Mediaplanet: What is blockchain?

Don Tapscott: We have spent three 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.

MP: Can you give us an example of how blockchain will impact the Internet of Things?

DT: In the not-too-distant future, billions of smart things in the physical world will be sensing, responding, communicating, sharing important data, and generating, buying, and selling their own electricity — doing everything from protecting our environment, charging our homes, and managing our health. Cities and regions will be profoundly transformed by this revolution, as everything from public transit systems, health care, and power-generation stands to be disrupted. This Internet of Everything Needs a Ledger of Everything, powered by blockchain.

MP: How is this system secured? How does it advance the cybersecurity and privacy agenda?

DT: There are different ways of validating transations on the network, but over all this is a more sure computing platform than we have today. Let’s take the Bitcoin Blockchain as an example. It’s complicated, but can be described simply. Money and other digital assets are not stored in a central location but distributed across a Global Ledger — that uses the highest levels of cryptography. Every transaction from a purchase to a vote is broadcast to the network. Around the world there is a massive community of contributors called Miners (like gold miners, not young people) who together own massive computing resources — estimated to be between 10 and 100 times bigger than all of google worldwide.  These miners use their computing power to achieve a consensus about what is the truth — who paid for what, who owns what, who married whom, who voted. Every few minutes, like the heartbeat of the network, all the transactions conducted in that period are stored in a block.  The miners do a lot of work — they compete in solving some tough mathematical problems to create a summary or digest of what has occurred.  The winning miners are rewarded.

Each block is added to the ledger and must refer to the preceding block to be valid. “A chain of blocks.”  This structure permanently time-stamps and stores exchanges of value — like a digital wax seal — preventing anyone from altering the ledger.  If you wanted to hack a block (say, try to spend some money twice) you’d have to hack not just that block but the entire chain, all using the highest levels of cryptography, not just on one computer but millions of computers simultaneously, in the light of the world’s most powerful computing resource.

MP: What other industries do you see becoming decentralised and remodeled?

DT: Every single one. In Blockchain Revolution we studied seven industries that stand to change due to the advancement of Blockchain technology, and they touch nearly every facet of our daily life. Maybe you’re a rights creator who wants to be fairly compensated for the value you create. Maybe you yearn to bring the unbanked 1 billion into the global economy, giving them access to financial services to move, store, and manage their assets safely and securely. Maybe you simply want to see a fairer and more prosperous world for all. In any case, the Blockchain Revolution is ours for the taking, and we have the once-in-a-generation opportunity to make this revolution into a reality, if we will it.

Don Tapscott is the co-author of Blockchain Revolution and co-founder of the newly launched Blockchain Research Institute, an organization helping companies and governments harness the power of blockchain.