How blockchain can transform multi-trillion dollar industries | Alex & Don Tapscott Explain

Today, we're on the brink of one of the biggest transformations of Money in probably 75 years, if not longer.

And we now have an Internet of value that can give us another opportunity to rewrite the economic power grid and the old social order.

This is Don and Alex Stapscott. They are tech evangelists and the leaders of this week's Blockchain Revolution global event. In this interview, we discuss the most successful blockchain use cases, the vulnerabilities of this technology, and whether blockchain can lead to societal change. Don't you think that it is a bit naive to believe that improving money is enough to guarantee prosperity and freedom for the whole world? I'm your host, Giovanni, and this is another exclusive Cointelegraph interview. Don, in a TED talk back in 2016, you claimed that blockchain technology was going to be the most disruptive technology in the following decades. Even more than AI, robotics, big data, and social media. Has that blockchain revolution taken place, according to you?

Yes, but I think it's been what we call an uneven and combined development. Because of the importance of the technology, it's taking a while to implement. You think about it that with the Internet of information, all you do is you create a website and you get Spotify and some e commerce platform, and you're in business in a week with the Internet of value, which is represented by blockchain. We're changing very fundamental things. We're changing a $50 trillion supply chain. You can't just change your company. You need to change the whole industry for that to work. We're changing a financial services industry with hundreds of of trillions of dollars each, with its own regulatory structures and laws and institutions and technology, locking these institutions into old ways of doing things and consumers with old habits and so on. So uneven and combined. I mean, in some areas, it's been slower. We had hopes that the music industry, music industry would be reinvented around this time. Technology. But it turns out that the traditional labels are resistant and sort of fighting change. The reason it's taking a long time is because of its importance. And what a very fundamental transformation is underway here as we digitize all assets and as we restructure entire industries and as we change the nature of the firm, the deep architecture and structure of the corporation.

Okay, so maybe Alex, now you can come in and you can answer the following question. So can you mention three concrete examples of successful applications of blockchain technology right now?

So one example is stablecoins. Today, the combined value of stablecoins is greater than every other crypto asset, with the exception of Bitcoin. And stablecoins are an industry that have grown from about a half a billion dollars in size two and a half years ago to over $20 billion in size now. Stablecoins were originally used, and are still used largely as a way to transact and speculate on crypto assets on other crypto assets. But we're beginning to see that shift to the enterprise and to the more traditional financial services industry. And that's because the dollar value of stablecoins has grown to the point where it's all of a sudden an important asset class for traditional financial services firms. So we have members of the Blockchain Research Institute, for example, who are in the traditional banking sector that see stablecoins as a potential workaround to the legacy infrastructure of payment networks. As it turns out that people aren't going to send remittances with bitcoin, but they are already sending them with stablecoins. And the dollar value of flows between different countries, especially in the Global south, has increased dramatically. And what we're seeing is it's not only something that startups are getting involved in, but a lot of big companies. So the most obvious of this is Facebook with Libra or JP Morgan, JPM Coin or Wells Fargo with its own version of the stablecoin. So stablecoins is one that I think is really interesting. The second one is in the world of decentralized finance and specifically in the world of decentralized exchanges or Dexes. So decentralized exchanges today are primarily again, in the world of crypto assets. We see platforms like Uniswap, for example, growing significantly over the past year, to the point where for a period of time during the summer, the volume on decentralized exchanges eclipsed the value on some of the larger centralized exchanges. Why is this important to the financial services industry in the real world, so to speak? Well, that's because if you can create a platform that allows for individuals to transact in assets peer to peer, using software, smart contracts in digital assets, then you can use that to apply to basically every other asset class. There's no reason why transacting in financial assets should require five or six different intermediaries, which would take three days to clear itself. Those transactions should happen instantaneously and they should be self executing, automated and immutable. And that's something that decentralized exchanges and smart contracts enable. So my expectation is that you'll begin to see that power of these platforms begin to creep into other asset classes. Another one is in fundraising. The ICO boom is a bit of a bad rap for the fact that many of the companies turned out to not be very promising businesses and some turned out to be outright frauds. But the fact remains that we have pioneered new ways for entrepreneurs to transact and to raise money in a peer to peer, decentralized way. And that's important because it could represent the beginning of a new era of entrepreneurship where it doesn't matter where in the world you are. You could be in Pakistan or Nigeria or Silicon Valley, where most money has been raised, or somewhere else, Russia, China, et cetera. And if you have a compelling enough idea, you can tap into a global pool of capital and start and run a business. And I'll add a fourth, which I think we'll want to talk about in a bit more detail. And it's related to number one, which is central bank digital currencies. These are sort of the big talking point of the day, which is basically a stablecoin that tracks the value of a fiat currency, but in a native digital format. And that's different from today's digital money, which is basically just entries in the centralized ledger. Banks and central banks, we're talking about a bearer instrument that is digital in nature, that allows people to move peer to peer to allow central banks to send money directly to consumers, and is immutable and proven to be true based on its technical requirements and specifications.

So according to executives at European central banks, central bank digital currencies do not really need blockchain technology. In fact, the element of trust will continue to be provided by a centralized party, which is the central bank itself. So apparently neither the Chinese digital yuan nor the Swedish E krona, which are the two most recent examples of this testing, CBDCs seem to be relying on blockchain. So if that is the case, that doesn't mean that blockchain may not be the protagonist of this transition to a digital economy. What do you think?

I think that central bankers are entitled to their opinion. And I think it's natural that institutions, which for decades if not centuries have had a monopoly on the creation of money and the governing of money and the implementation of monetary policy, would want the system to remain centralized in a way that they can control. If the goal is for governments to be able to completely control and govern these assets and to prevent them from being bare instruments that individuals can hold like cash, then perhaps there is no reason for blockchain. But then you might wonder, what's the point of them altogether the point is that today we're on the brink of one of the biggest transformations of Money in probably 75 years, if not longer. And there are some big trends that are defining this next sort of decade that we're going through. One is the emergence of digitally native money, such as Bitcoin, that has emerged from a civil society that is active on the Internet. The second is the emergence of corporations that are looking to put their stamp on financial services and on money, such as Facebook and Libra. And then, of course, the third one is central bank digital currencies. If CBDCs have any hope of competing with either of these, then they need to embrace blockchain as the platform to do that. There are obviously plenty of design challenges that go into this. For example, immutability is important for when it comes to transactions, but supply is something that central bankers probably would not want to have a physical supply. They would also want to be able to have some visibility into how money is being spent and by whom. And there are laws in place today that allow governments to monitor how cash and other funds flow through the system. But we'd also have to ensure that there's some degree of privacy and anonymity, if indeed the goal is to replicate cash in a digital format. You know, when you use cash to go buy something at the grocery store, it is an anonymous transaction in the sense that the only two parties who are aware of it are you and the merchant. You don't give your social insurance number or your ID or any other sort of information to the merchant or any other third party. And that's how digital cash should operate as well. So I think that it's very likely that digital payment systems can be created by central banks that don't include blockchain. But I would question whether or not there's even a point to doing that, because it would lack many of the design features which make digital currencies on blockchain so potent and so powerful.

Benoit Kure, head of the Innovation Hub at the bank for International Settlements, wrote a piece For CoinDesk titled CBDCs mean evolution, not Revolution. He mentioned the potentially positive effect of CBDCs in making money more accessible and inclusive. However, he said CBDCs will not usher in an age of prosperity or solve a raft of societal issues. This is beyond the scope of any currency. What do you think about this statement? Don't you think that it is a bit naive to believe that improving money is enough to guarantee prosperity and freedom for the whole world?

Well, I certainly don't agree that improving money is enough to guarantee prosperity and freedom for the world. Technology doesn't do things like guarantee prosperity and freedom. Humans do. But, you know, we have another kick at the can here, not just with central bank digital currencies, but with blockchain overall, because the Internet of Information, its predecessor, you know, lots of wonderful things happen. I'm a grandparent and I can facetime with my grandchildren, and I do every day. But there have also been lots of problems. Our data has been captured by a tiny handful of digital conglomerates. These massive companies, five top companies on nasdaq, own half of the value of the NASDAQ exchange, the 20% of the S&P 500. They're capturing our data. Our privacy is being undermined. We have a bifurcation of wealth for the first time in human history. The economy's growing, the middle class is shrinking. We have. The Internet led to a fragmentation of public discourse. This has led to a real. What's led to big problems around the pandemic, that shucksters can put forward all kinds of crazy views and have all kinds of people following them, and they can spread disinformation, and people can follow their own facts, including facts that come from the head of state, the president of the country. So those are three of many problems that have been created by the Internet. And we now have an Internet of value that can give us another opportunity to rewrite the economic power grid and the old social order. But it's only humans that will do that, not technology.

I guess that question was more like a provocative question towards Alex, who in his CoinDesk recent piece wrote, if you want to understand the future, follow the money, or something like that. That was a quote that was highlighted in the article. So, Alex, do you have anything to add about what Benoit said?

Well, again, it's not a question of whether or not money, the reinvention of money, is going to lead to prosperity and freedom for the world. It's more to understand what are the dynamics and forces that are being put into motion today, today that are going to change the world fundamentally, for better or for worse. In a decade's time, it's possible we could end up in a scenario where China's CBDC is widely deployed across large parts of the world as an instrument for a form of monetary colonialism or diplomacy where the money is used as a weapon and where China and the United States go to battle in this tech cold war on yet another frontier, on the frontier of digital money and the global reserve currency status, it's possible that big corporations like Facebook and others, if they're successful in launching Libra, could end up not only dominating our social lives and our information, but controlling big parts of our financial reality. And that could have a massively destabilizing effect on the world. If you're in big parts of Africa, South Asia and so forth, you may be more likely to have a Facebook account today than a bank account. And so Facebook all of a sudden becomes not just the bank of choice, but sort of the central bank of choice, because you'd much rather hold a stablecoin backed by hard money, so to speak, US dollars, euros and so forth, than the local currency. And that could lead to all sorts of tension and risk. I think that what's more important than saying that this can solve every problem in the world, which I don't think it can at all, and I think could create many problems we haven't thought about is how we navigate these changing waters in these fast moving times. That, to me, is the most important thing. I'll add one more comment too, which is it's interesting to hear that a representative of the European Central bank and the bank of International Central Bank Settlements is saying that there are specific limitations to the power of monetary policymakers. Because in the United States, the Federal Reserve is taking a very different approach to monetary policy. They're saying not only can they increase the money supply in order to lower rates to try and boost the economy, but they can also target specific social inequities that the Federal Reserve can ensure that people of color, women or immigrants can have a more fair footing in the economy than anyone else. So I'm not providing my opinion on that per se. I'm just saying that on one side of the Atlantic, you vote an assertive central bank that is actually broadening its mandate to address all those social issues you just raised, while in Europe they're saying the opposite. So we'll see who is more correct in that regard. And I think it's going to take some time to play out.

Talking about some recent usage of the blockchain. Last summer, a nationwide vote for constitutional amendments took place in Russia and part of it involved the usage of blockchain technology to guarantee security and transparency. However, the vote was largely criticized for being the most falsified one in modern Russia. In fact, the electoral commission did not publish the vote decryption key after the event took place and provided no information on how to register a node to observe the voting processes. So don't you think that this is a good example of how blockchain itself is not manipulation free and that can be misused if controlled by an authoritarian regime.

Guarantee security and transparency. Yet there was no information published about a decryption key and no information on how to register a note to observe the voting process. That is the antithesis of transparency. But you can't conclude from that that blockchain itself can be corrupted. What was corrupted was the process, not the technology. I mean, hacking a blockchain, as I've famously said, is like turning a chicken McNugget back into a chicken. You can't do that, not at this stage in human history. But you can sure use a chicken McNugget for all kinds of things. If you let it harden enough and throw it hard at somebody might hurt them. So that's what we're talking about here. We're talking about applications of the technology, not about the technology.

Just to reiterate what I said earlier, which is that technology is just a tool and humans have created plenty of tools through human history. And sometimes those tools can be used for good and sometimes they can be used for ill. And I would just say that, you know, as anything an authoritarian regime does is going to be tainted by the fact that as it's sort of founding principle is that it lacks transparency and accountability because it's not representative of the people, it's not democratically elected. So, you know, again, it's not a technology issue. This is just a problem with Russia.

Awesome. That was great. Thanks a lot. Don and Alex, thank you.

My pleasure.

Thank you. We'll see you next week.

That was Don and Alex Tapscott, tech evangelists and founders of the Blockchain Research Institute. I'm Giovanni, your host. If you enjoyed this interview, remember to like the video and subscribe to our channel, Cointelegraph.

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