Hi, Alex. For those who may not be familiar with your work, can you tell us about your background and what led you to research blockchain technology?
I spent seven years working in capital markets in New York and Toronto, and was immensely interested in the applications of this technology in financial services.
Don Tapscott and I have spent two years researching this technology and have concluded, unequivocally, that blockchain technology is the second generation of the digital revolution. The first generation brought us the internet of information. The second generation – powered by blockchain – is bringing us the internet of value. So what is it? Blockchain is the ingeniously simple, revolutionary protocol that allows transactions to be simultaneously anonymous and secure, peer-to-peer, instant and frictionless. It does this by distributing trust from powerful intermediaries to a large global network, which, through mass collaboration, clever code and cryptography, enables a tamper-proof public ledger of every transaction that’s ever happened on the network.
And while it’s the technology that drives bitcoin and other digital currencies, the underlying framework has the potential to go far beyond these and record virtually everything of value to humankind, from birth and death certificates to insurance claims and even votes. In short, it’s a new medium for value.
The book you co-authored with your father Don Tapscott is doing well on Amazon, too. What’s the most insightful feedback you’ve received so far?
People are amazed by blockchain’s profound impact on everyday living. Perhaps you’re a music lover who wants artists to make a living off their art. Perhaps you’re an immigrant who’s sick of paying big fees to send money home to loved ones in your ancestral land. Or a Saudi woman who wants to publish her own fashion magazine. Maybe you’re an aid worker who needs to identify land titles of landowners so you can rebuild their homes after an earthquake. Or a citizen fed up with the lack of transparency and accountability of political leaders. Or a user of social media who values your privacy and thinks all the data you generate might be worth something – to you. Or an entrepreneur looking for a new platform to build a business.
Blockchain is nothing less than the second era of the internet. For decades, we’ve had the internet of information. Now we’re getting the internet of value. This will enable profound changes on how we live. We can fix the deep structures and architecture of government and how we create public value, and maybe even build a second era of democracy based on accountability to citizens, transparency and a culture of public deliberation. More broadly, it gives those of us who want a better world another kick at the can to rewrite the economic power grid and the old order of things.
What do you think are the winning conditions for blockchain leaders to fully convince financial regulators?
When we started our research a mere two years ago, few (if any) banks had woken up to this opportunity. Now, virtually every major player in the financial service industry – from banks to insurers to audit and professional service firms – are investing significant resources into this. And for good reason: blockchain can radically reduce costs for banks, providing a boost to productivity and making it easier to offer products and services to a global clientele.
They can also reduce risk in the industry, particularly in wholesale finance. Settlement times for many financial products take days, sometimes weeks, tying up capital and exposing industry participants to huge counterparty risks. Blockchain promises to radically simplify many business processes, reducing risk and boosting transparency. That’s a good thing. And this is really the tip of the iceberg: personal and commercial lending, risk management, investment banking, treasury services, global markets, insurance, technology, operations and asset management will each feel the effect.
There’s a unique lack of governance in the blockchain space. This bottom-up leadership ensures that states, corporations and state-based institutions such as the United Nations cannot control this new global resource. Instead, the Internet is a self-organising set of communities.
Do you think there’s too much emphasis on the impact of blockchain in financial services? What is another high-potential application outside of this milieu?
Much of the focus around blockchain has been on its potential to fundamentally change the financial services industry – by dropping the cost and complexity of financial transactions, making the world’s unbanked a viable new market, and improving transparency and regulation. It’s already having a big impact on that sector. However, blockchain can go far beyond financial services and transform business, government and society in perhaps even more profound ways. For example, healthcare has emerged, in earnest, as one of the most exciting areas. Companies are working to unclog bottlenecks in the system, from clinical trial data to personal health records.
Being based in Toronto, are there any Canadian fintech companies that you admire?
My firm, Northwest Passage Ventures Inc, is advising several companies in the blockchain space. Some of these companies include Paycase Financial, Nuco, Tendermint, and several others.
What’s next for you? Are you working on new research or projects?
We’re launching the definitive research study on the impact of blockchain on business. We are staffing up our team with the world’s leading thinkers and tackling seven verticals: financial services, healthcare, retail, manufacturing, telecommunications and media, technology and government. We’re also looking horizontally at the functions of the enterprise, from supply chain management and human resources, to marketing and information technology. Look for more announcements soon.
Also in the spring, Northwest Passage Ventures is launching its first blockchain fund. Don and I both continue to do our part to move this ecosystem forward.
In 2016, we launched the Muskoka Group with the mission of promoting ecosystem health and empowering the nascent governance ecosystem. We’re currently conducting a project to outline some sensible steps forward. In March, we will be releasing our findings and making recommendations to all stakeholders about how to overcome these deficiencies and build an effective ecosystem.
Also in March, we’ll launch an online Blockchain Ecosystem Hub sponsored by some of the most important international organisations. The hub will provide important governance know-how for the internet’s second era.
In addition, I will continue to contribute as a member of the World Economic Forum’s Global Future Council on Blockchain. And of course, we will both be on the road in 2017 launching into new exciting markets such as Korea, Thailand, Japan and several new European and Latin American countries.