WASHINGTON, D.C. — A leading authority on technology’s impact on business and society says blockchain will be the biggest driver of change for in-house counsel in the coming decade.
“I think this is probably the biggest thing if you’re a corporate counsel, for the next decade or so, that you need to understand,” said Tapscott during the opening keynote to the Association of Corporate Counsel annual meeting in Washington Monday.
Tapscott, who is co-author with his son Alex Tapscott of Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World, said there is an opportunity with blockchain to fix many problems faced by organizations today, especially the financial industry.
“I think this is the biggest innovation in computer science in a generation. For the first time in history, people everywhere can trust each other and transact peer-to-peer,” he said. “And trust is not achieved by counterparties and middlemen — trust is achieved by cryptography, by collaboration and by some very clever code.”
The big banks, for example, will potentially see the biggest challenge as Tapscott noted that the banks exclude two billion people from the global economy, mostly because they may not have an identity. It can also take days or weeks for digital assets to move through computer systems on Wall Street.
He noted that the biggest flow of money from the developed world to the developing world is remittances between people who send money home to families living in ancestral countries — about $1 trillion annually. That kind of cash transfer represents about 15 per cent of the GDP in the Philippines.
The problem is many intermediary service providers charge up to 10 per cent for funds transfers and can take four to seven days, whereas a blockchain-based remittance app called Abra delivers funds in minutes via mobile “tellers” like Uber drivers, with the transaction costing significantly less.
While not “unhackable,” Tapscott described blockchain as a “highly processed” and an “infinitely more secure” computing platform than the ones that exist in most companies today.
He referenced Ethereum, a blockchain application platform for building all kinds of apps, invented by a 19-year-old Toronto student, which is now worth $30 billion. Ethereum has a tool for building smart contracts that “self polices itself and self executes.”
“The first killer app of the internet was email and then you had the rise of the web that enabled all sorts of apps to be developed. The first killer app of blockchain was Bitcoin, but now we have platforms like Ethereum emerging that are general-purpose applications,” said Tapscott.
Smart contracts are made out of software, police themselves and self execute, and if it has a bank account and certain contractual conditions are met, payments flow.
“I think of it as a contract that has a bank, government and a lawyer inside,” he said.
“It doesn’t mean lawyers will be replaced — I generally think it’s the biggest opportunity for lawyers,” he said. “It’s a huge opportunity for law firms, but for corporate counsel this is pure opportunity — this is not going to disintermediate you, this is an opportunity to build a more secure and stable organization and speed up the metabolism of a company.”
For accounting and auditing functions, blockchain moves beyond double-entry accounting of debit and credit and also allows for a third entry automatically — the balance — meaning you can have real-time auditing 24 hours a day.
“If you talk to the smart public accounting companies like Deloitte or KPMG, the CEOs will tell you that business is going to, if not disappear, change very radically and they are working hard to figure out what auditing looks like in a triple-entry accounting world,” he said.
The same will apply for governments.
“If we had triple-entry accounting in our governments, it would be an extraordinary thing — it could bring great transparency and sunlight is the best disinfectant and we sure need a lot of sunlight on our governments these days,” he said.
Venture capital has also been radically changed by blockchain. In October, more money has been raised on blockchain crowdfunding or “initial client offerings” than on all venture capital in the world — $2.8 billion.
“This is the bread and butter of what the investment banks do,” Tapscott said.
Tapscott advised the audience of mostly in-house counsel to educate themselves and pilot a blockchain experiment and seek out those in their organizations who are experimenting.
“Talk to your CTO, CFO and CIO and see if they are working on this,” he said.