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Cryptocurrencies have been making headlines for a couple of years, but many people remain confused. Navigator asked Don Tapscott, founder of the Blockchain Research Institute (BRI) and best-selling author, with Alex Tapscott, of The Blockchain Revolution, to explain what’s going on and what it all means.
IN APRIL, Navigator became the first public affairs firm to join the Blockchain Research Institute (BRI), an organization conducting ground-breaking research on the impact of blockchain technology on business, government and society. To celebrate this landmark occasion, we sat down with its visionary co-founder Don Tapscott to talk about this emerging industry and how Canada is poised to become a global leader in this space.
In the simplest terms, how would you describe blockchain technology?
Blockchain is the technology behind cryptocurrencies like bitcoin or ether. Whereas the current internet is limited to a network of information, blockchain represents a network for things with value—money, stocks, votes, data, intellectual property and more. Right now, we depend on big intermediaries like banks, governments or big social media companies to verify trust within digital transactions. Blockchain enables us to bypass those intermediaries and transact peer to peer.
It works by incentivizing thousands of different computers to verify transactions on a global, distributed ledger. That ledger is decentralized and public, meaning it can’t be hacked. It’s also far more efficient, allowing us to clear and settle transactions around the world in minutes where it once could take days or even weeks.
How does digital currency differ from traditional currency?
Traditional fiat currencies like the loonie or U.S. dollar are printed by a central bank and their value is backed by a particular government. Digital currencies like bitcoin don’t require a central bank or a government. They are created using blockchain, and the number of coins increases as a reward for those helping verify transactions on the ledger.
Can digital currencies and fiat currencies co-exist in the future?
Absolutely! A number of central banks are already looking at the ways this can happen. The Bank of Canada even released a report recently exploring the possibility of a digital fiat currency.
Right now, the currency we use is really determined by our jurisdiction—where we transact. The digital currencies we use can determine how we transact, what we transact or even with whom we transact. There’s still a role for fiat currencies in that world.
What are some uses for blockchain technology outside digital currencies?
Every industry you can think of will be radically altered by blockchain technology—from shipping to marketing to music. If you can think of a process requiring an intermediary that does not add value beyond establishing trust between parties, you have found a use-case for blockchain.
Why are digital currencies so volatile?
Probably because they’re so new! Regulators are only now beginning to consider how they should approach this new technology, and larger markets have not yet fully engaged in digital currencies. I think that volatility will settle down once the market matures and regulations are put in place.
How would you address concerns about money laundering and criminal activities associated with digital currencies?
Criminals tend to be the first adapters for any disruptive new technology. In the coming years the criminal element will occupy an increasingly small role in the digital currency market, particularly as the technology matures and regulators catch up. Some law enforcement officials are even finding the public, transparent nature of these blockchains quite helpful in tracking the activities of particular criminal organizations.
Do you believe there is a role for the regulator in this emerging space?
Absolutely! I think there’s widespread agreement that some regulation would be welcome in the space to provide guidance and protection for consumers, investors and innovators. That being said, we have to be careful that this regulation doesn’t stifle innovation and growth in this sector. In the modern era, these companies and entrepreneurs will just pick up and go to a friendlier jurisdiction if the regulations are inadequate here.
How do we ensure Canadian blockchain innovators stay here and don’t leave for other blockchain-friendly jurisdictions?
We can start by establishing a more nuanced taxonomy regarding the various digital tokens in circulation right now. Describing them all as “securities” doesn’t accurately reflect the diverse range of applications they might have. We also need to signal that our governments are open to innovation in this field.
We also need to have governments actively engaging in blockchain innovation, which I think we’re seeing. The City of Toronto, the Province of Ontario and the Government of Canada are all founding members of the BRI. There are some fantastic pilot projects using blockchain to improve efficiency and transparency within Canadian government. That creates an attractive market for innovators and shows we’re serious about this technology.
Want to hear more from Don Tapscott and other blockchain experts? Navigator has launched a new podcast, Banking on Blockchain, to mark our membership with the BRI. Each week, we sit down with top experts in the field who will help guide listeners to a deeper understanding of the technology and how it’s changing the way we do business in Canada. Visit www.bankingonblockchain.fm to listen to the latest episodes.