2015.

  30. Ibid.

  31. www.theguardian.com/music/2013/feb/24/napster-music-free-file-sharing, accessed August 12, 2015.

  32. www.inc.com/magazine/201505/leigh-buchanan/the-vanishing-startups-in-decline.html.

  33. Naked City was a police drama series that aired from 1958 to 1963 on the ABC television network.

  34. An October 2015 World Economic Forum report suggests it will not become mainstream until 2027.

  35. Interview with David Ticoll, December 12, 2015.

  Chapter 2: Bootstrapping the Future: Seven Design Principles of the Blockchain Economy

  1. Interview with Ann Cavoukian, September 2, 2015.

  2. Guy Zyskind, Oz Nathan, and Alex “Sandy” Pentland, “Enigma: Decentralized Computation Platform with Guaranteed Privacy,” white paper, Massachusetts Institute of Technology, 2015. June 10, 2015. Web. October 3, 2015, arxiv.org/pdf/1506.03471.pdf.

  3. Interview with Ann Cavoukian, September 2, 2015.

  4. Ibid.

  5. Interview with Austin Hill, July 22, 2015.

  6. Interview with Ann Cavoukian, September 2, 2015.

  7. Vitalik Buterin, “Proof of Stake: How I Learned to Love Weak Subjectivity,” Ethereum blog, Ethereum Foundation, November 25, 2014. Web. October 3, 2015, blog.ethereum.org/2014/11/25/proof-stake-learned-love-weak-subjectivity.

  8. Dino Mark Angaritis, e-mail attachment, November 27, 2015. He arrived at his calculation by “assuming hashrate of 583,000,000 Gh/s. (Gh/s = billion hashes /s). There are 600 seconds in 10 minutes. 600*583,000,000 = 349,800,000,000 billion hashes in 10 minutes. That’s 350 Quintillion / 350,000,000,000,000,000,000 / 350 million million billion.”

  9. Proof of burn calls for miners to send their coins to a dead-end address where they become unredeemable. In exchange for burning these coins, miners gain entrance to a lottery where, presumably, they win back more than they burned. It’s not a consensus mechanism but a trust mechanism.

  10. Interview with Paul Brody, July 7, 2015.

  11. Franklin Delano Roosevelt, “Executive Order 6102—Requiring Gold Coin, Gold Bullion and Gold Certificates to Be Delivered to the Government,” The American Presidency Project, ed. Gerhard Peters and John T. Woolley, April 5, 1933, www.presidency.ucsb.edu/ws/?pid=14611, accessed December 2, 2015.

  12. Interview with Josh Fairfield, June 1, 2015.

  13. Allusion to Bandai’s digital toy designed so that users would take care of it and protect it. It died if no one tended to it.

  14. Joseph E. Stiglitz, “Lessons from the Global Financial Crisis of 2008,” Seoul Journal of Economics 23(3) (2010).

  15. Ernst & Young LLP, “The Big Data Backlash,” December 2013, www.ey.com/UK/en/Services/Specialty-Services/Big-Data-Backlash; http://tinyurl.com/ptfm4ax.

  16. The type of attack was named after “Sybil,” a pseudonym of a woman diagnosed with dissociative identity disorder described in a 1973 book of that name. Cat-loving computer scientist John “JD” Douceur popularized the name in a 2002 paper.

  17. Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System,” www.bitcoin.org, November 1, 2008; www.bitcoin.org/bitcoin.pdf, section 6, “Incentive.”

  18. Nick Szabo. “Bit gold.” Unenumerated. Nick Szabo. December 27, 2008. Web. October 3, 2015. http://unenumerated.blogspot.com/2005/12/bit-gold.html.

  19. Interview with Austin Hill, July 22, 2015.

  20. Neal Stephenson, Snow Crash (1992). An allusion to Snow Crash’s virtual world, of which Hiro Protagonist is the protagonist and hero. Hiro was one of the top hackers of the Metaverse. Kongbucks are like bitcoin: the franchulates (corporate states, from the combination of franchise and consulate) issue their own money.

  21. Ernest Cline, Ready Player One (New York: Crown, 2011).

  22. Interview with Austin Hill, July 22, 2015.

  23. John Lennon. “Imagine.” Imagine. Producers John Lennon, Yoko Ono, and Phil Spector. October 11, 1971. www.lyrics007.com/John%20Lennon%20Lyrics/Imagine%20Lyrics.html.

  24. Andy Greenberg. “Banking’s Data Security Crisis.” Forbes. November 2008. Web. October 3, 2015. www.forbes.com/2008/11/21/data-breaches-cybertheft-identity08-tech-cx_ag_1121breaches.html.

  25. Ponemon Institute LLC, “2015 Cost of Data Breach Study: Global Analysis,” sponsored by IBM, May 2015, www-03.ibm.com/security/data-breach.

  26. Ponemon Institute LLC, “2014 Fifth Annual Study on Medical Identity Theft,” sponsored by Medical Identity Fraud Alliance, February 23, 2015, Medidfraud.org/2014-fifth-annual-study-on-medical-identity-theft.

  27. Interview with Andreas Antonopoulos, July 20, 2015.

  28. Michael Melone, “Basics and History of PKI,” Mike Melone’s blog, Microsoft Corporation, March 10, 2012. Web. October 3, 2015. http://tin
yurl.com/ngxuupl.

  29. “Why Aren’t More People Using Encrypted Email?,” Virtru blog, Virtru Corporation, January 24, 2015. Web. August 8, 2015. www.virtru.com/blog/aren’t-people-using-email-encryption, August 8, 2015.

  30. Interview with Andreas Antonopoulos, July 20, 2015.

  31. Interview with Austin Hill, July 22, 2015.

  32. Ibid.

  33. Interview with Ann Cavoukian, September 2, 2015.

  34. Ibid.

  35. David McCandless, “Worlds Biggest Data Breaches,” Information Is Beautiful, David McCandless, October 2, 2015. Web. October 3, 2015. www.informationisbeautiful.net/visualizations/worlds-biggest-data-breaches-hacks/.

  36. Interview with Haluk Kulin, June 9, 2015.

  37. Interview with Austin Hill, July 22, 2015.

  38. Coinbase privacy policy, www.coinbase.com/legal/privacy, November 17, 2014, accessed July 15, 2015.

  39. See Don Tapscott and David Ticoll, The Naked Corporation: How the Age of Transparency Will Revolutionize Business (New York: Simon & Schuster, 2003).

  40. Interview with Haluk Kulin, June 9, 2015.

  41. ProofofExistence.com, September 2, 2015; www.proofofexistence.com/about/.

  42. Interview with Steve Omohundro, May 28, 2015.

  43. Interview with Andreas Antonopoulos, July 20, 2015.

  44. Ibid.

  45. Interview with Stephen Pair, June 11, 2015.

  46. Edella Schlarger and Elinor Ostrom, “Property-Rights Regimes and Natural Resources: A Conceptual Analysis,” Land Economics 68(3) (August 1992): 249–62; www.jstor.org/stable/3146375.

  47. Interview with Haluk Kulin, June 9, 2015.