While cryptocurrencies like bitcoin are falling in value, the authors of the Blockchain Revolution insist its day has just begun.
Don Tapscott and his son Alex, who co-authored the book, then founded the Blockchain Research Institute around it, are about to release an update, making this a good time to see where the revolution stands.
A blockchain is simple in concept. It’s a spreadsheet, organized as a general ledger, each block encrypted with a private key. The key denotes ownership of what’s behind the block, and the ledger records transactions involving blocks.
A blockchain can thus represent a market, a supply chain or a distribution channel. The owner of the blockchain can be a market or a market-maker, the ledger can be shared or proprietary, and the blocks can be any asset — even a load of guacamole.
The Walmart Example
Guacamole is where companies like Chipotle Mexican Grill, Inc. (NYSE:CMG) and Walmart Inc (NYSE:WMT) enter the picture.
Alex Tapscott explained. “The reason people got sick at Chipotle was because one truck driver stopped at a truck stop and turned off his cab to get a drink. That caused the guacamole in his truck to go bad.” Because Chipotle could not track the load, billions of dollars in market value were lost.
But, “if every participant in the supply chain was able to access shared data in real time, from sensors installed on the truck, they could have pinpointed exactly where this had occurred, stop it before it got to the store, or at least track it back, because they had a shared record.”
It’s this that has companies like Walmart, FedEx Corporation (NYSE:FDX) and Merck & Co., Inc. (NYSE:MRK), supporting blockchain.
“Consider the $50 trillion supply chain industry,” said Don Tapscott. “We had Electronic Data Interchange and computer systems that automated existing ways of doing things. That’s paving the cow path.” Blockchain, however, can automate how all goods, services and capabilities are orchestrated to create value.
Not Just Finance
Blockchain applications began in finance, with bitcoin. Some despair for it, seeing bitcoin as a proxy, said Alex Tapscott. But if you go back just a year or two, comparing the prices of these assets today with what they were, you see a correction, not a crash. “Everything is relative,” he said.
But crypto assets are just one part of the blockchain phenomenon in finance. Banks are investing heavily in blockchain because of things like security tokens.
“A security token is a native digital app that represents financial rights,” said Alex Tapscott. “It could be a stock or a bond or anything else. There’s no reason why you can’t use blockchain for all intermediaries” and all types of assets. “You should be able to clear instantly and trade peer-to-peer.”
If I have a block of Apple Inc. (NASDAQ:AAPL) stock behind a private key, in other words, and you’re willing to buy it at a specific price, we should be able to make that trade directly and record it on a blockchain.
Another application involves smart contracts. Conditions for performing under contracts can be written into a blockchain, violations detected in real time. If a hedge fund manager using smart contracts tries to make a trade in violation of his fund’s rules, the trade won’t go through. Instead of having four support people behind each trader, trader can be running their own funds.
Every Asset a Block, Every Trade on a Chain
For Don Tapscott, now 71, blockchain has made him an overnight sensation at an age when many men retire. “I wrote some books in the 80s no one read. I wrote a book about privacy in 1995 called Who Knows: Safeguarding your Privacy. I wrote a book about transparency that was a decade too early. But we hit the zeitgeist with this one. It’s a best-seller and you can’t print them fast enough in China. I was there recently and did a TV show about blockchain. It got 3 million likes. Alex is in demand around the world.”
When the Tapscotts decided to update their book, “we looked through it again and saw it holds up very well,” said Don Tapscott. “We ended up writing 25,000 words of new stuff.”
But here is the bottom line. Every analog asset can be a digital one. Every trade can go into a ledger. Every market can be a blockchain.
Blockchain changes everything.
Dana Blankenhorn is a financial and technology journalist. He is the author of a mystery novella involving Bitcoin, The Reluctant Detective Saves the World, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
