Blockchain Revolution

 Blockchain Revolution 

By Don Tapscott and Alex Tapscott 

Preview 

The internet fundamentally changed the way we live our lives, do business or start new ones. Information Technology changed our society, but it failed to provide two essential things, trust, and power to the ordinary user. There is no mechanism for establishing identities online, and this has led to a trust deficit that we all experience. We depend on third parties, banks, credit card companies, and firms to do business with an unknown person. We are beholden to big corporations and governments to lead our online as well as real lives. All this is about to change though thanks to the disruptive and wonderfully designed Blockchain technology. The Blockchain is a mechanism that aims to establish a system of transparent, public, and peer-to-peer network ledgers that can be used for anything we want, from banking to copyright protection and much more. The Blockchain is built to handle challenges like fraud and hacking that plague our current online systems. It is the next logical step after the internet to manage increasingly complex and sensitive tasks individuals, corporations and governments alike need.

Intended Readers

Blockchain has the potential to transform the financial and legal world in the next few decades, and that makes this book a must-read for entrepreneurs, artists, and activists. The book offers something for all the people as it covers a broad range of issues including moral and legal implications. Anyone regardless of his age and profession will find something valuable in this book.

The Authors and their style:

The Tapscott father and son duo, Don and Alex, are Canadian-born business experts. Don Tapscott is a business executive and author who specializes in how technology affects business. He is the founder of the Tapscott group along with his son and co-author of this book, Alex Tapscott. Don Tapscott is a prolific writer and is among the foremost thinkers in his field. Alex Tapscott followed his father’s footsteps and is a successful business personality and a member of advisory forums for the World Economic Forum and the International Monetary fund. Both the writers have years of experience in the field of economics and technological impacts on the world.

They have done an excellent job of explaining and demystifying Blockchain and cryptocurrencies. Their writing style is replete with practical and real-life examples. They also avoid oversimplification and maintain a level of technical sophistication to impress upon the reader the true nature of Blockchain technology. The writing is nuanced as it does not blindly endorse Blockchain, the challenges, as well as negative impacts of the technology, are also covered. The authors manage to present a balanced view of the emerging technology and the promise and peril it holds.

 Understand why Blockchain is touted as the next big thing and explore its implications for the present order

The Blockchain is a continuously growing list of records or for simplicity a ledger. This ledger can be visualized as a chain of blocks of data that proceed chronologically. Each new block must validate the previous block, and the entire history of blocks/transactions is public and immutable. No transaction can deviate from its history, and a permanent record exists for every transaction made.

 The benefit of such a system is obvious, and everything is transparent and more importantly un-hackable. The records are not stored on a central server. Instead, a peer-to-peer network of computers is utilized. The biggest implication of a global, distributed ledger is that it will finally provide us with a mechanism to establish trust online. All one needs to do is look at a person’s records and instantly know about his credibility. 

Banking is just one example of an application area of Blockchain as it can serve in fields like the internet of things, utilization of spare resources, and governance. The Internet is now being used for sensitive and security-intensive tasks at a scale and level of complexity it was never meant to handle. As a result, our present infrastructure is ill-suited for the challenges such as financial inclusion, protection of intellectual property, and autonomous authentication between devices. 

Cryptocurrencies like Bitcoin are means to run the system in real life. Bitcoin is to Blockchain what HTTP is to the web, a protocol not the actual system. It is essential to understand this distinction before diving into the world of Blockchain. 

What you will learn from this book:

• Why the global financial system still hasn’t caught up with present technology.
• The need to create an un-hackable personal identity online and how to do it.
• The untapped potential of billions of people excluded from the global financial system and how Blockchain connects them.
• The need for sharing idle resources and a method of automatic trust establishment between peers in a network.

Blockchain can eliminate the need for any intermediaries and connect counterparties directly to each other

Anonymity is perhaps the most significant strength as well as the weakness of the web. The protection offered by hiding one’s identity is essential to activists and dissidents, but criminals abuse the same privilege. Anonymity makes it impossible to trust someone you meet online. Consider an example of hiring a plumber online. You will not call a number you found somewhere online. You will look for an agency or website like craigslist to vouch for the plumber. The third party that vouched for the plumber takes a cut just for establishing trust.

Companies make a fortune just by creating trust between buyers and sellers. Any payments made online go through a payment gateway, and this gateway is a seal of confidence by the bank on the vendor and a record of the transaction. Blockchain allows both the users, sellers, and buyers, to share their records with each other. A customer can see that the seller is trustworthy and more importantly any transaction he makes is permanently recorded. This system eliminates uncertainty and the possibility of fraud. The benefits of establishing trust are that it allows us to bypass unnecessary regulations and commissions, and allows direct contact between two parties.  

A freelancer can post a history of his work and previous employers on Blockchain. Anyone can see the work and hire him/her without paying a cut to freelance websites. Governments establish the identity of their citizens without hassle. Companies who post their accounts on Blockchain will win the support of their shareholder for being transparent.  

Blockchain can revamp the global financial system

Our current banking infrastructure is a peculiar case of resisting and embracing technology at the same time. Companies and banks have adopted a slick and user-friendly interface that allows payments to be cleared in less than a second. On the other hand, the actual transfer of funds takes days as the internal infrastructure of the banks has not changed since the 1960s. The delay in transfer the funds becomes even more severe for firms operating in different countries.

The Blockchain is the perfect technology that can disrupt the current structure. If Blockchain is adopted as the primary tools for banking payments can be settled in just 10 minutes. It would not matter how many payments are made between the 10-minute windows after which all the transactions are verified and settled. The existing banking methods can be improved using Blockchain, but an even more exciting and vital task can be accomplished with it, total financial inclusion. It is strange and frankly shameful to note that billions of people in the world still have no access to formal credit. Blockchain will enable people to connect and tap into the global financial market with only a mobile phone. 

In the developing world, remittances are a significant boost to the economy, but a large chunk of the money is lost to unreasonable transaction fees and exchange charges. There exist many start-ups which aim to change this situation. These companies use mobile apps to transfer funds in bitcoins, and the transfer cost is minimal compared to traditional pathways. 

 

Solving the prosperity paradox: Technology can be leveraged for equal distribution of wealth

The prosperity paradox refers to the current scenario of the global economy. At this point in history, we are creating wealth its benefits are being enjoyed by a few. This paradox is a result of the economic structure in which money makes more money faster than work. Millionaires can earn more money quickly by investing existing capital, unlike a middle-class person. Blockchain can change the current economic structure by democratizing entrepreneurship and removing hassles on the path of budding entrepreneurs.  

In developing countries, setting up a business takes three times longer than in the developed world. Red tape curbs growth and Blockchain can cut the red tape in many ways. The first is the creation of a persistent ID. A globally valid ID will help people gain access to credit much faster. Blockchain can also act as a register for property especially land deeds. Ownership of land is critical in developing nations, but the system that keeps track of it is shoddy and corrupt. Blockchain can create a permanent and accurate record of a property that will help in setting up businesses much faster.

A persistent ID can have another added benefit. Money allocated for government schemes as well as foreign aid will finally reach its intended target. Corruption holds back development and creates income inequality. Blockchain also opens up the opportunity to invest in IPO’s even for the poorest by allowing micro-investments. Blockchain can put small businesses in any part of the world on an equal footing with big corporations.

Internet of things needs a ledger of everything. Smart P2P networks can utilize idle resources.

Currently, there are more devices connected to the internet than there are humans on earth and this number will rise exponentially in the coming years. Devices that form the internet of things can communicate with each other, but there is no way to determine the authenticate devices from a different network. The idea is to create a Blockchain of devices all around us. Nodes connected to a network can verify the trustworthiness of a device without human intervention

If the devices are given access to bitcoin, then they can keep running themselves and even earn money. Weathernet is a weather prediction platform that relies on data provided by sensors attached to various devices. The beauty of this system is that the nodes report temperature and their value is compared to those provided by neighboring nodes. So, if a node consistently provides accurate information, its reputation increases. Each node is paid in bitcoins which act as an incentive to provide accurate data. If a device behaves abnormally, it loses status and thus the rewards too.  

Smart electricity grids are also being tested. These networks allow excess power generated by independent owners, renewable sources, to be sold to consumers directly. The smart meters will automatically pay each other in bitcoins. The meters can identify trusted suppliers and customers via Blockchain. The exchange of services directly between two parties will save time and provide sellers with the actual value of their services.  

The case against Blockchain and why it might not gain its full potential

Blockchain undoubtedly has the potential to do much good, but all is not rosy in a future molded by it. The largest Blockchain today is of bitcoins and allows untraceable transactions. No bank or government controls it and thus cannot seize these digital wallets. Criminals and terrorists are aware of this and making most of the opportunity. The infamous silk road, the biggest seller of all kinds of drugs on the dark web used bitcoins exclusively.  

Bitcoins present another problem as there is only a limited number of them so in case someone loses access to his or her digital wallets, the coins in them are lost forever. Moreover, bitcoins require massive computational power and electricity. Technical reasons side other issues hold back Blockchain. There is no apparent authority that decides on protocols and standards. Lack of legal avenues in case of any dispute makes businesses wary of adopting it. Blockchain aims to upend the existing order in the world’s most entrenched and monopolized sector, the financial sector. Banks are secretive, and the transparency of Blockchain transactions does not excite them. Governments too are not huge fans of this new technology as it would mean surrendering control in many areas.  

The key to becoming widely accepted is to get the general public on board, something that has yet to happen. Blockchain and bitcoin are not user-friendly as of now. There are no simple interfaces or customer support to speak in case of a problem. To use these one needs to be an enthusiast or at least aware of the jargon associated with the field.

Final Summary

We hope you enjoyed this quid on Blockchain Revolution. The blockchain is a piece of technology that can fundamentally change our concepts of money, ownership, and online privacy. It is in the truest sense a model for distributed capitalism. Its use of the collective wisdom of the network democratizes the entire ecosystem. Every person will be able to control his identity, intellectual property, and finances. Instantaneous settlement of payments regardless of location and currency will boost productivity globally. Big corporations have managed to get a stranglehold on our data and lives; Blockchain can set us free. The transparency provided by this system will lead to responsible governments and corporations alike. 

All that being said about Blockchain the road to the future is riddled with problems. Technology does not necessarily breed prosperity. We must think about the collective good of society.

Sections that stand out.

• Processing and protecting the more than $3 billion worth of bitcoins in circulation requires more than $100 million in electricity each year. (Pg. 187)

• Today, the global 1 percent owns half the world’s wealth while

      3.5 billion people earn fewer than two dollars a day (Pg. 131)

• $38 billion is charged annually as fees for transferring remittances. (Pg. 137)

• 2.5 billion people are excluded from the global financial system. (Pg. 18)