It first came to prominence as the technical innovation behind cryptocurrency bitcoin. But why is blockchain – a digital, peer-to-peer ledger that records transactions in real time with ruthless accuracy – now set to change the way we do business far beyond the world of finance? Director asks the experts…
You wouldn’t steal a car,” flashes the caption in the anti-piracy advert that you may recall from the days of watching DVDs. “You wouldn’t steal a handbag. You wouldn’t steal a television.” The flaw in the ad’s reasoning, of course, was that many who wouldn’t dream of purloining someone’s physical property would not think twice about downloading a copy of a Ferrari California, a Hermès Birkin or a 55in smart TV, were it possible to do so without the rightful owner being deprived of their original prototype.
This is a quandary that has stumped the finest minds in the IT industry for decades: while replicating information digitally is all very well, reproducing things of actual monetary value is extremely problematic.
And while 3D printing has some way to go before we can start cloning Ferraris, the problem is a pressing one when the focus turns to other units that are worth something – and we’re not just talking about digital piracy.
“When it comes to things like assets, money, stocks, bonds or anything that has real value, sending a copy is a really bad idea,” explains Alex Tapscott, CEO and founder of Northwest Passage Ventures and co-author of the recently released book Blockchain Revolution: How the technology behind bitcoin is changing money, business, and the world.
“If I send you $20 (£15) in payment for something, it’s important that you know you have it and, crucially, that I no longer do, and that I cannot send that same $20 to every other person I know. That would make the $20 worthless, and the system wouldn’t work. So while it’s great to have an online printing press for information, it’s not for money.”
The current solution to this predicament – referred to as the “double spend problem” by computer scientists – is to have intermediaries such as banks, technology firms and governments administer every aspect of transactions, from identity issues to trust creation between parties via processing, settlement and record-keeping. But what if there were another way – a quicker, more secure, less complex and cheaper way?
“What if there were a vast distributed network, based on the principle of a ledger, that wasn’t just run on one single computer, like a bank system or a government database, but on every computer all around the world?” says Tapscott, who was a keynote speaker at a blockchain summit on Sir Richard Branson’s Necker Island in June. “
And on this network are things that have real value: money, stocks, titles, deeds, financial assets of every kind, intellectual property, even votes in an election, all moved and stored and managed peer-to-peer?” Enter, stage left, blockchain – the disruptive technology which Tapscott believes represents “the second generation of the internet”.