Hey everyone, today I'll be
joined by Alex Tapscott.
He's the author of "Blockchain Revolution" and
will soon be releasing his new book,
"Financial Services Revolution".
Welcome, Alex, to the show, let's
get straight into the first question.
I know that Jack Dorsey, the CEO of Twitter,
said that Africa will be the defining region
of the future. How exactly would a country
try to project its influence into a region
like Africa using a digital currency?
Yeah, so I think Jack is
looking at a couple of things.
Africa is the only continent in the world that
has a positive growth rate in terms of
natural growth rate. Maybe Latin America, but that's
pretty close to break even at this
point. Everybody else is shrinking.
So, you know, most of the new young people who
will exist in the world will be born in
Africa over the next 50 years.
And its population as a result will be
much bigger portion of the global population.
And even though, you know, I mean, Africa is
a huge place and, you know, there are
countries in Africa which are relatively affluent and
then there are ones that are the
poorest in the world.
So it's a mistake to try and
paint it all with one brush.
But one thing that is true of many countries
in Africa is that there have an abundance of
natural resources and other sort of strategic assets,
which is why China has been doing
sort of this debt fueled diplomacy, where
basically they will lend money to governments
or private companies in Africa to build
major industrial planted equipment, let's say
ports or railroads or factories and all like.
And, you know, if those companies or governments
are unable to pay that back, then they
basically foreclose on those assets
and take them over.
Now, if you had a native digital currency like,
say, you know, crypto, you know, one or
whatever, they would be able to, again, just
have a greater level of scrutiny and greater
level of detail of how that money is being
spent so that money can be moved into those
countries to be used to fuel those projects.
And then they can know with 100 percent
certainty how it's being spent and whether it's
being spent on the right things.
So, again, it's just a form of making it
easier to finance and develop assets outside of
the country. Now, for seventy five years, the
US dollar has been the global reserve
currency of the world and the US financial system
is the center of that sort of power
structure and the creation of a native
digital currency that doesn't require you to
interact with any of those institutions, allows
you to break free from US control.
So I think that you'll see a lot of
governments looking at that as a solution to that
particular problem. And it's not just China could
potentially be Russia who has its own
diaspora and its own sphere of influence in
Eastern and Central Europe and Central Asia.
You know, it could be Iran trying to use
a native digital currency to bypass sanctions or
it could be someone else altogether
that we haven't necessarily thought of.
But the idea is that a government that has
money, that it knows that it can identify how
it's being spent, where it's being spent and
can do so without the need for interacting
with the US system at all is
a very powerful and potent tool.
Now, I'm not suggesting that this
is a good thing necessarily.
I'm just saying that at this point in
time, though, it's early stage, the contours of
this new world are becoming much clearer.
And I think at this point, it's an
inevitability that we get to that stage.
Do you think that these digital
currencies will be built on blockchain?
I think so, yeah. I don't really know.
You know, I'd be lying if I said I knew
exactly how they were going to do it, every
single detail. You know, the virtue of Bitcoin
is that it is decentralized and it allows
for censorship resistant payments, but it does
so at the expense of certain things.
Like it does use a lot of energy and
it doesn't actually have a very high throughput.
And, you know, I think that that's
probably a limiting factor for Bitcoin.
But a lot of people view that
as a feature, not a bug.
The fact that it is censorship resistant is
enough to justify its lack of, you know,
throughput or its lack of scalability.
Obviously, if you're talking about a
government issued currency, they're not really
interested in censorship resistance at all.
In fact, they're probably pro-censorchip, in which
case you don't actually have to make
the tradeoff necessarily.
So I'm not suggesting it's going to
be a fully decentralized cryptocurrency like Bitcoin.
It's probably going to be
some kind of a hybrid.
And what exactly that looks like, I'm not entirely
sure, but if they can figure it out
and reach scale, then the outcome, the upside to
them, at least for their goal and those
are not goals I necessarily
share, could be very significant.
So I kind of want to jump a
little bit sideways because I'm curious about enterprise,
enterprise blockchains because I feel like they're
also kind of walking this line between
like using blockchain technology but
also having the centralized entity.
So can we just like dive into a little bit
and just start out by explaining to me what
exactly an enterprise blockchain is?
Yeah, well, I could ask you the same thing
because I'm not really sure what an enterprise
blockchain is either. You know, like, okay.
So when the book came out in 2016, there
are a lot of companies, you know, professional
services firms like Accenture, PWC, these other
ones that were touting their own
blockchain, whatever that was.
And, you know, they were trying to
appeal to enterprises because enterprises love the
idea of, you know, reducing friction
and complexity in their business.
But they were also kind of afraid of
this weird, strange world of Bitcoin and
cryptocurrency. So companies like this help to
satisfy the curiosity of the crypto
curious, which is what a
lot of enterprises were.
But I think it's abundantly clear at this
point that a lot of those private blockchains,
those sort of enterprise specific blockchains, were
more like the Internets of the early
Internet age, not the
Internet, the public networks.
And I think a lot of them, you
know, they don't scale, they won't work.
And as a result, I don't know very many
enterprises that are still interested in them or
using them. I think what's more likely to
happen is that you can build customized
applications or use cases on
top of public infrastructure.
So you can create use cases that provide
for some level of centralization or, you know,
of anonymity using public infrastructure.
And you know as the co-founder of the BRI,
I see this struggle happening every day with a
lot of enterprises, which is that they know
that this technology is going to be impactful
to their business. They want to use it,
but they're not sure which platform to choose.
Now, they could, you know, build with,
say, Hyperledger, which is an interesting
platform. But I think some of them are concerned
about, you know, ending up with a vendor
lock in with IBM because IBM is a
major contributor to the Hyperledger source code.
And, you know, I think a plurality at
least of the nodes on that network.
And then they look at other things like
Ethereum and they think, well, you know, this
could be interesting when you want to put
anything at scale on the Ethereum network and
it's not going to work very well.
So the types of use cases are limited to
ones where, you know, you need to have finality
on a ledger. You need to know for sure
that something that's true, but you don't have to
do millions of transactions.
So, again, that goes back to the first question
you asked me, which is, you know, what
are the trends that I'm
most looking forward to?
What I'm looking forward to seeing a handful
of public protocols that allow you to
program discrete applications that do different things,
to see those kinds of protocols
scale and to become dominant, because it's only
at that point that, you know, if you're
the chief information officer of a Fortune
50 company, that you're going to feel
comfortable saying, OK, we're now going to build
on Cosmos, we're now going to build on
Ethereum, we're now going to build on
Tezos or whatever it might be.
And until that thing happens, I think a
lot of the enterprise use cases, adoption that
you're going to see are going to be mostly
pilots and proofs of concepts and trials and
testing and curiosity, but nothing
that's super, super commercial.
And I think also, so that's one side.
And the other side is, you know, there
are some very specific industry related projects
like, let's say, JP Morgan's Quorum Project or
say R3, which again, is geared towards
financial services where, you know, they're not
being particularly public, but they are
quietly scaling some
interesting applications.
So that's something we'll look for as well.
But in all of these instances, we're not
talking about some built from scratch private
blockchain that runs on a server
inside of a consulting company.
We're talking about people taking public infrastructure
and then trying to customize and
specialize on top of it.
And I think that's the only way
that enterprise blockchain actually works in scales.
Yeah, that reminds me of something that you said
in one of your more recent podcasts you
participated in, where you said a blockchain
that will become like an operating system.
Is this kind of what you're talking about,
sort of this like baseline layer like Windows?
Because it reminded me of like
Windows or Mac or something.
And I was kind of thinking along those lines
that all of a sudden we would have
institutions like interacting with each other over
on using this public or open source
blockchain network as their baseline layer.
Was that sort of what you were talking about?
Yeah, that is what I'm talking about.
But it's not going to be, hopefully, not
an operating system that's proprietary to a
specific company. It's probably going to be more
like Linux or Mozilla or Wikipedia in
the sense that it's a common shared resource
where people are contributing to it and it's
not necessarily owned by anyone.
And where anybody can build on
it in a permissionless way.
And so the idea is that it's permissionless to
build on it, but you can build permission
use cases, you know what I mean.
So like in financial services, if you want to
use this as a way to clear settle
transactions and securities.
Sorry. So you can build permission
applications on top of it.
So in the securities industry, you may not want
everybody to be able to see, you know,
who's doing what, who's selling what to whom,
who's buying, you know, a given stock or
asset so you can limit utility towards people
who are, you know, authorized or qualified
to access that system.
But all that ought to be running
on top of public shared infrastructure.
In the same way that, by the way, in the
same way that the mobile web and cloud computing
and all the other implementations of the
Internet still run on the Internet.
Which is not owned by anyone.
It's governed by
this multi-stakeholder network.
It's a shared communal resource in a way.
So do you see this as sort of like Web 3.0
or something like that? Well, that's
a buzzword that people use.
You know, first, the Internet was a
publishing medium that it was communicating social
tool, and now it's a tool
for decentralized apps and moving value.
Sure, that's a fine way to think about it.
I think a better way to think of it is
that, you know, we had the first digital age where
we had an Internet that was
designed for moving, sharing information.
And now we have a second digital age where
we have a technology that allows us to move
and store assets peer-to-peer.
Blockchain, the first native
digital medium for value.
So in many respects, I don't think of it
as some sort of third step along the way.
I think of it as a clean break.
You know, we were in a first era where
we had an Internet of information now where the
second era where we had Internet value.
So my last question before I think our time is up
is a lot of people it seems to me like
having a trouble distinguishing between a
like private blockchain, maybe something that
you could build on top of Hyperledger, you
know, just for your ecosystem of companies and
just a database. What would be the advantage
of using a blockchain network to bring
companies together? Or is there any advantage rather
than just using some sort of shared
database that isn't on a blockchain?
I think you need to, I think it's
useful if there's a trustless or an adversarial
environment. You know, if you're talking about
reconciling data inside of a company
between different divisions, I really don't know why
you need a blockchain to do that.
Presumably your operation in China, UK, Estonia
and Canada trust each other enough since
they're the same legal entity to just, you
know, use a shared database and pool
information. But in an adversarial or
trustless environment like, say, a securities
market where you've got buyers and sellers
who are literally adversaries in the most
traditional sense.
Or say in a supply chain where you
have different stakeholders who all have different
interests and sharing information that's immutable
and trusted is an advantage, then
there is a use for blockchain.
So I think like many technologies, when this
first launched, there was a lot of hype
around this being a panacea, something that could
be used for every problem under the
sun. And I think that what you see in
the early stages of development is that, well,
actually there are some areas where it is
useful and others where where it's less useful.
And and that's fine.
That's part of the process of
learning and of creative destruction.
And I think we're starting to
see that playing out today.
So, again, you know, having a blockchain
be used for some internal data reconciliation
project. I just don't
think it's that interesting.
But when you're talking about digitizing assets
and where you're talking about rethinking
how markets function, that to me
is where it gets really exciting.
Great, thank you so much for coming on.
Yeah, my pleasure, thank you.
Thank you, everyone, for watching.
That was Alex Tapscott.
And always remember to
like, subscribe and hodl.
