Now, there’s this trichotomy in the blockchain world. You have security, scalability, and decentralization. You have these three things, and the thinking is you basically have to choose two. I’m not sure that holds up, necessarily, because I think you can do all three. But a lot of people in the space will say, if you want fast transaction throughput, get yourself a mainframe. You’re not decentralized. You don’t have to reach a consensus. But of course that’s a problem because it’s centralized.
I think Hashgraph is on to something. Theirs is much more centralized than Bitcoin. It’s a sort of federated system where there are different nodes that all act as validators. There will be lots of use cases that apply that type of model — either a traditional crypto-stake system like Ethereum, what Ethereum hopes to do, or some of these more novel federated systems like Hashgraph and EOS.
What’s interesting is that all this innovation — Hashgraph, Cosmos, Aion, EOS, all these things — are basically infrastructure-level protocols. They’re not companies in a traditional sense. During the first era of the internet, nobody was out there trying to build new internets. There was no financial incentive to do so. We ended up with one protocol that everyone converged around. This time it’s different. There’s a financial incentive to not only build a protocol, but also be an early user, as an end user or an app developer.
We’re ending up with an area where lots of protocols are being built at the same time. As a result, the most important challenge is not going to be scalability. Eventually, enough smart people are working on this to overcome that. It’s actually interoperability. You don’t want to end up in an area where, as Amber Baldet says, you have balkanization of all these different protocols that begin to resemble nation-states more than anything else. They need to be interoperable in the sense that you can run transactions and smart contracts and business logic across lots of platforms seamlessly. If not, then what’s the point of all this stuff?
The scale question will be solved. I think the interoperability question is a tougher one. But again, there’s a lot of really smart people working on that.
VentureBeat: As far as the kinds of companies that are succeeding so far, what do you notice about them? Who are you following closely?
Tapscott: Most of the successful corporations in this space are directly involved in the asset side of the business, the exchanges. Exchanges are the biggest and most profitable businesses in this industry, because right now one of the few commercial use cases for this is storing value and trading, as well as capital raising. You see those companies capturing value.
But the idea of the most successful companies is a little misleading, because a lot of the value has not been captured by companies at all. It’s captured by networks. Bitcoin is the most obvious one, but also, Ethereum has demonstrated what is possible when you build an open and decentralized system that anybody can use and iterate and build on. You end up creating a lot more value.
I think it’s unlikely that Ethereum, as a private company, would ever have become as valuable, at least not in the same period of time that it has. Today the value is something like $35-40 billion, and it’s a three-year-old protocol from launch. It’s four and a half years since it was ideated and created. That kind of growth is almost unheard of in the private sector and traditional companies. I think it demonstrates the vast network effects of these platforms.
There are others like it that we can point to. I think we’ll see a lot of growth. But eventually, as more commercial use cases become realizable, you will see more and more companies capturing some of the value that’s created here.
VentureBeat: Is this the first book you and your father have worked on together, or have you done others?
Tapscott: We’ve been collaborating for a long time. My dad wrote a book in the ’90s called Growing Up Digital, which was about how the millennial generation was the first that was born into a digital world and immersed in digital technology, and as a result they were different in ways that were good and bad, but mostly very positive. He ended up working closely with me and my sister and many of our peers, other kids, on that project.
Since then we’ve done other stuff together. But as far as a formal collaboration, this is the first time. It started before the book, actually. The genesis of the book was that my dad was running this project called the Global Solutions Network at the University of Toronto, where he was affiliated at the time. He asked me what I was interested in, and I said it was cryptocurrencies. He said, “Why don’t you write a paper for the program? We’re trying to figure that stuff out too.” That was in February 2014. It was one of the first things we worked on.
After that we worked on a few other projects looking at not just Bitcoin, but blockchain and what it meant for business and government. That work we did together became the basis for the book. His publisher came to him in late 2014 and said, “This is an important topic and no one’s written a book for general audiences to understand. You and Alex have done a lot of work together. Would you be interested in this project?” For me it was an offer I couldn’t refuse. I quit my job and wrote a book with my dad, and it ended up working out pretty well.
VentureBeat: Are you still running into a lot of people who don’t know what blockchain is, but who worry that it’s something they need to know about?
Tapscott: Yeah, I’d say so. It’s interesting to watch the evolution in the space. When the book came out, I would give a talk and ask people, “Who’s heard of Bitcoin?” Maybe a third of the audience would raise their hand. With blockchain it was maybe 10 percent. That’s a general business audience, not a technology audience, but that’s pretty low awareness.
If I were to ask today, though, with Bitcoin it would be close to 100, and with blockchain it would be 75-80 percent. That’s been my experience, at least. At the same time, I do think it’s not necessarily the most intuitive thing for people to understand. While there are tons of great resources out there you can read, not all of it is approachable for the average person. That’s one of the ways in which our book has resonated. It’s given people, I think, a good foundation on the tech, and more important, what it means and why anybody in any industry should care. Not just in finance and tech, but in the entire economy.
VentureBeat: What sort of advice are you imparting to people about what’s important for them to know?
Tapscott: This technology represents a second era of the internet. For 25-30 years, you had the internet of information, and it’s been this great tool to share information and collaborate, but it hasn’t been that transformational for many industries, because we don’t have a digital medium for value. When you move something on the internet, you’re not moving some unique thing. You’re sending a copy. You can send the same copy to someone else, which is fine if it’s a PowerPoint, but that doesn’t work with money. You have to rely on intermediaries.
The internet, if anything, has actually created more powerful intermediaries than we’ve ever seen. It’s not just banks and governments. It’s the FANG, these large corporations that trade more in data than they do in dollars and cents. Blockchain represents, for the first time ever — people can transact and move value and organize capability on the internet without a third party, a corporation. That’s a powerful thing.
As a result, it’s going to impact every single industry. Wherever there are intermediaries that add friction and cost to a system, and maybe some amount of risk or unreliability, that becomes an opportunity for blockchain. It could be that you’re working in a financial market where there are lots of intermediaries that enable the movement of value. It could be that you’re in a supply chain where assets are difficult to track across many different entities, because we’re not all working on the same common set of data. It could be that you’re in the tech industry and you’re building a sharing economy model and your business relies on a central coordinator, like Uber or Airbnb. That might not be necessary in the future, because you can coordinate peer to peer.
My point is, there are opportunities everywhere. As a result, people need to not be afraid and join the revolution, basically. [laughs]
VentureBeat: It’s interesting to see what kind of hopes are being attached to blockchain and cryptocurrency now. I’ve talked to people like Philip Rosedale, the Second Life founder and now CEO of High Fidelity, and Tim Sweeney at Epic Games. They’re hopeful that blockchain can be the glue for the metaverse, the notion of creating a character in a virtual world and owning it for life and taking it from world to world and game to game.
Tapscott: That’s absolutely right. It’s one of the areas that I think is really exciting. If you look at what CryptoKitties has done, all of a sudden they’ve created these digital assets that people are prepared to spend money on. And it’s not just because they have an unhealthy love of cats. It’s because they can demonstrate, through the blockchain, that this is the only cat of its kind. Scarcity is what ultimately creates value.
There are so many different use cases where a unique collectible digital asset, something that you can prove you own across universes, would be valuable. In-game purchases, currencies used to purchase goods in the game universe, land in virtual worlds as AR and VR become more and more pervasive — all of these things are exciting. There’s a VR project, Decentraland. If you can imagine virtual spaces, virtual worlds, not unlike The Sims or Second Life, where owning land and having assets and being immersed in that world — it could be incredibly interesting for a lot of people. And instead of having to be centralized by a third party, one specific game company that authenticates the value of those assets, you can do that using the blockchain and sell those assets peer to peer.
It creates a whole digital economy that exists within the game. It’s not dependent on a centralized authority to say that what you own is valuable, or that you own what is valuable. You can do that on your own because the information is all out there. Just the other day, a Magic: The Gathering card sold for something like $80,000? You can think of a card game like that, but not needing to use a physical medium at all. Most of the people who play these games or collect these cards are younger men, and there’s a lot of overlap with the crypto world. Things like game cards and sports memorabilia, as well as virtual assets that are used in games, will ultimately all become blockchain-based digital assets. In many ways, those can fall into crypto-collectibles, part of that taxonomy in the new book.
VentureBeat: That’s the beginning of a whole new conversation. It seems like the book has done well for you, though?
Tapscott: The book itself has done really well. I think it’s been translated now into 18 languages. It’s a best-seller in a few different countries, especially in Korea and Japan, as well as Canada, the United States, and the United Kingdom. The success of the book internationally reflects the global nature of this whole industry. This is not something where all the value and innovation is being created in Silicon Valley. It’s not like the early ’90s. The technology is global and the phenomenon is global as well. It’s very exciting to see it happening everywhere.