Alex Tapscott - Blockchain Breakdown

Alex Tapscott – Blockchain Breakdown

Lock chain and Canada's have transformed and transfixed the Canadian investment landscape and and they've moved the focus of the discussion away from the administrative or legal or commercial or medicinal or recreational benefits of the products to a discussion about the astonishing amounts of quick money that can be made in trading in them this morning we will consider blockchain distributed leisure and cryptocurrency and try and make sense of these words to see if there's any lasting value in these concepts or if they are all just the latest incarnation of the madness of crowds and other popular delusions which seized Holland in the tulip craze of 1636 1637 to help us unpack this puzzle we are very fortunate to have the father-and-son team of Don Tapscott and Alex Tapscott when I think it was 2014 they published their first book on the subject it was widely heralded as pioneering and excellent and the position they took was that blockchain was a revolutionary boon to mankind I'm eager to hear what their opinions are after a tumultuous year of dizzying a sense and precipitous declines in the value of various crypto currencies especially Bitcoin in theory these new kinds of money of which there are over a thousand did you know that already the theory of these new kinds of money is that they are alternatives to an eventual competition for what's called fiat or state money which is so frequently debased by inept and/or corrupt governments my own view is that almost from the very beginning Bitcoin aetherium phone IAM and all of their kind have really at the beginning been a measure of all the hot and dirty money there is in the world and there is a lot so as observers and as analyst Alex will kick off this pod to set the scene and Don will then act as cleanup with the hope of providing some perspective in some meaning and then between we'll hear from a few people who are trying to turn this bubble into something real and something useful so let's begin with you Alex we're all talking about this thing we barely understand it please come and help us out well Thank You Moses for that very colorful introduction the reason that we believe that blockchain is going to be profoundly disruptive is because it represents nothing short of the second era of the Internet now the second era of the Internet is part of this new fourth Industrial Age which I think all of us have sort of involuntarily become immersed in and there's lots of technologies that make up this new period of human development I think yesterday you heard a lot about artificial intelligence and machine learning you might also hear about you know technology in our bodies robotics space travel and all these other really important innovations but it's really the blockchain that's going to help to animate these new technologies and really bring about a period of profound change so before I go on here just a quick show of hands who's heard of this thing blockchain and who understands it really well all right it's not bad so it wasn't four years ago Moses it was two years ago that the book came out and I actually came here to Koerner Hall to have this add an introductory discussion about this subject with the ideas to the audience and I would say that at the time maybe 20% of people raised their hands so we're making good progress here hopefully not just an awareness but also in our comprehension of what this means so when you use the internet today to send and move and share information you're not actually sending an original unique thing you're sending a copy and you're retaining an original now for most kinds of information that's okay so if I send an email to one person I can send the same email to someone else or many more people if I post a tweet anybody can see it if I host a website it's available for all to access so the internet as of the first digital medium for information basically was like our own personal printing press we could create as much information and disseminate it as far and as wide as we wanted to and for a lot of kinds of information that's hugely important and has been very impactful in the world however when it comes to things that have value assets like money being able to send a copy is actually a terrible idea so sir since you're in the front row if I owe you $20 for beers last night we didn't actually go out but like it's a hypothetical and I send it to you it's important that when you receive it that you know you have the only version of that that I can't send the same $20 to the next person or to everybody in this room because if I could copy money the way I can copy information the money becomes worthless so it's good to have a printing press for information it's not so good if everybody has a printing press for money and this is a very specific problem computer scientists have been trying to figure out it's called the double spend problem how do you ensure that when you move something of value on line that you aren't leaving behind a copy a trail of breadcrumbs and because it's such a difficult problem to solve we've always had to rely on intermediaries middlemen banks brokers but increasingly big technology companies like Google Amazon social media firms like Facebook who sit in the center and basically coordinate between parties they establish identity they create trust and they perform what's called business logic clearing settling contracting record-keeping data processing and overall they do a pretty good job but they have some specific limitations they're centralized which makes them vulnerable to attack they exclude big parts of the population there are two billion who don't have access to financial services they add cost and friction to the process of moving value online it takes you know a few days to move money between two people on different sides of a border and can cost upwards of 10% so we talk about this market for cross-border payments which is kind of odd when you really think about it when was the last time anybody here sent a cross-border email it doesn't really exist right I mean the information flows instantly you can be man email around the world 100 times in a second but you can't move value between two parties in less than seven days so overall these intermediaries have done a pretty good job but they have had some limitations and the biggest one is that they capture the data that we have to share in order to do business online every time you enter into a transaction you're leaving behind information about yourself so what if the internet were entering a second year app from an Internet of information to an Internet of value based on this new technology platform called blockchain so a blockchain in essence is a vast global distributed ledger or database kind of like a record of transactions except instead of most traditional records which sit inside of banks or governments or other corporations this one exists across every computer that's connected to the network and on this network not just information like PDFs and emails and websites but things that have value assets like money stocks and bonds titles and IP votes in an election can be moved stored and managed peer-to-peer where Trust is not established by an intermediary but through a combination of collaboration consensus and clever code the network itself establishes trust which is why we call blockchain the trust protocol so all this started with Bitcoin who's heard of Bitcoin just kidding everybody's heard of Bitcoin it's that thing you guys used to have launder money and buy drugs and guns and stuff so bitcoin is you by the way bitcoins used for that but as Moses so a jointly pointed out but it's so is cash right I mean cash is used for crime as well no Bitcoin was designed to do a simple thing to be cash for the internet a way to move money peer-to-peer without the need for an intermediary so in the same way that if I went to Tim Hortons across the street with five bucks bought a coffee and a doughnut I handed that that five dollars to that clerk I'm not using the visa Network I'm not showing you my driver's license we're not using PayPal cash is what's called a bearer instrument once you are the bearer of it you have it and the other person doesn't something like that did not exist online and what bitcoin did is basically solved that problem and it worked so well that it set off this spark which is caught on like wildfire and it's created all sorts of excitement but it's also provoked the ire of a lot of shall we say more seasoned people Warren Buffett says that bitcoin is probably rat poison squared I don't have any mathematicians that are in the room but I don't know how exactly how you square a rat poison or what the product of the squared squared rat poison is I guess it's worse rat poison which I always thought rat poison was kind of binary to either kills the rat or doesn't so this is something we've seen before you know leaders of old paradigms kind of react to these new technologies and new trends with with the sarcasm sometimes you know humor and eventually hostility and I think that's not special about blockchain and frankly I've great respect for Warren Buffett but he missed the internet revolution and he's going to miss this one too so we heard about crypto currencies Moses's introduction and I think it's important to kind of demystify what exactly we're talking about because there are a thousand of these digital assets out there and to the outside observer looking in you might think well why do we need a thousand currencies surely the fewer currencies there are the better that way you can you know move value and everybody recognizes what things are worth regardless of where you are if we have a thousand currencies it's kind of like the system we have today where every little country's got their own currency and there's tons of friction between those countries and that's true and what's important to note about this whole space is that most of these things are actually not currencies in the traditional sense they actually fall into one of seven different categories of which currencies is really just one let's talk about them crypto currencies the big D Bitcoin so a Bitcoin is the mother of all crypto currencies it's the you know ship that launched a thousand others and it is right now worth about a hundred billion dollars and processes billions of dollars of transaction volume at day it's used by tens of millions of people on every single continent including Antarctica and also in space so bitcoin is a powerful technology and it's spawned a whole bunch of other different kinds of crypto currencies that are designed to be a currency so a currency is a medium of exchange a store of value and a unit of account a way to move money store money and a way to price things basically and that's what these currencies are designed for and some of these other ones like Manero and z cash and – which is what three of those little funny ones on the side are are basically designed to be like Bitcoin except with some tweaks more anonymous in the payments and there's lots of very valid use cases for anonymous payments maybe you're a woman in Saudi Arabia that wants to get an online subscription you don't want the government to know that you're doing that catagory number two our platforms aetherium who's sort of aetherium good Canadian crowd yeah Canada's most successful startup ever basically is this platform called aetherium was started by a nineteen year old University of Waterloo graduate named Vitalik boo Terran who along with his friends created this platform issued tokens in their platform back in 2014 and raised 18 million dollars and that platform went live in 2016 today it's now worth around forty five billion dollars why good question people think of a theorem at Bitcoin they kind of compare them as being the same they're not Bitcoin is designed to be a currency aetherium is a platform technology meaning that you can use it to build and run applications that do lots of things where currency is just one of many applications so you can build a stock market you can build a supply chain you can build a casino you can build you get the idea and as a result of this technology being general-purpose meaning it can be used to program other things these new protocols have become much more valuable so a Bitcoin when the book came out Bitcoin was 85 percent of the market today it's about 35 percent of the market because of the ascent of these new protocols and one of the big things that's driving them is that platforms like etherium are completely transforming the venture capital industry in ways that are broadly positive though there are some downsides which I'll discuss so an IC o—- stands for initial coin offering it's a bit of a misnomer because it forces us to think of all these things as coins like currencies and they're not but it's caught on as the term that we use and basically what an IC o—- is is a company or project or platform issues a token that represents some kind of value in what they're building for money and that's how they raise money so they don't go to venture capitalists they don't go to Bay Street buy investment bankers they go direct to this global capital market of individuals that want to be participants in the network in 2016 the amount of money raised this way it was a hundred to sixty five million dollars which is kind of interesting it's good for you know writing an article or two but it's not really shaking the boots of the big bags fast forward to last year and the amount of money raised was seven billion dollars and through the first two quarters of this year it's over ten billion dollars so all of a sudden the venture capital industry has been completely transformed and Wall Street will be next the majority of the activity in icos happens on the etherium network so the more activity there is the more demand there is for their native token the more the value of the network increases it's kind of like if you could own a piece of the Internet rather than having to invest directly into Apple and Google and Amazon what if you could actually own a piece of the underlying technology that's what these new protocols afford most of the companies and projects that have launched on these platforms have done this thing called issuing a utility token now that utility tokens not exactly like equity it's kind of something different you can imagine an entrepreneur that's got a really innovative new rollercoaster and he's going to sell basically rides on that rollercoaster at a massive discount to people who share his vision and so he issues basically a share of a right to ride the the roller-coaster to individuals the money they raise helps to build a roller coaster and all the people in this community help to support and maintain it it's not an exact analogy but basically the point is that the people who provide the capital are also your users and they're also the people who help you to develop and build it and this is the way a lot of projects have launched over the past year and a half I'm not gonna go into the individual models but there are a lot of really interesting ways to build utility into a token however I think many of the tokens that launched last year weren't actually utility tokens they were securities and for those of you who don't know like the securities like stock or a bond basically so these people were issuing something to raise money to help build their company which isn't a utility token it's kind of more like stock in a company and that's okay and I actually think that that's the future of a lot of token projects which is that we are going to be using the blockchain to create and issue financial assets the value of the whole crypto asset industry today is around two hundred and eighty-five billion dollars pretty big about the third of the value of Apple right the biggest company in the world but if you compare it to say the global stock market which is worth a hundred and ten trillion dollars it's still very small there's no reason why the stocks that we trade today need to clear and settle t + 3 meaning when you buy and sell it it takes actually 3 days to deliver the actual value to the person who bought or sold in it should take T plus 0 and that's possible with this technology there's no reason why we should have custodians and clearing houses and exchanges and all the other sort of intermediaries that add friction to the system when everything can be done on a blockchain so I think that we're about to see the biggest migration of wealth ever from analog to a digital format the fifth category are these things called natural asset tokens so similar to security tokens except where there's a delivery of a physical asset like say gold or oil or something else now this is most interesting to me for what it could mean for frontier markets like carbon markets so right now there's no real standard for what a carbon credit should look like for retail and commercial and for government use every country has a different standard so what if we could create a standard token format of a carbon asset that you could use to offset your footprint in you know Karachi and Toronto and New York and Winnipeg I mean anywhere in the world I mean that's something that could help to unleash the power of what is ultimately one of the biggest markets in the world number six is crypto collectibles so crypto collected by the way crypto Kitty's who owns a crypto kitty owns one not heard of one no really looking at you know crypto kitty alright so crypto kitty is a what's called a crypto collectible so basically it is a unique digital asset that is a basically a cartoon cat you can buy it sell it breed it marry it merge it whatever breed it I did I would say breed it sorry breeding is on the brain Jesus okay where was I so the most expensive crypto kitty ever sold for 140,000 dollars why good question other than someone having too much money and an unhealthy love of cats the reason is that they the only way you would spend that much money on anything is if you knew was authentic basically and the only way you can prove its authenticity is to prove that it's unique and what we can do with the blockchain is we can do assets that have many of a type like say Bitcoin there many Bitcoin or say shares in the company there are many shares in a company or we can do assets that are totally unique like art like collectibles like assets in virtual worlds like assets in the real world there are lots of things Koerner Hall is unique it's a unique asset there's no other trigger hall in the world so we can use these standards to help to tokenize unique assets and that creates huge opportunities like the global art market for examples worth forty five billion dollars the final category are these things called crypto fiat currencies and stable coins so stable coin is basically a coin that tries to maintain the same value in some other assets so like let's say it tries to be worth at one US dollar always and forever these are kind of interesting I'm not going to get into it what's more interesting to me are these crypto fiat currencies which is basically currencies issued by governments or central banks but that are done on the blockchain so you might think that this is something you know the u.s. or Canada or the UK or China might be interested in and they have spent a lot of time talking about it but it's actually been shall I say roguish countries that have actually made real progress specifically Venezuela issued this thing called the petrol claim to have raised seven hundred million dollars in an ICO earlier this year and the petrol is basically a natural asset token that allows you to redeem for oil that's in the ground now you might think that's probably not going to be successful you know Venezuela doesn't known for managing its economy particularly well but what it does represent is proof that this can work and it shows that countries like this might decide to build stuff monetary rails to the US dollar system to try and get around things like sanctions which is something that's deeply disturbing so it's important for Canada and other advanced nations to move ahead so that's seven categories which is one section of the new edition of our book and it's one aspect of this whole phenomenon but it's important now for you to realize we're not talking about a thousand currencies we're talking about the digitization of all the assets in the world and that is going to be one of the most profound and important things that happens in technology there are questions about regulations important questions that need to be answered and I'm not going to get into this discussion but only to say one thing which is that you want to make sure that the rules you create don't have unintended consequences and that they had predict or helped to predict what the future is going to be like rather than the past so in the UK there were these things called the red flag laws which basically said that if you wanted to operate a horseless carriage a car you needed three people a driver an operator and a red flag man and the purpose of the red flag man was literally to walk in front of the car like this waving a red flag and the reason was that they were worried that cars would scare horses so they were thinking about the past not the future and that was a mistake so I'm gonna end with this and I know I'm thirty seconds over but I think it's a helpful metaphor it was popularized by the futurist Ray Kurzweil and it goes something like this so the king of the land is so pleased with the invention of chess that he offers the inventor anything in the kingdom whatever his heart desires as a reward and the inventor says oh you know I'm a humble servant of the king all I wish is for some rice to feed my family but I want you to give it to me in this way one grain on the first piece two grains on the second piece of the chessboard four grains on the third piece of the chessboard eight Graydon's on the fourth piece of the chessboard 16 on the fifth and so on and the king huai guy there's like not a math guy says that fine sure whatever what's that like a bag of rice humble requests from a humble man sir you're done of course sixteen becomes thirty-two becomes 64 becomes 128 and so on so by halfway through the chessboard it's more rice than the whole kingdom can produce in a year and by the end of the chessboard it's enough rice to cover the whole planet in six feet of rice by the wayside story King gets really irritated chops the guy's head off that's not the point of my story the point of my story is that technology is exponential and we're in this period now where we're entering the second half the chessboard so get involved thank you very much [Applause]


2 thoughts on “Alex Tapscott – Blockchain Breakdown”

  • David Marchant says:

    Warren Buffett did not "miss the Internet revolution". In the early days of the Internet, he said he couldn't understand the absurdly-high valuations of dotcom companies and, therefore, he wasn't going to invest in them. He was proven to be right when these companies crashed and burned en masse, an event widely known as the "dot-com bubble".

  • David Marchant says:

    Shame on the organizers of this event for inviting someone (Alex Tapscott) whose venture capital firm was exposed for attempting to raise C$100 million through fraud (for that is what it was). This cryptocurrency industry is full of scam artists. Inviting someone whose firm attempted to raise money through lies, which is what Alex Tapscott's firm did, to make a presentation like this shows an appalling lack of judgment and lack of values.

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