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Don Tapscott

Paradigm Shift: The New Promise of Information Technology (1993) Coauthor, Art Caston

The Digital Economy: Promise and Peril in the Age of Networked Intelligence (1995)

Growing Up Digital: The Rise of the Net Generation (1997)

Who Knows: Safeguarding Your Privacy in a Networked World (1997) Coauthor, Ann Cavoukian

Digital Capital: Harnessing the Power of Business Webs (2000) Coauthors, David Ticoll and Alex Lowy

The Naked Corporation: How the Age of Transparency Will Revolutionize Business (2003)

Coauthor, David Ticoll

Wikinomics: How Mass Collaboration Changes Everything (2006) Coauthor, Anthony D. Williams

Grown Up Digital: How the Net Generation Is Changing the World (2008)

Macrowikinomics: New Solutions for a Connected Planet (2010) Coauthor, Anthony D. Williams

Portfolio/Penguin An imprint of Penguin Random House LLC

375 Hudson Street New York, New York 10014

Copyright © 2016, 2018 by Don Tapscott and Alex Tapscott Penguin supports copyright. Copyright fuels creativity, encourages diverse voices, promotes free speech, and creates a vibrant culture. Thank you for buying an authorized edition of this

book and for complying with copyright laws by not reproducing, scanning, or distributing any part of it in any form without permission. You are supporting writers and allowing Penguin to

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ISBN 9781101980149 (trade paperback)

Library of Congress Cataloging-in-Publication Data

Names: Tapscott, Don, 1947– author | Tapscott, Alex, author. Title: Blockchain revolution : how the technology behind bitcoin is changing money, business,

and the world / Don Tapscott and Alex Tapscott. Description: New York : Portfolio, [2016] | Includes bibliographical references and index.

Identifiers: LCCN 2016008427 (print) | LCCN 2016014933 (ebook) | ISBN 9781101980156 (ebook) | ISBN 9781101980132 (hardcover) | ISBN 9780399564062 (international edition)

Subjects: LCSH: Electronic funds transfers. | Bitcoin. | Electronic commerce. | Mobile commerce. | Banks and banking—Technological innovations. | Financial institutions—

Technological innovations. Classification: LCC HG1710 (ebook) | LCC HG1710.T385 2016 (print) | DDC 332.1/78—dc23

LC record available at https://lccn.loc.gov/2016008427

First Portfolio/Penguin hardcover edition: May 2016 First Portfolio/Penguin trade paperback edition: June 2018

While the author has made every effort to provide accurate telephone numbers, Internet addresses, and other contact information at the time of publication, neither the publisher nor the author assumes any responsibility for errors, or for changes that occur after publication. Further, the publisher does not have any control over and does not assume any responsibility for author

or third-party websites or their content.

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https://lccn.loc.gov/2016008427
To Ana Lopes and Amy Welsman for enabling this book, and for understanding that “it’s all about the blockchain.”

“A masterpiece. Gracefully dissects the potential of blockchain technology to take on today’s most pressing global challenges.”

—Hernando De Soto, Economist and President, Institute for Liberty and Democracy, Peru

“The blockchain is to trust as the Internet is to information. Like the original Internet, blockchain has potential to transform everything. Read this book and you will understand.”

—Joichi Ito, Director, MIT Media Lab

“In this extraordinary journey to the frontiers of finance, the Tapscotts shed new light on the blockchain phenomenon and make a compelling case for why we all need to better understand its power and potential.”

—Dave McKay, President and CEO, Royal Bank of Canada

“Deconstructs the promise and peril of the blockchain in a way that is at once accessible and erudite. Blockchain Revolution gives readers a privileged sneak peak at the future.”

—Alec Ross, author, The Industries of the Future

“If ever there was a topic for demystification, blockchain is it. Together, the Tapscotts have achieved this comprehensively and in doing so have captured the excitement, the potential, and the importance of this topic to everyone.”

—Blythe Masters, CEO, Digital Asset Holdings

“This is a book with the predictive quality of Orwell’s 1984 and the vision of Elon Musk. Read it or become extinct.”

—Tim Draper, Founder, Draper Associates, DFJ, and Draper University

“Blockchain is a radical technological wave and, as he has done so often, Tapscott is out there, now with son Alex, surfing at dawn. It’s quite a ride.”

—Yochai Benkler, Berkman Professor of Entrepreneurial Legal Studies, Harvard Law School

“If you work in business or government, you need to understand the blockchain revolution. No one has written a more thoroughly researched or engaging book on this topic than Tapscott and Tapscott.”

—Erik Brynjolfsson, Professor at MIT; coauthor of The Second Machine Age

“An indispensable and up-to-the-minute account of how the technology underlying bitcoin could—and should—unleash the true potential of a digital economy for distributed prosperity.”

—Douglas Rushkoff, author of Present Shock and Throwing Rocks at the Google Bus

“Technological change that used to develop over a generation now hits us in a relative blink of the eye, and no one tells this story better than the Tapscotts.”

—Eric Spiegel, President and CEO, Siemens USA

“Few leaders push us to look around corners the way Don Tapscott does. With Blockchain Revolution he and his son Alex teach us, challenge us, and show us an entirely new way to

think about the future.” —Bill McDermott, CEO, SAP SE

“Blockchain Revolution is a brilliant mix of history, technology, and sociology that covers all aspects of the blockchain protocol—an invention that in time may prove as momentous as the invention of printing.”

—James Rickards, author of Currency Wars and The Death of Money

“Blockchain Revolution serves as an atlas to the world of digital money, masterfully explaining the current landscape while simultaneously illuminating a path forward toward a more equitable, efficient, and connected global financial system.”

—Jim Breyer, CEO, Breyer Capital

“Blockchain Revolution is the indispensable and definitive guide to this world-changing technology.”

—Jerry Brito, Executive Director, Coin Center

“Incredible. Really incredible. The Tapscotts’ examination of the blockchain as a model for inclusion in an increasingly centralized world is both nuanced and extraordinary.”

—Steve Luczo, Chairman and CEO, Seagate Technology

“Makes a powerful case for blockchain’s ability to increase transparency but also ensure privacy. In the authors’ words, ‘The Internet of Things needs a Ledger of Things.’”

—Chandra Chandrasekaran, CEO and Managing Director, Tata Consultancy Services

“The epicenter of trust is about to diffuse! The definitive narrative on the revolutionary possibilities of a decentralized trust system.”

—Frank D’Souza, CEO, Cognizant

“Identifies a profound new technology movement and connects it to the deepest of human needs: trust. Thoroughly researched and provocatively written. Every serious businessperson and policy maker needs to read Blockchain Revolution.”

—Brian Fetherstonhaugh, Chairman and CEO, OgilvyOne Worldwide

“Blockchain Revolution sets the table for a wave of technological advancement that is only just beginning.”

—Frank Brown, Managing Director and Chief Operating Office, General Atlantic

“A must read. You’ll gain a deep understanding of why the blockchain is quickly becoming one of the most important emerging technologies since the Internet.”

—Brian Forde, Director of Digital Currency Initiative, MIT Media Lab

“Blockchain technology has the potential to revolutionize industry, finance, and government—a must read for anyone interested in the future of money and humanity.”

—Perianne Boring, Founder and President, Chamber of Digital Commerce

“When generational technology changes the world in which we live, we are truly fortunate to have cartographers like Don Tapscott, and now his son Alex, to explain where we’re going.”

—Ray Lane, Managing Partner, GreatPoint Ventures; Partner Emeritus, Kleiner Perkins

“Don and Alex have written the definitive guidebook for those trying to navigate this new and promising frontier.”

—Benjamin Lawsky, Former Superintendent of Financial Services, State of New York; CEO of The Lawsky Group

“Blockchain Revolution is an illuminating, critically important manifesto for the next digital age.”

—Dan Pontefract, author of The Purpose Effect; Chief Envisioner, TELUS

“The most well-researched, thorough, and insightful book on the most exciting new technology since the Internet. A work of exceptional clarity and astonishingly broad and deep insight.”

—Andreas Antonopoulos, author of Mastering Bitcoin

“Blockchain Revolution beautifully captures and illuminates the brave new world of decentralized, trustless money.”

—Tyler Winklevoss, Cofounder, Gemini and Winklevoss Capital

“A fascinating—and reassuring—insight into a technology with the power to remake the global economy. What a prize. What a book!”

—Paul Polman, CEO, Unilever

CONTENTS

Also by Don Tapscott Title Page Copyright Dedication Praise for Don Tapscott and Alex Tapscott Acknowledgments Preface

PART I: Say You Want a Revolution

CHAPTER 1: The Trust Protocol In Search of the Trust Protocol How This Worldwide Ledger Works A Rational Exuberance for the Blockchain Achieving Trust in the Digital Age Return of the Internet Your Personal Avatar and the Black Box of Identity A Plan for Prosperity Promise and Peril of the New Platform

CHAPTER 2: Bootstrapping the Future: Seven Design Principles of the Blockchain Economy The Seven Design Principles

1. Networked Integrity 2. Distributed Power 3. Value as Incentive 4. Security 5. Privacy 6. Rights Preserved 7. Inclusion

Designing the Future

PART II: Transformations

CHAPTER 3: Reinventing Financial Services A New Look for the World’s Second-Oldest Profession The Golden Eight: How the Financial Services Sector Will Change From Stock Exchanges to Block Exchanges Dr. Faust’s Blockchain Bargain The Bank App: Who Will Win in Retail Banking Google Translate for Business: New Frameworks for Accounting and Corporate Governance Reputation: You Are Your Credit Score The Blockchain IPO The Market for Prediction Markets Road Map for the Golden Eight

CHAPTER 4: Re-architecting the Firm: The Core and the Edges Building ConsenSys Changing the Boundaries of the Firm Determining Corporate Boundaries

CHAPTER 5: New Business Models: Making It Rain on the Blockchain

bAirbnb Versus Airbnb Global Computing: The Rise of Distributed Applications The DApp Kings: Distributed Business Entities Autonomous Agents Distributed Autonomous Enterprises The Big Seven: Open Networked Enterprise Business Models Hacking Your Future: Business Model Innovation

CHAPTER 6: The Ledger of Things: Animating the Physical World Power to the People The Evolution of Computing: From Mainframes to Smart Pills The Internet of Things Needs a Ledger of Things The Twelve Disruptions: Animating Things The Economic Payoff The Future: From Uber to SUber Hacking Your Future for a World of Smart Things

CHAPTER 7: Solving the Prosperity Paradox: Economic Inclusion and Entrepreneurship A Pig Is Not a Piggy Bank The New Prosperity Paradox Road Map to Prosperity Remittances: The Story of Analie Domingo Blockchain Humanitarian Aid Safe as Houses? The Road to Asset Ownership Implementation Challenges and Leadership Opportunities

CHAPTER 8: Rebuilding Government and Democracy Something Is Rotten in the State

High-Performance Government Services and Operations Empowering People to Serve Selves and Others The Second Era of Democracy Blockchain Voting Alternative Models of Politics and Justice Engaging Citizens to Solve Big Problems Wielding Tools of Twenty-first-Century Democracy

CHAPTER 9: Freeing Culture on the Blockchain: Music to Our Ears Fair Trade Music: From Streaming Music to Metering Rights Artlery for Art Lovers: Connecting Artists and Patrons Privacy, Free Speech, and Free Press on the Blockchain Getting the Word Out: The Critical Role of Education Culture on the Blockchain and You

PART III: Promise and Peril

CHAPTER 10: Overcoming Showstoppers: Ten Implementation Challenges 1. The Technology Is Not Ready for Prime Time 2. The Energy Consumed Is Unsustainable 3. Governments Will Stifle or Twist It 4. Powerful Incumbents of the Old Paradigm Will Usurp It 5. The Incentives Are Inadequate for Distributed Mass Collaboration 6. The Blockchain Is a Job Killer 7. Governing the Protocols Is Like Herding Cats 8. Distributed Autonomous Agents Will Form Skynet 9. Big Brother Is (Still) Watching You

10. Criminals Will Use It Reasons Blockchain Will Fail or Implementation Challenges?

CHAPTER 11: Leadership for the Next Era Who Will Lead a Revolution? The Blockchain Ecosystem: You Can’t Tell the Players Without a Roster A Cautionary Tale of Blockchain Regulation The Senator Who Would Change the World Central Banks in a Decentralized Economy Regulation Versus Governance A New Framework for Blockchain Governance A New Agenda for the Next Digital Age The Trust Protocol and You

Afterword Notes Index

ACKNOWLEDGMENTS

This book came from the meeting of two minds and two life trajectories. Don had been leading a $4 million syndicated research program called Global Solution Networks (GSN) at the Rotman School of Management, University of Toronto. The initiative was investigating new, networked models of global problem solving and governance. He researched how the Internet was governed by a multistakeholder ecosystem and became interested in digital currencies and their governance. Meanwhile, Alex was an executive with the investment bank Canaccord Genuity. He noticed the growing enthusiasm for early-stage bitcoin and blockchain companies in 2013 and began leading his firm’s efforts in the space. During a father-son ski trip to Mont-Tremblant in early 2014, we brainstormed over dinner about collaborating on this topic, and Alex agreed to lead a research project on the governance of digital currencies, culminating in his white paper, titled A Bitcoin Governance Network. The more we dug into the issues, the more we concluded that this could be the next big thing.

Meanwhile our agent, Wes Neff at the Leigh Bureau, along with Don’s publisher Adrian Zackheim at Portfolio/Penguin (Wikinomics, Macrowikinomics), was encouraging Don to formulate a new book concept. When Alex’s paper became widely recognized as leading thinking in this area, Don approached Alex to be his coauthor. Adrian, to his credit, made us an offer we couldn’t refuse and the book never went to auction, as is normally the case.

We then made what in hindsight was a smart decision. We approached the best book editor we knew, Kirsten Sandberg, formerly of Harvard Business School Press, and asked her to edit our book proposal. She did a spectacular job and our collaboration was so effortless that we asked her to be a full-time member of the book research team. Kirsten participated with us in more than one hundred interviews and collaborated in real time as we tried to understand the myriad issues on the table and develop helpful formulations to

explain this extraordinary set of developments to a nontechnical audience. She helped us bring the story to life. In that sense, she was our coauthor and this book would not have appeared, at least in its current comprehensible form, without her. For that, and for all the stimulation and laugh lines, we are very grateful.

Our heartfelt thanks to the people below who generously shared their time and insights with us and without whom this book would not be possible. In alphabetical order:

Jeremy Allaire, Founder, Chairman, and CEO, Circle Marc Andreessen, Cofounder, Andreessen Horowitz Gavin Andresen, Chief Scientist, Bitcoin Foundation Dino Angaritis, CEO, Smartwallet Andreas Antonopoulos, Author, Mastering Bitcoin Federico Ast, CrowdJury Susan Athey, Economics of Technology Professor, Stanford Graduate School

of Business Adam Back, Cofounder and President, Blockstream Bill Barhydt, CEO, Abra Christopher Bavitz, Managing Director, Cyberlaw Clinic, Harvard Law

School Geoff Beattie, Chairman, Relay Ventures Steve Beauregard, CEO and Founder, GoCoin Mariano Belinky, Managing Partner, Santander InnoVentures Yochai Benkler, Berkman Professor of Entrepreneurial Studies, Harvard Law

School Jake Benson, CEO and Founder, LibraTax Tim Berners-Lee, Inventor, World Wide Web Doug Black, Senator, Canadian Senate, Government of Canada Perriane Boring, Founder and President, Chamber of Digital Commerce David Bray, 2015 Eisenhower Fellow and Harvard Visiting Executive in

Residence Jerry Brito, Executive Director, Coin Center Paul Brody, Americas Strategy Leader, Technology Group, EY (formerly IoT

at IBM)

Richard G. Brown, CTO, R3 CEV (former Executive Architect for Industry Innovation and Business Development, IBM)

Vitalik Buterin, Founder, Ethereum Patrick Byrne, CEO, Overstock Bruce Cahan, Visiting Scholar, Stanford Engineering; Stanford Sustainable

Banking Initiative James Carlyle, Chief Engineer, MD, R3 CEV Nicolas Cary, Cofounder, Blockchain Ltd. Toni Lane Casserly, CEO, CoinTelegraph Christian Catalini, Assistant Professor, MIT Sloan School of Management Ann Cavoukian, Executive Director, Privacy and Big Data Institute, Ryerson

University Vint Cerf, Co-creator of the Internet and Chief Internet Evangelist, Google Ben Chan, Senior Software Engineer, BitGo Robin Chase, Cofounder and Former CEO, Zipcar Fadi Chehadi, CEO, ICANN Constance Choi, Principal, Seven Advisory John H. Clippinger, CEO, ID3, Research Scientist, MIT Media Lab Bram Cohen, Creator, BitTorrent Amy Cortese, Journalist, Founder, Locavest J-F Courville, Chief Operating Officer, RBC Wealth Management Patrick Deegan, CTO, Personal BlackBox Primavera De Filippi, Permanent Researcher, CNRS and Faculty Associate at

the Berkman Center for Internet and Society at Harvard Law School Hernando de Soto, President, Institute for Liberty and Democracy Peronet Despeignes, Special Ops, Augur Jacob Dienelt, Blockchain Architect and CFO, itBit and Factom Joel Dietz, Swarm Corp Helen Disney, (formerly) Bitcoin Foundation Adam Draper, CEO and Founder, Boost VC Timothy Cook Draper, Venture Capitalist; Founder, Draper Fisher Jurvetson Andrew Dudley, Founder and CEO, Earth Observation Joshua Fairfield, Professor of Law, Washington and Lee University Grant Fondo, Partner, Securities Litigation and White Collar Defense Group,

Privacy and Data Security Practice, Goodwin Procter LLP Brian Forde, Former Senior Adviser, The White House; Director, Digital

Currency, MIT Media Lab Mike Gault, CEO, Guardtime George Gilder, Founder and Partner, Gilder Technology Fund Geoff Gordon, CEO, Vogogo Vinay Gupta, Release Coordinator, Ethereum James Hazard, Founder, Common Accord Imogen Heap, Grammy-Winning Musician and Songwriter Mike Hearn, Former Google Engineer, Vinumeris/Lighthouse Austin Hill, Cofounder and Chief Instigator, Blockstream Toomas Hendrik Ilves, President of Estonia Joichi Ito, Director, MIT Media Lab Eric Jennings, Cofounder and CEO, Filament Izabella Kaminska, Financial Reporter, Financial Times Paul Kemp-Robertson, Cofounder and Editorial Director, Contagious

Communications Andrew Keys, Consensus Systems Joyce Kim, Executive Director, Stellar Development Foundation Peter Kirby, CEO and Cofounder, Factom Joey Krug, Core Developer, Augur Haluk Kulin, CEO, Personal BlackBox Chris Larsen, CEO, Ripple Labs Benjamin Lawsky, Former Superintendent of Financial Services for the State

of New York; CEO, The Lawsky Group Charlie Lee, Creator, CTO; Former Engineering Manager, Litecoin Matthew Leibowitz, Partner, Plaza Ventures Vinny Lingham, CEO, Gyft Juan Llanos, EVP of Strategic Partnerships and Chief Transparency Officer,

Bitreserve.org Joseph Lubin, CEO, Consensus Systems Adam Ludwin, Founder, Chain.com Christian Lundkvist, Balanc3 David McKay, President and Chief Executive Officer, RBC Janna McManus, Global PR Director, BitFury Mickey McManus, Maya Institute Jesse McWaters, Financial Innovation Specialist, World Economic Forum Blythe Masters, CEO, Digital Asset Holdings

Alistair Mitchell, Managing Partner, Generation Ventures Carlos Moreira, Founder, Chairman, and CEO, WISeKey Tom Mornini, Founder and Customer Advocate, Subledger Ethan Nadelmann, Executive Director, Drug Policy Alliance Adam Nanjee, Head of Fintech Cluster, MaRS Daniel Neis, CEO and Cofounder, KOINA Kelly Olson, New Business Initiative, Intel Steve Omohundro, President, Self-Aware Systems Jim Orlando, Managing Director, OMERS Ventures Lawrence Orsini, Cofounder and Principal, LO3 Energy Paul Pacifico, CEO, Featured Artists Coalition Jose Pagliery, Staff Reporter, CNNMoney Stephen Pair, Cofounder and CEO, BitPay Inc. Vikram Pandit, Former CEO, Citigroup; Coinbase Investor, Portland Square

Capital Jack Peterson, Core Developer, Augur Eric Piscini, Principal, Banking/Technology, Deloitte Consulting Kausik Rajgopal, Silicon Valley Office Leader, McKinsey and Company Suresh Ramamurthi, Chairman and CTO, CBW Bank Sunny Ray, CEO, Unocoin.com Caterina Rindi, Community Manager, Swarm Corp Eduardo Robles Elvira, CTO, Agora Voting Keonne Rodriguez, Product Lead, Blockchain Ltd. Matthew Roszak, Founder and CEO, Tally Capital Colin Rule, Chairman and CEO, Modria.com Marco Santori, Counsel, Pillsbury Winthrop Shaw Pittman LLP Frank Schuil, CEO, Safello Barry Silbert, Founder and CEO, Digital Currency Group Thomas Spaas, Director, Belgium Bitcoin Association Balaji Srinivasan, CEO, 21; Partner, Andreessen Horowitz Lynn St. Amour, Former President, The Internet Society Brett Stapper, Founder and CEO, Falcon Global Capital LLC Elizabeth Stark, Visiting Fellow, Yale Law School Jutta Steiner, Ethereum/Provenance Melanie Swan, Founder, Institute for Blockchain Studies Nick Szabo, GWU Law

Ashley Taylor, Conensys Systems Simon Taylor, VP Entrepreneurial Partnerships, Barclays David Thomson, Founder, Artlery Michelle Tinsley, Director, Mobility and Payment Security, Intel Peter Todd, Chief Naysayer, CoinKite Jason Tyra, CoinDesk Valery Vavilov, CEO, BitFury Ann Louise Vehovec, Senior Vice President, Strategic Projects, RBC

Financial Group Roger Ver, “The Bitcoin Jesus,” Memorydealers KK Akseli Virtanen, Hedge Fund Manager, Robin Hood Asset Management Erik Voorhees, CEO and Founder, ShapeShift Joe Weinberg, Cofounder and CEO, Paycase Derek White, Chief Design and Digital Officer, Barclays Bank Ted Whitehead, Senior Managing Director, Manulife Asset Management Zooko Wilcox-O’Hearn, CEO, Least Authority Enterprises Carolyn Wilkins, Senior Deputy Governor, Bank of Canada Robert Wilkins, CEO, myVBO Cameron Winklevoss, Founder, Winklevoss Capital Tyler Winklevoss, Founder, Winklevoss Capital Pindar Wong, Internet Pioneer, Chairman of VeriFi Gabriel Woo, Vice President of Innovation, RBC Financial Group Gavin Wood, CTO, Ethereum Foundation Aaron Wright, Professor, Cardozo Law School, Yeshiva University Jonathan Zittrain, Harvard Law School

Also special thanks to a few people who really rolled up their sleeves to help. Anthony Williams and Joan Bigham of the GSN project worked closely with Alex on the original digital currencies governance paper. Former Cisco executive Joan McCalla did deep research for the chapters on the Internet of Things and also Government and Democracy. We received a lot of familial support. IT executive Bob Tapscott spent many days downloading and getting under the hood of the entire bitcoin blockchain to give us firsthand insights on some of the technical issues. Technology entrepreneur Bill Tapscott came up with the revolutionary idea of a blockchain-based personal carbon credit trading system, and technology executive Niki Tapscott and her

husband, financial analyst James Leo, have been great sounding boards throughout. Katherine MacLellan of the Tapscott Group (conveniently a lawyer) tackled some of the tougher issues around smart contracts as well as managing the interview process. Phil Courneyeur was on the lookout daily for juicy material, and David Ticoll provided helpful insights about the state of the digital age so far. Wes Neff and Bill Leigh of the Leigh Bureau helped us craft the book concept (how many books is this, guys?). As always (now more than twenty years), Jody Stevens flawlessly managed the administration for the entire project including databases, finances, and document management, as well as the proofreading and production process—a full-time job, in addition to her other full-time jobs at the Tapscott Group.

Special thanks to Dino Mark Angaritis, the CEO of blockchain company Smartwallet; Joseph Lubin, CEO of the Ethereum development studio Consensus Systems; and Carlos Moreira of fast-growing security company WISeKey—who each spent considerable time with us brainstorming ideas. They are each brilliant and so kind to help us out. Now we get to enjoy witnessing the success of each of their businesses in this space. Also big thanks to the great team at Penguin Random House led by our editor Jesse Maeshiro and overseen by Adrian Zackheim.

Most important, we’d like to give our heartfelt thanks to our wives, Ana Lopes (Don) and Amy Welsman (Alex), who more than tolerated our obsession with cracking this big nut over the better part of a year. We are both very fortunate to have such wonderful life partners.

Writing this book has been a joyous experience for both of us and it’s fair to say that we loved every minute of it. As someone famous once said, “If two people agree on everything, one of them is unnecessary.” We challenged each other daily to test our beliefs and assumptions, and this book is living proof of that healthy and vigorous collaboration. Mind you, collaborating does seem effortless when you share so much DNA and have a shared thirty- year history of exploring the world together. We do hope you find the product of this collaboration important and helpful.

Don Tapscott and Alex Tapscott, January 2016

PREFACE TO THE PAPERBACK EDITION Don Tapscott and Alex Tapscott

CONTENTS

The Big Ideas Cryptoassets and the New Revolution in Financial Services

1. Cryptocurrencies 2. Platforms 3. Utility Tokens (App Coins) 4. Security Tokens 5. Natural Asset Tokens and Commodity Tokens 6. Crypto Collectibles: Virtual and IRL 7. Crypto Fiat Currencies and Stablecoins

Permissioned Networks Introducing the Menome: Identity on the Blockchain Smart Contracts Come of Age Asset Chains: When Blockchain Meets Supply and Procurement Blockchain and the C-Suite Governance and Leadership for the New Era

Stewarding the Blockchain Revolution Profile of a Blockchain Hotbed: Seven Conditions for Succes Leadership of Nations: The Ten Ahead What Leaders Can Do

THE BIG IDEAS

When we wrote Blockchain Revolution, we got off to a good start by characterizing blockchain—the underlying technology of cryptocurrencies— as the Internet of value. We explained that, for nearly four decades, we’ve had the Internet of information. It vastly improved the flow of data within and among firms and people, but it hasn’t transformed how we do business. That’s because the Internet was designed to move information—not value— from person to person. When we e-mail someone a document, photograph, or audio file, we’re really sending a copy of our original. This information is abundant, unreliable, and perishable. Anyone else can copy, change, and send it to somebody else. In many cases, it’s legal and advantageous to share these copies.

In contrast, to expedite a business transaction, we cannot e-mail money directly to someone—not just because copying money is illegal but because we can’t be 100 percent sure our recipient is who he says he is. Information about identity needs to be scarce, permanent, and unchangeable. So we go through powerful intermediaries to establish trust and maintain integrity. Banks, governments, and even big technology companies confirm our identities and enable us to transfer assets; they clear and settle transactions and keep records of these transfers. But the limitations of these intermediaries —their operational opacity and their vulnerability to hackers, rogue employees, and equally vulnerable suppliers—are becoming more apparent. We need a new way forward.

Blockchain solves the double-spend problem, as cryptographers call it. Now for the first time ever we have a native digital medium for value, through which we can manage, store, and transfer any asset—from money and music to votes and Stradivarius violins—peer to peer in a secure and private way. Trust is achieved not necessarily by intermediaries but by cryptography, collaboration, and clever code. We almost titled the book The Trust Protocol.

It seems that Blockchain Revolution was a clearer title—it’s still a best seller, as of this writing. The response to it has both encouraged and delighted us. It received widespread coverage from such respected media as the Financial Times, Forbes, Fortune, The Guardian, Harvard Business Review, Newsweek, NPR’s All Things Considered, Reuters, Time, and The Wall Street Journal and was a feature article in The New York Review of Books and the subject of a PBS television special.