One of the great mysteries of modern life is the time it still takes for a check to clear. Every other financial transaction is being reduced to the tap of a phone or the press of a key. But checks take days to rumble their way from payee to the originating bank, days of lost interest and presumably fees for the intermediaries passing them around behind the scenes. Transactions and data management are supposed to be slicker these days, and yet time and again all of us run into situations where it’s as though technology never happened, or stopped around 1993.
Now come blockchains, and according to father and son authors Don and Alex Tapscott, we should all be cheering. Blockchains are basically a much better way of managing information. They are distributed ledgers, run on multiple computers all over the world, for recording transactions in a way that is fast, limitless, secure and transparent. There is no central database overseen by a single institution responsible for auditing and recording what goes on. If you and I were to engage in a transaction, it would be executed, settled and recorded on the blockchain and evident for all to see, yet encrypted so as to be villain-proof. “The new platform enables a reconciliation of digital records regarding just about everything in real time,” write the Tapscotts. No more waiting for that check to clear. It would all be done and recorded for eternity before you know it.
The digital currency bitcoin is currently the best-known blockchain technology. If I wanted to pay you using bitcoin, I would start with a bitcoin wallet on my computer or phone and buy bitcoins using dollars. I would then send you a message identifying the bitcoin I would like to send you and sign the transaction using a private key. The heavily encrypted reassignment of the bitcoin to your wallet is recorded and verified in the bitcoin ledger for all to see, and they are now yours to spend. The transaction is likely more secure and cheaper than a traditional bank transfer.
By Don and Alex Tapscott
Portfolio, 348 pages, $30
But bitcoin is just one of many possible blockchain applications. Another might be a personal-identity service, which gives us control over our personal data and allows us to keep it private or sell it publicly or anonymously to marketers or researchers. Right now, it’s the likes of Google and Facebook that profit from those sales.
Business and personal contracts could be validated using blockchain software. You could have an entire company that was nothing but software-executing activities using blockchain data—completing supply-chain purchases, say, or managing a payroll—all blissfully free of human error.
The Internet of Things, in which physical devices like cars and fridges communicate with one another, becomes more appealing when it is underpinned by a system as robust as blockchains seem to be. Gone are the error-prone middlemen. “It may not be the Almighty,” write the Tapscotts, “but a trustworthy global platform for our transactions is something very big. We’re calling it the Trust Protocol.”
Financial services, the authors argue, are ripe for disruption by blockchains. The front-end of finance—the execution of sales, trading and service—may look very 2016. But behind the scenes—the settlements—the process is cluttered with near-Dickensian artifacts like sign-offs, authorizations and verifications. Banks and venture-capital firms are piling into blockchain ventures, which they see as the next big thing in automation and data management.
It all sounds hugely appealing, except for one thing. Wasn’t the Internet supposed to do all this? Be fast, secure and transparent? Bleach secrecy with sunlight, gorge us on information and banish sticky-fingered intermediaries? Internet evangelists told us that very soon artists would transact directly with their audiences, money would flicker effortlessly between our accounts and government would be transformed by having us all vote on everything online.
Yet time and again, after each wave of technological revolution, a few Silicon Valley billionaires cackle off into the sunset, and the rest of us are left standing with our pants around our ankles. Musicians have to deal with the derisory royalties they receive from Spotify. Immigrants sending remittances home still pay exorbitant fees at Western Union. Government and corporate governance voting remains absurdly dependent on paper and pencil. Or as the Tapscotts put it: “Powerful technology companies have shifted much activity from the open, distributed, egalitarian, and empowering Web to closed online walled gardens or proprietary, read-only applications that among other things kill the conversation. Corporate forces have captured many of these wonderful peer-to-peer, democratic, and open technologies and are using them to extract an inordinate share of value.”
So, hooray for yet another technology promising jam for all, but beware the rustlers as they prepare to pounce.
Yet for the most part the Tapscotts are blockchain boosters. “Let’s look,” they write, “at how we can expand peer production, ideagoras, prosumers, open platforms, the new power of the commons, the global plant floor, and the wiki (social) workplace by adding in native payment systems, reputation systems, uncensorable content, trustless transactions, smart contracts and autonomous agents.”
If that sounds like consultants bearing gifts, then be warned. This is not a book that meets the layman halfway. The layman, in fact, might want to wait for a more penetrable explanation of blockchains to come along—as one surely will if the authors’ predictions are even one-zillionth right.
Mr. Delves Broughton is the author of “The Art of the Sale: Learning From the Masters About the Business of Life.” His latest book is “ Charlie Whistler’s Omnium Gatherum: Campfire Stories and Adirondack Adventures.”