Emerging technologies such as blockchain and cryptocurrencies are compelling subjects for Alex Tapscott. The author, public speaker and venture capital investors new book Financial Services Revolution, How Blockchain is Transforming Money, Markets and Banking, was co-authored with his father Don Tapscott. The Star spoke to the younger Tapscott recently about uses for blockchain, security concerns and possibility of the Bank of Canada introducing a digital loonie.

Can you explain what blockchain is?

Simply put, blockchain is the most important computer science innovation in a generation and its ushering in a new era for the internet an internet of value. You see, when you use the internet to send information youre sending a copy and retaining an original (think email). That works for information but not money, financial assets or anything that requires scarcity. So we still rely on middlemen. After all, when I send you money you need to know I dont still have a copy. Historically weve needed an intermediary to establish trust. Blockchain solves this problem. For the first time in human history we have a digital medium for value that will enable individuals to transact and store value in virtually every kind of asset peer to peer in a private, secure and trustless way without the need for middlemen like banks.

What are the most promising uses of blockchain?

Blockchain will do for capital and assets what the internet did for newspapers, film, and TV. It will force us to rethink the deep structure and workings of many industries, starting with finance.

In this next shift, not only could the U.S. dollar be displaced by a synthetic alternative or a Chinese crypto-yuan, but virtually every marketplace from securities like stocks and bonds, to insurance, accounting, audit and venture capital, as well as new assets like our identities, never before owned and monetized as assets by individuals will be made virtually unrecognizable.

Do you think Facebooks proposed currency Libra will materialize?

When Facebook announced its plan to create digital money called Libra, incumbents immediately pushed back. Even though Facebook has marketed Libra mainly as a way to bank the unbanked a noble cause, to be sure it wants to deploy this coin across its platform, for use in all forms of commerce online and off, which would position Facebook as a powerful new player in the global financial system. It could change how, where, and with whom billions of people spend and save, borrow and loan, and otherwise finance and insure their lives and livelihoods and current legislators, regulators, and masters of the universe are having none of it. This is a watershed moment. Facebook is one of the largest landlords of our digital economy, and its actions are far-reaching.

YOU MIGHT BE INTERESTED IN...

First, Facebook is placing itself in the crosshairs of lawmakers and regulators as they wrestle for control over finance, money, and influence among citizen users. Second, by wading into the massive, complex world of financial services, Facebook is pitting itself against big banks as well as bit tech. Does anyone expect Jeff Bezos to allow Libra on Amazon, without launching an alternative? Finally, Libra, like bitcoin, could forever alter the traditional role of fiat money in the global economy. Just as cellular technology allowed billions to leapfrog land lines, Libras blockchain-based platform has the potential to leapfrog the traditional banking infrastructure of today.

In Financial Services Revolution, theres much discussion of international transfer of funds being deliberately and unnecessarily slow. How hard will it be for existing financial institutions to be convinced to give up their profit margins on these?

With paradigm shifts, leaders of the old are often last to embrace the new, if they survive to embrace it at all. So why did Blockbuster not create Netflix, and why did Sears not create Amazon? One reason is the innovators dilemma, where disrupters of old paradigms have trouble disrupting themselves. But leaders of todays banking giants need to understand that theyre standing on a burning platform where the risk of taking a leap into the unknown is actually lower than the risk of staying put because eventually that platform will be engulfed and collapse.

Do recent major hacks on digital currencies that use blockchain, including Ethereum Classic last year, pose a confidence problem?

Blockchains are highly secure but they are not unhackable. If I say theyre unhackable Ill surely get hacked tomorrow! However, large established blockchains such as bitcoin, Hyperledger and even Ethereum have proven highly resilient to attack. Certainly they are far more secure than traditional methods for storing data, which have proven very vulnerable think Equifax, Target or the Democratic National Committee.

YOU MIGHT BE INTERESTED IN...

Do you think there will ever be a digital loonie, as the Bank of Canada recently speculated?

Yes. In fact the Bank of Canada has said if commercial currency initiatives like Facebooks Libra become more popular they will have no choice but to launch them. They shouldnt wait for someone else to do it first. This is a once-in-a-generation opportunity for our central bank to show leadership in digital transformation.

Processing speed is important in financial transactions but Blockchain-based transactions are slow. Will this be problematic?

Not all blockchains are created equal. While its true that bitcoin is a heck of a lot slower than other payment systems like Visa or Mastercard, numerous new blockchains are stepping up to address these bottlenecks. The most promising one is Cosmos which allows different blockchains to interoperate, radically improving their scalability. (By the way, I should disclose that Im an investor in Cosmos.)

Get more business in your inbox

Get the business news and analysis that matters most every morning in our Star Business email newsletter.

Does the amount of energy usage required for mining bitcoin and other currencies using blockchain technology concern you?

For bitcoin it is a valid concern, though I would point out that according to a recent study 74 per cent of bitcoin mining is powered by renewable energy. However, we shouldnt view this as some reason blockchain or cryptocurrencies are a bad idea, but rather as an implementation challenge to be overcome. We have a once-in-a-lifetime opportunity to harness a radically powerful new technology to transform the economy as we know it and usher in a financial industry that is more resilient, private, efficient and secure.

This interview has been edited for length and clarity.

View post:

A digital loonie may be on the way and thanks to blockchain, money will never be the same again - Toronto Star