Blockchain Revolution (updated) Read online

  ALSO BY

  Don Tapscott

  Paradigm Shift: The New Promise of Information Technology (1993)

  Coauthor, Art Caston

  The Digital Economy: Promise and Peril in the Age of Networked Intelligence (1995)

  Growing Up Digital: The Rise of the Net Generation (1997)

  Who Knows: Safeguarding Your Privacy in a Networked World (1997)

  Coauthor, Ann Cavoukian

  Digital Capital: Harnessing the Power of Business Webs (2000)

  Coauthors, David Ticoll and Alex Lowy

  The Naked Corporation: How the Age of Transparency Will Revolutionize Business (2003)

  Coauthor, David Ticoll

  Wikinomics: How Mass Collaboration Changes Everything (2006)

  Coauthor, Anthony D. Williams

  Grown Up Digital: How the Net Generation Is Changing the World (2008)

  Macrowikinomics: New Solutions for a Connected Planet (2010)

  Coauthor, Anthony D. Williams

  An imprint of Penguin Random House LLC

  375 Hudson Street

  New York, New York 10014

  Copyright © 2016 by Don Tapscott and Alex Tapscott

  Penguin supports copyright. Copyright fuels creativity, encourages diverse voices, promotes free speech, and creates a vibrant culture. Thank you for buying an authorized edition of this book and for complying with copyright laws by not reproducing, scanning, or distributing any part of it in any form without permission. You are supporting writers and allowing Penguin to continue to publish books for every reader.

  ISBN: 9781101980132

  International edition ISBN: 9780399564062

  ISBN: 9781101980156 (ebook)

  While the author has made every effort to provide accurate telephone numbers, Internet addresses, and other contact information at the time of publication, neither the publisher nor the author assumes any responsibility for errors or for changes that occur after publication. Further, the publisher does not have any control over and does not assume any responsibility for author or third-party Web sites or their content.

  Version_1

  To Ana Lopes and Amy Welsman for enabling this book, and for understanding that “it’s all about the blockchain.”

  “A masterpiece. Gracefully dissects the potential of blockchain technology to take on today’s most pressing global challenges.”

  —Hernando De Soto, Economist and President, Institute for Liberty and Democracy, Peru

  “The blockchain is to trust as the Internet is to information. Like the original Internet, blockchain has potential to transform everything. Read this book and you will understand.”

  —Joichi Ito, Director, MIT Media Lab

  “In this extraordinary journey to the frontiers of finance, the Tapscotts shed new light on the blockchain phenomenon and make a compelling case for why we all need to better understand its power and potential.”

  —Dave McKay, President and CEO, Royal Bank of Canada

  “Deconstructs the promise and peril of the blockchain in a way that is at once accessible and erudite. Blockchain Revolution gives readers a privileged sneak peak at the future.”

  —Alec Ross, author, The Industries of the Future

  “If ever there was a topic for demystification, blockchain is it. Together, the Tapscotts have achieved this comprehensively and in doing so have captured the excitement, the potential, and the importance of this topic to everyone.”

  —Blythe Masters, CEO, Digital Asset Holdings

  “This is a book with the predictive quality of Orwell’s 1984 and the vision of Elon Musk. Read it or become extinct.”

  —Tim Draper, Founder, Draper Associates, DFJ, and Draper University

  “Blockchain is a radical technological wave and, as he has done so often, Tapscott is out there, now with son Alex, surfing at dawn. It’s quite a ride.”

  —Yochai Benkler, Berkman Professor of Entrepreneurial Legal Studies, Harvard Law School

  “If you work in business or government, you need to understand the blockchain revolution. No one has written a more thoroughly researched or engaging book on this topic than Tapscott and Tapscott.”

  —Erik Brynjolfsson, Professor at MIT; coauthor of The Second Machine Age

  “An indispensable and up-to-the-minute account of how the technology underlying bitcoin could—and should—unleash the true potential of a digital economy for distributed prosperity.”

  —Douglas Rushkoff, author of Present Shock and Throwing Rocks at the Google Bus

  “Technological change that used to develop over a generation now hits us in a relative blink of the eye, and no one tells this story better than the Tapscotts.”

  —Eric Spiegel, President and CEO, Siemens USA

  “Few leaders push us to look around corners the way Don Tapscott does. With Blockchain Revolution he and his son Alex teach us, challenge us, and show us an entirely new way to think about the future.”

  —Bill McDermott, CEO, SAP SE

  “Blockchain Revolution is a brilliant mix of history, technology, and sociology that covers all aspects of the blockchain protocol—an invention that in time may prove as momentous as the invention of printing.”

  —James Rickards, author of Currency Wars and The Death of Money

  “Blockchain Revolution serves as an atlas to the world of digital money, masterfully explaining the current landscape while simultaneously illuminating a path forward toward a more equitable, efficient, and connected global financial system.”

  —Jim Breyer, CEO, Breyer Capital

  “Blockchain Revolution is the indispensable and definitive guide to this world-changing technology.”

  —Jerry Brito, Executive Director, Coin Center

  “Incredible. Really incredible. The Tapscotts’ examination of the blockchain as a model for inclusion in an increasingly centralized world is both nuanced and extraordinary.”

  —Steve Luczo, Chairman and CEO, Seagate Technology

  “Makes a powerful case for blockchain’s ability to increase transparency but also ensure privacy. In the authors’ words, ‘The Internet of Things needs a Ledger of Things.’”

  —Chandra Chandrasekaran, CEO and Managing Director, Tata Consultancy Services

  “The epicenter of trust is about to diffuse! The definitive narrative on the revolutionary possibilities of a decentralized trust system.”

  —Frank D’Souza, CEO, Cognizant

  “Identifies a profound new technology movement and connects it to the deepest of human needs: trust. Thoroughly researched and provocatively written. Every serious businessperson and policy maker needs to read Blockchain Revolution.”

  —Brian Fetherstonhaugh, Chairman and CEO, OgilvyOne Worldwide

  “Blockchain Revolution sets the table for a wave of technological advancement that is only just beginning.”

  —Frank Brown, Managing Director and Chief Operating Office, General Atlantic

  “A must read. You’ll gain a deep understanding of why the blockchain is quickly becoming one of the most important emerging technologies since the Internet.”

  —Brian Forde, Director of Digital Currency Initiative, MIT Media Lab

  “Blockchain technology has the potential to revolutionize industry, finance, and government—a must read for anyone interested in the future of money and humanity.”

  —Perianne Boring, Founder and President, Chamber of Digital Commerce

  “When generational technology changes the world in which we live, we are truly fortunate to have cartographers like Don Tapscott, and now his son Alex, to explain where we’re going.”

  —Ray Lane, Managing Partner, GreatPoint Ventures
; Partner Emeritus, Kleiner Perkins

  “Don and Alex have written the definitive guidebook for those trying to navigate this new and promising frontier.”

  —Benjamin Lawsky, Former Superintendent of Financial Services, State of New York; CEO of The Lawsky Group

  “Blockchain Revolution is an illuminating, critically important manifesto for the next digital age.”

  —Dan Pontefract, author of The Purpose Effect; Chief Envisioner, TELUS

  “The most well-researched, thorough, and insightful book on the most exciting new technology since the Internet. A work of exceptional clarity and astonishingly broad and deep insight.”

  —Andreas Antonopoulos, author of Mastering Bitcoin

  “Blockchain Revolution beautifully captures and illuminates the brave new world of decentralized, trustless money.”

  —Tyler Winklevoss, Cofounder, Gemini and Winklevoss Capital

  “A fascinating—and reassuring—insight into a technology with the power to remake the global economy. What a prize. What a book!”

  —Paul Polman, CEO, Unilever

  CONTENTS

  Also by Don Tapscott

  Title Page

  Copyright

  Dedication

  Praise for Don Tapscott and Alex Tapscott

  Acknowledgments

  PART I: Say You Want a Revolution

  CHAPTER 1: The Trust Protocol

  In Search of the Trust Protocol

  How This Worldwide Ledger Works

  A Rational Exuberance for the Blockchain

  Achieving Trust in the Digital Age

  Return of the Internet

  Your Personal Avatar and the Black Box of Identity

  A Plan for Prosperity

  Promise and Peril of the New Platform

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

  The Seven Design Principles

  1. Networked Integrity

  2. Distributed Power

  3. Value as Incentive

  4. Security

  5. Privacy

  6. Rights Preserved

  7. Inclusion

  Designing the Future

  PART II: Transformations

  CHAPTER 3: Reinventing Financial Services

  A New Look for the World’s Second-Oldest Profession

  The Golden Eight: How the Financial Services Sector Will Change

  From Stock Exchanges to Block Exchanges

  Dr. Faust’s Blockchain Bargain

  The Bank App: Who Will Win in Retail Banking

  Google Translate for Business: New Frameworks for Accounting and Corporate Governance

  Reputation: You Are Your Credit Score

  The Blockchain IPO

  The Market for Prediction Markets

  Road Map for the Golden Eight

  CHAPTER 4: Re-architecting the Firm: The Core and the Edges

  Building ConsenSys

  Changing the Boundaries of the Firm

  Determining Corporate Boundaries

  CHAPTER 5: New Business Models: Making It Rain on the Blockchain

  bAirbnb Versus Airbnb

  Global Computing: The Rise of Distributed Applications

  The DApp Kings: Distributed Business Entities

  Autonomous Agents

  Distributed Autonomous Enterprises

  The Big Seven: Open Networked Enterprise Business Models

  Hacking Your Future: Business Model Innovation

  CHAPTER 6: The Ledger of Things: Animating the Physical World

  Power to the People

  The Evolution of Computing: From Mainframes to Smart Pills

  The Internet of Things Needs a Ledger of Things

  The Twelve Disruptions: Animating Things

  The Economic Payoff

  The Future: From Uber to SUber

  Hacking Your Future for a World of Smart Things

  CHAPTER 7: Solving the Prosperity Paradox: Economic Inclusion and Entrepreneurship

  A Pig Is Not a Piggy Bank

  The New Prosperity Paradox

  Road Map to Prosperity

  Remittances: The Story of Analie Domingo

  Blockchain Humanitarian Aid

  Safe as Houses? The Road to Asset Ownership

  Implementation Challenges and Leadership Opportunities

  CHAPTER 8: Rebuilding Government and Democracy

  Something Is Rotten in the State

  High-Performance Government Services and Operations

  Empowering People to Serve Selves and Others

  The Second Era of Democracy

  Blockchain Voting

  Alternative Models of Politics and Justice

  Engaging Citizens to Solve Big Problems

  Wielding Tools of Twenty-first-Century Democracy

  CHAPTER 9: Freeing Culture on the Blockchain: Music to Our Ears

  Fair Trade Music: From Streaming Music to Metering Rights

  Artlery for Art Lovers: Connecting Artists and Patrons

  Privacy, Free Speech, and Free Press on the Blockchain

  Getting the Word Out: The Critical Role of Education

  Culture on the Blockchain and You

  PART III: Promise and Peril

  CHAPTER 10: Overcoming Showstoppers: Ten Implementation Challenges

  1. The Technology Is Not Ready for Prime Time

  2. The Energy Consumed Is Unsustainable

  3. Governments Will Stifle or Twist It

  4. Powerful Incumbents of the Old Paradigm Will Usurp It

  5. The Incentives Are Inadequate for Distributed Mass Collaboration

  6. The Blockchain Is a Job Killer

  7. Governing the Protocols Is Like Herding Cats

  8. Distributed Autonomous Agents Will Form Skynet

  9. Big Brother Is (Still) Watching You

  10. Criminals Will Use It

  Reasons Blockchain Will Fail or Implementation Challenges?

  CHAPTER 11: Leadership for the Next Era

  Who Will Lead a Revolution?

  The Blockchain Ecosystem: You Can’t Tell the Players Without a Roster

  A Cautionary Tale of Blockchain Regulation

  The Senator Who Would Change the World

  Central Banks in a Decentralized Economy

  Regulation Versus Governance

  A New Framework for Blockchain Governance

  A New Agenda for the Next Digital Age

  The Trust Protocol and You

  Notes

  Index

  ACKNOWLEDGMENTS

  This book came from the meeting of two minds and two life trajectories. Don had been leading a $4 million syndicated research program called Global Solution Networks (GSN) at the Rotman School of Management, University of Toronto. The initiative was investigating new, networked models of global problem solving and governance. He researched how the Internet was governed by a multistakeholder ecosystem and became interested in digital currencies and their governance. Meanwhile, Alex was an executive with the investment bank Canaccord Genuity. He noticed the growing enthusiasm for early-stage bitcoin and blockchain companies in 2013 and began leading his firm’s efforts in the space. During a father-son ski trip to Mont-Tremblant in early 2014, we brainstormed over dinner about collaborating on this topic, and Alex agreed to lead a research project on the governance of digital currencies, culminating in his white paper, titled A Bitcoin Governance Network. The more we dug into the issues, the more we concluded that this could be the next big thing.

  Meanwhile our agent, Wes Neff at the Leigh Bureau, along with Don’s publisher Adrian Zackheim at Portfolio/Penguin (Wikinomics, Macrowikinomics), was encouraging Don to formulate a new book concept. When Alex’s paper became widely recognized as leading thinking in this area, Don approached Alex to be his coauthor. Adrian, to his credit, made us an offer we couldn’t refuse and the book never went to auction, as is normally the case.

  We then made what in hindsight was a smart decision. We approached the best book edito
r we knew, Kirsten Sandberg, formerly of Harvard Business School Press, and asked her to edit our book proposal. She did a spectacular job and our collaboration was so effortless that we asked her to be a full-time member of the book research team. Kirsten participated with us in more than one hundred interviews and collaborated in real time as we tried to understand the myriad issues on the table and develop helpful formulations to explain this extraordinary set of developments to a nontechnical audience. She helped us bring the story to life. In that sense, she was our coauthor and this book would not have appeared, at least in its current comprehensible form, without her. For that, and for all the stimulation and laugh lines, we are very grateful.

  Our heartfelt thanks to the people below who generously shared their time and insights with us and without whom this book would not be possible. In alphabetical order:

  Jeremy Allaire, Founder, Chairman, and CEO, Circle

  Marc Andreessen, Cofounder, Andreessen Horowitz

  Gavin Andresen, Chief Scientist, Bitcoin Foundation

  Dino Angaritis, CEO, Smartwallet

  Andreas Antonopoulos, Author, Mastering Bitcoin

  Federico Ast, CrowdJury

  Susan Athey, Economics of Technology Professor, Stanford Graduate School of Business

  Adam Back, Cofounder and President, Blockstream

  Bill Barhydt, CEO, Abra

  Christopher Bavitz, Managing Director, Cyberlaw Clinic, Harvard Law School

  Geoff Beattie, Chairman, Relay Ventures

  Steve Beauregard, CEO and Founder, GoCoin

  Mariano Belinky, Managing Partner, Santander InnoVentures

  Yochai Benkler, Berkman Professor of Entrepreneurial Studies, Harvard Law School

  Jake Benson, CEO and Founder, LibraTax

  Tim Berners-Lee, Inventor, World Wide Web

  Doug Black, Senator, Canadian Senate, Government of Canada

  Perriane Boring, Founder and President, Chamber of Digital Commerce

  David Bray, 2015 Eisenhower Fellow and Harvard Visiting Executive in Residence

  Jerry Brito, Executive Director, Coin Center

  Paul Brody, Americas Strategy Leader, Technology Group, EY (formerly IoT at IBM)

  Richard G. Brown, CTO, R3 CEV (former Executive Architect for Industry Innovation and Business Development, IBM)

  Vitalik Buterin, Founder, Ethereum

  Patrick Byrne, CEO, Overstock