Alex Tapscott: Can Africa Lead the Crypto Revolution, Corporate & Private Blockchains

Hey everyone. Today I'll be joined by Alex Tapscott. He's the author of Blockchain Revolution and will soon be releasing his new book, Financial Services Revolution. Welcome, Alex, to the show. Let's get straight into the first question. I know that Jack Dorsey, the CEO of Twitter, said that Africa will be the defining region of the future. How exactly would a country try to project its influence into a region like Africa using a digital currency?

Yeah, so I think Jack is looking at a couple of things. Africa is the only continent in the world that has a positive growth rate in terms of natural growth rate, maybe Latin America, but that's pretty close to break even at this point. Everybody else is shrinking. So most of the new young people who will exist in the world will be born in Africa over the next 50 years. And its population as a result will be much bigger portion of the global population. And even though, I mean, Africa is a huge place and there are countries in Africa which are relatively affluent, and then there are ones that are the poorest in the world. So it's a mistake to try and paint it all with one brush. But one thing that is true of many countries in Africa is that there have an abundance of natural resources and other sort of strategic assets. Which is why China has been, you know, doing sort of this debt fueled diplomacy where basically they will lend money to governments or private companies in Africa to build major, you know, industrial plant and equipment like say, ports or railroads or factories and the like. And, you know, if those companies or governments are unable to pay them back, then they basically foreclose on those assets and take them over. Now, if you had a native digital currency like say Crypto Won or whatever, they would be able to again, just have a greater level of scrutiny and greater level of detail of how that money is being spent so that money can be moved into those countries, can be used to fuel those projects, and then they can know with 100% certainty how it's being spent and whether it's being spent on the right things. So again, it's just a form of making it easier to finance and develop assets outside of the country. Now, for 75 years, the US dollar has been the global reserve currency of the world. And the US financial system is the center of that sort of power structure. And the creation of a native digital currency that doesn't require you to interact with any of those institutions allows you to break free from US control. So I think that you'll see a lot of governments looking at that as a solution to that particular problem. And it's not just China. It could potentially be Russia, who has its own diaspora and its own sphere of influence in Eastern and Central Europe and Central Asia. It could be Iran trying to use a native digital currency to bypass sanctions, or it could be someone else altogether that we haven't necessarily thought of. But the idea is that a government that has money, that it knows that it can identify how it's being spent, where it's being spent, and can do so without the need for interacting with the US system at all, is a very powerful and potent tool. Now, I'm not suggesting that this is a good thing necessarily. I'm just saying that at this point in time, though it's early stage, the contours of this new world are becoming much clearer. And I think at this point it's an inevitability that we get to that state.

And do you think that these digital currencies will be built on blockchain?

I think so, yeah. I don't really know. You know, I'd be lying if I said I knew exactly how they were going to do it, every single detail. You know, the virtue of Bitcoin is that it is decentralized and it allows for censorship resistant payments, but it does so at the expense of certain things, right? Like it does use a lot of energy and it doesn't actually have a very high throughput. And I think that that's probably a limiting factor for bitcoin, but a lot of people view that as a feature, not a bug. The fact that it is censorship resistant is enough to justify its lack of throughput or its lack of scalability. Obviously, if you're talking about a government issued currency, they're not really interested in censorship resistance at all. In fact, they're probably pro censorship, in which case you don't actually have to make the trade off necessarily. So I'm not suggesting it's going to be a decentralized, fully decentralized cryptocurrency like bitcoin. It's probably going to be some kind of a hybrid. And what exactly that looks like, I'm not entirely sure. But if they can figure it out and reach scale, then the outcome, the upside to them, at least for their goals, and those are not goals I necessarily share, could be very significant.

So I kind of want to jump a little bit sideways because I'm curious about enterprise blockchains because I feel like they're also kind of walking this line between using blockchain technology but also having this centralized entity. So could we just dive into it A little bit and just start out by explaining to me what exactly an enterprise blockchain is.

Yeah, well, I could ask you the same thing because I'm not really sure what an enterprise blockchain is either. You know, like. So, okay, so when the book came out in 2016, there were a lot of companies, you know, professional services firms like, you know, Accenture and PwC and these other ones that were touting their own blockchain, whatever that was. And you know, they were trying to appeal to enterprises because enterprises loved the idea of, of reducing friction and complexity in their business. But they were also kind of afraid of this weird, strange world of Bitcoin and cryptocurrencies. So companies like this help to satisfy the curiosity of the crypto. Curious, which is what a lot of enterprises were. But I think it's abundantly clear at this point that a lot of those private blockchains, those sort of enterprise specific blockchains were, were more like the Internets of the early Internet age, not the Internet, the public network. And I think a lot of them, they don't scale, they won't work. And as a result, I don't know very many enterprises that are still interested in them or using them. I think what's more likely to happen is that you can build customized applications or use cases on top of public infrastructure. So you can create use cases that provide for some level of centralization or. Anonymity or what have you using public infrastructure. As a co founder of an institute, the bri, I see this struggle happening every day with a lot of enterprises, which is that they know that this technology is going to be impactful to their business, they want to use it, but they're not sure which platform to choose. Now they could build with say Hyperledger, which is an interesting platform, but I think some of them are concerned about ending up with a vendor lock in with IBM because IBM is a major contributor to the Hyperledger source code. And there's I think, a plurality at least of the nodes on that network. And then they look at other things like Ethereum and they think, well, this could be interesting, but you want to put anything of scale on the Ethereum network and it's not going to work very well. So the technologies, types of use cases are limited to ones where you need to have finality on a ledger. You need to know for sure that something is true, but you don't have to do millions of transactions. So again, that goes back to the first question you asked me, which is what are the trends that I'm most looking forward to. What I'm looking forward to is seeing a handful of public protocols that allow you to program discrete applications that do different things, to see those kinds of protocols scale and to become dominant. Because it's only at that point that you know, if you're the chief information officer of a Fortune 50 company that you're going to feel comfortable saying, okay, we're now going to build on Cosmos, we're now going to build on Ethereum, we're now going to build on Tezos or whatever it might be. And until that thing happens, I think a lot of the enterprise use cases, adoption that you're going to see are going to be mostly pilots and proofs of concept and trials and testing and curiosity, but nothing that's super, super commercial. And I think also. So that's one side and then the other side is there are some very specific industry related projects like say JP Morgan's Quorum project or say R3, which again is geared towards financial services where they're not being particularly public, but they are quietly scaling some interesting applications. So that's something to look for as well. But in all of these instances, we're not talking about some built from scratch private blockchain that runs on a server inside of a consulting company. We're talking about people taking public infrastructure and then trying to customize and specialize on top of it. And I think that's the only way that enterprise blockchain actually works and scales.

Yeah, that reminds me of something that you said in one of your more recent podcasts you, you participated in where you said that a blockchain network will become like an operating system. Is this kind of what you're talking about as sort of this like baseline layer, like Window? Because it reminded me of like Windows or Mac or something. And I was kind of thinking along those lines that all of a sudden we would have institutions like interacting with each other over on using this public or open source blockchain network as like their baseline layer. It was that sort of what you were talking about, or.

That is what I'm talking about. But it's not going to be, hopefully not an operating system that's proprietary to a specific company. It's probably going to be more like Linux or Mozilla or Wikipedia in the sense that it's a common shared resource where people are contributing to it and it's not necessarily owned by anyone and where anybody can build on it in a permissionless way. So the idea is that it's permissionless to Build on it. But you can build permissioned use cases, you know what I mean? So like in financial services, if you've got, if you want to use this as a way to clear and settle transactions and securities. Sorry, no problem. So you can build permissions applications on top of it. So in the securities industry, you may not want everybody to be able to see, you know, who's doing what, who's selling what to whom, who's buying a given stock or asset. So you can limit utility towards people who are authorized or qualified to access that system. But all that ought to be running on top of public shared infrastructure in the same way that, by the way, in the same way that the mobile web and cloud computing and all the other implementations of the Internet still run on the Internet. Right. Which is not owned by anyone. It's governed by this multi stakeholder network. It's a shared communal resource in a way.

So do you see this as sort of like web 3.0 or something like this?

Well, that's a buzzword that people use.

Yeah.

You know, first the Internet was a publishing medium, then it was a communicating social tool, and now it's a tool for decentralized apps and moving value. Sure, that's a fine way to think about it. I think a better way to think of it is that we had the first digital age where we had an Internet that was designed for moving and sharing information. And now we have a second digital age where we have a technology that allows us to move and store assets peer to peer. Blockchain is the first native digital medium for value. So in many respects I don't think of it as some sort of third step along the way. I think of it as a clean break. We were in a first era where, where we had an Internet of information. Now we're at a second era where we have an Internet of value.

So my last question before I think our time is up is a lot of people, it seems to me, are having trouble distinguishing between a private blockchain, maybe something that you could build on top of Hyperledger just for your ecosystem of companies and just a database. What would be the advantage of using a blockchain network to bring companies together? Or is there any advantage rather than just using some sort of shared database that isn't on a blockchain?

I think you need to, I think it's useful if there's a trustless or an adversarial environment. You know, if you're talking about reconciling data inside of a company between different divisions I really don't know why you need a blockchain to do that. Presumably your operation in China, the UK and Estonia and Canada trust each other enough, since they're the same legal entity, to just use a shared database and pool information. But in an adversarial or trustless environment, like, say, a securities market, where you've got buyers and sellers who are literally adversaries in the most traditional sense, or say, in a supply chain where you have different stakeholders who all have different interests, and where sharing information that's immutable and trusted is an advantage, then there is a use for blockchain. So I think, like many technologies, when this first launched, there was a lot of hype around this being a panacea, something that could be used for every problem under the sun. And I think that what you see in the early stages of development is that, well, actually, there are some areas where it is useful and others where it's less useful, and that's fine. That's part of the process of learning and of creative destruction. And I think we're starting to see that playing out today. So, again, having a blockchain be used for some internal data reconciliation project, I just don't think is that interesting. But where you're talking about digitizing assets and where you're talking about rethinking how markets function, that, to me, is where it gets really exciting.

Great. Thank you so much for coming on.

Yeah, my pleasure. Thank you.

Thank you, everyone, for watching. That was Alex Tapscott. And always remember to, like, subscribe and HODL cointelegraph.

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