The second era of the Internet just begins. Blockchain will turn all sectors, the world expert Alex Tapscott says
The technologies which are behind the bitcoin and other cryptocurrencies are going to change the Internet. Already today companies around the world are investing, to make it more efficient for logistics. “Blockchain first hit investors and venture capital, another one is Wall Street and then everyone else,” says Alex Tapscott, one of the world’s leading experts and speaker on the First Crypto Banking Conference in the World, which is organized by XIXOIO.
What is the meaning of blockchain for you personally?
In my view, blockchain represents nothing less than the second era of the internet. The difference is that we’re transitioning from an internet of information to an internet of value. Blockchain enables us to transact things of value peer-to-peer without the need for an intermediary, the same way that the internet enabled us to share information peer-to-peer.
In which field/business area do you see the biggest opportunities for blockchain application?
Blockchain is going to have a transformational impact on every industry, but right now I think the majority of disruption has been focused on financial services. In Blockchain Revolution we predicted that venture capital would be unrecognizable in five years. It ended up taking about two years for the money raised through Initial Coin Offerings (ICOs) to become a significant part of the overall venture capital industry. From basically nothing, blockchain spawned a $10Bn+ market for new digital assets. VC was impacted first. Wall Street will be next.
Is the regulation (e.g. financial markets) a big obstacle for blockchain adoption?
Absolutely, regulatory uncertainty is one of the biggest hurdles to blockchain innovation and widespread adoption. So much of blockchain’s potential is tied up in what we call “cryptoassets.“ Those include cryptocurrencies like bitcoin, but they also include other types of assets like utility tokens or cryptocollectibles. The challenge for regulators is to balance their duty to uphold the integrity of capital markets and protect investors with the opportunity to foster innovation, growth and entrepeneurshiop. Beyond financial services, blockchain will impact every industry. Because this is a protocol which impacts value rather than information, it will by definition require a more active role for governments and regulators. That is both the main challenge and the biggest opportunity- countries that embrace innovation will be a leader in the 2nd digital age.
Should we call all DLT blockchain? Is there a better taxonomy/name? What are the main types of blockchains?
The big distinction is between public and private blockchains. Bitcoin and Ethereum are both based on what we call “public“ blockchains, which means that anyone in the world can participate in the ledger- they can buy assets, set up nodes, build applications and finance themselves through ICOs. Public blockchains incentivize people to help verify transactions on the ledger with cryptocurrencies – people who help the network achieve consensus are rewarded with bitcoin, or ethereum, or whatever token that blockchain creates. That makes them extremely secure, but it also presents a lot of challenges with speed and scalability.
Private blockchains, like Corda or Hyperledger Fabric, control who gets to participate in the network. That makes them more scaleable and better-suited to enterprise applications. It means they don’t have to rely on cryptocurrencies as an incentive for verifying transactions on the ledger, but they have some disadvantages: they are not open source, meaning they don’t benefit from the innovation and experimentation of public blockchains, and they could be made less secure because they have fewer nodes and no strong incentive to secure the network.
How do you respond to the critics saying blockchain will never be broadly used technology and can never be used outside out the cryptocurrencies world?
Well, it’s already being used outside the world of cryptocurrencies, so I’d probably just point them to that. Companies are transforming their supply chains, improving the way they settle transactions, creating more efficient digital advertising, and more. Many of the ideas we talk about in Blockchain Revolution aren’t just ideas anymore. There are start-ups and large enterprises putting them into action.
And how do you – on the other hand – respond to the critics like Nouriel Roubini who claim that blockchain is just a hype and bubble that will burst?
There are always going to be critics of new technologies who respond with mockery or outright disdain. Mr. Roubini and others like him conflate the speculative value of bitcoin as an asset to the more fundamental value of blockchain and cryptocurrecies as a native medium for peer-to-peer value exchange. When the dot-com bubble burst in the 1990s, it did very little long-term diminish the future impact of the internet on business and society. At the time, trillions of dollars of value were wiped out and many companies failed, but the internet ended up having a much greater impact on the world than many of its most ardent supporters predicted at the time. It’s human nature to overestimate technology in the short term but massively underestimate it in the long term. The same will be true of blockchain.
How safe are the cryptographic functions of DLT? Won’t the become easily corruptible with the growth of computing power/ HPC/ quantum computing?
With our existing computing power, they’re extremely safe. Remember, the bitcoin blockchain alone is currently storing over $100 billion USD in value, securely. Now, quantum computing could emerge as a threat to the security of these systems, despite the enormous energy and computing power working to protect them. We actually conducted some research on this at the BRI. Right now there’s a 50 percent chance the world will see a working quantum computer by 2031, so it’d be prudent to begin the process of quantum-proofing blockchain systems now.
Supporters of blockchain technology claim it will get rid of the middlemen, but won’t it introduce another type of gate-keeper?
There are certainly bottlenecks in blockchain technology. For example, today most cryptoassets are traded and stored on centralized exchanges, so in effect, we’ve replaced one middleman for another. But I think that’s short term. The emergence of decentralized exchanges and other decentralized applications is reducing the need every day for intermediaries in a wide range of industries. No matter what, we will require people dedicating resources to the maintenance of the network, and their relative influence changes according to the consensus mechanism that particular blockchain uses. While there are still actors who maintain the network, the network itself is a highly disruptive force.
Do you still believe in ICOs after your own try failed?
We never did an ICO. Instead, the company I co-founded, NextBlock Global, raised $20 million from traditional investors to invest in blockchain opportunities and cryptoassets. The strategy worked exceptionally well. To date, we have returned 150% profits to investors, significantly outperforming the cryptoasset market over the same time frame and outperforming most, if not all, asset management companies and funds in the industry over the same time frame.
As for ICOs, I do think that they have tremendous potential, despite the return-to-earth we saw after last year’s ICO boom. The cooldown has been pretty important in separating the wheat from the chafe and assuring that organizations have to be operating at their very best. Done right, token-based fundraising lowers the barriers for entrepreneurs to raise capital to build businesses, projects, and technology. This could usher in the halcyon days of startups – where anyone anywhere can start a business and build real value.
What is the main mission of the Blockchain Research Institute you co-founded?
While blockchain has enormous potential and it’s clear that people are starting to understand that, there’s still a significant knowledge gap we need to overcome. After writing Blockchain Revolution, noticed that the book often created more questions about this technology than answers. So we founded this think-tank, the Blockchain Research Institute, to provide the definitive investigation into blockchain strategy for enterprise and government. We’re conducting over 80 research projects intended to inform business and government leaders – as well as the public – about the applications and implications of this new technology.