- Blockchain can help solve the prosperity paradox, where developed economies grow but the middle class and prosperity for most stagnates by enabling us to “pre-distribute” wealth by including billions of people in the global economy.
- All of Canada’s industries and businesses will be impacted by blockchain technology.
- Canada is well positioned to lead the blockchain revolution due to its existing blockchain-focused talent pool, openness to immigration, innovation ecosystems, stable banking sector and other key factors.
The lack of a stable, defined regulatory framework to build blockchain companies around is limiting individuals and companies within the Canadian blockchain ecosystem. The Canadian Government must remove this uncertainty by providing clear regulations, but must also ensure that Canada seizes its once-in-a-generation opportunity to lead the next era of the digital revolution by avoiding overregulation that can stifle innovation.
You have described blockchain as the“the second era of the internet”. What do you mean by this? What opportunities does blockchain technology offer in terms of shared prosperity, economic inclusion and the reduction of social inequality – the internet’s original promises?
For the past twenty years, we’ve had an Internet of Information. When I send you an email, I’m actually sending you a copy of an email. That works great for information, but it doesn’t work for things of value – money, stocks, votes, carbon credits, or intellectual property. It’s important that I not be able to send you a copy of a vote, or of $100. We’ve been forced to rely on intermediaries to transact things of value, which is an inefficient and inequitable system.
Blockchain represents not an Internet of Information, but an Internet of Value – where any thing of value in digital form can be communicated, transacted, stored and managed peer to peer. Trust is not achieved buy an intermediary but through cryptography, collaboration and clever code.
The system of intermediaries within the Internet of Information has allowed the wealth generated by the digital revolution to be distributed asymmetrically. For marginalized people, engaging in the digital economy is far too difficult, time-consuming and expensive.
“Blockchain represents not an Internet of Information, but an Internet of Value – where any thing of value in digital form can be communicated, transacted, stored and managed peer to peer.”
Blockchain can help us solve this prosperity paradox, where developed economies grow but the middle class and prosperity for most stagnates. Rather than the usual solution – the “re-distribution of wealth” – blockchain could help us “pre-distribute” wealth by including billions of people in the global economy. It can do so by: protecting rights through immutable records like land titles; creating a true sharing economy by replacing service aggregators like Uber with distributed applications on a blockchain; ending the remittance rip-off and helping diasporas return funds to their ancestral lands; enabling citizens to own and monetize their data and protect their privacy through owning their personal identities rather than identities being owned by big social media companies or governments; unleashing a new halcyon age of entrepreneurship by enabling small companies to have all the capabilities of large companies; helping build accountable government through transparency, smart contracts and revitalized models of democracy.
An interesting case related to economic inclusion and the reduction of social inequality is that of immigrants. One of the biggest use-cases for blockchain right now comes in the form of remittances. As it stands, we have millions of immigrants living in Canada who send a significant part of their paycheque to support their families in their countries of origin, and those people are getting ripped off. Sending money requires a service like Western Union, which can take almost a week and costs nearly 10% of the total money being sent. Now, companies like Paycase are using blockchain to enable people to send money overseas in minutes, and for a fraction of the cost.
That speaks to the core of this issue. Our existing system involves far too many barriers to meaningful economic inclusion. Blockchain enables individuals to bypass those barriers.
What impacts do you foresee for democracy and government, and how should Canadian governments move to adopt blockchain’s most promising features and mitigate its risks?
Blockchain has the potential to help government operate more efficiently and transparently, and to challenge the crisis of legitimacy we’ve seen around the world in recent years. As a nascent technology, there are obviously concerns over people potentially abusing it and its overall disruptive potential. However, Canada is also very well-positioned to lead this second era of the internet, so it’s important we not drive innovation away with overregulation.
“There is actually some really interesting work being done within Canada’s public sector, from using blockchain to improve food safety to establishing secure digital identification platforms from your phone.”
Overall, I think Canadian legislators have shown a lot of interest in this technology. Canada is actually considered one of the leaders in this space, and the public sector wants to encourage that innovation. Not just that, but they see it as a means of improving their own organizations – the City of Toronto, Province of Ontario, and Government of Canada were all founding members of the Blockchain Research Institute.
There is actually some really interesting work being done within Canada’s public sector, from using blockchain to improve food safety to establishing secure digital identification platforms from your phone. Overall, I think the focus right now is on the ways blockchain can be leveraged to improve government services, and increase transparency. That’s a great place to start.
Which Canadian industries do you see as the most likely candidates for disruption by blockchain technology, and could the technology have implications for Canadian sectors that are not traditionally seen as digital – our natural resource industries, for example? What advice would you give Canada’s corporate leaders to prepare for what blockchain disruption means for their companies?
The Blockchain Research Institute is focusing our investigation on eight specific verticals, but there is not a single industry that won’t be impacted by this technology. Obviously, the majority of disruption has been in the financial services industry, and that will continue. But the resource sector, advanced manufacturing, agriculture and transport are all ripe for disruption by blockchain in the coming years.
Any technology that reshapes the global trade network has enormous implications for a country like Canada and its natural resource industries. Think about how much of our economic discourse is centered around getting our raw materials to market, or the way in which global trade impacts our resource sectors.
“Any technology that reshapes the global trade network has enormous implications for a country like Canada and its natural resource industries.”
In the past year alone we have enormous work being done to develop blockchain solutions for transport and supply chain logistics. Our existing supply chains are enormously complex, with multiple intermediaries often operating with completely different records – sometimes using nothing more than paper and pencil. Blockchain creates one ledger, and one version of the truth, throughout all the intermediaries in a supply chain. Walmart and IBM recently cooperated on a pilot to simplify their food supply chain this way. It used to take weeks to trace a product to its origin. After this pilot, it took minutes. You can imagine what the widespread adoption of this system would mean for Canadian producers – not just of agricultural goods, but any raw material.
My advice to Canada’s corporate leaders would be to start by assessing the way your business adds value – do you exist primarily to facilitate trust between parties as a non-value-adding intermediary, or do you provide value beyond that of an intermediary? If your value is primarily building trust between parties, it’s time to pivot. Either way, blockchain will transform your business – but in some fundamentally different ways.
“In a blockchain-based economy, vertical integration may become unnecessary, and what we now understand as firms would more closely resemble networks.”
In terms of organizational structure, blockchain could ultimately result in a fundamental shift in the organization of the firm. Nobel Prize-winning economist Ronald Coase argued that the firm exists because the cost of organizing a network of independent contractors is simply too high. In a blockchain-based economy, that sort of vertical integration may become unnecessary, and what we now understand as firms would more closely resemble networks.
How are Canada and its companies positioning themselves globally in terms of blockchain’s development and adoption of the technology? What is needed in terms of governance and regulation to support the industry’s development?
Any list of the top five global hubs for blockchain innovation should include the Waterloo-Toronto corridor. Canada’s stable banking system, skilled labour force and openness to immigration are all tremendous assets. We’re also home to some of the people and organizations at the forefront of this technology, and are ahead of the curve in terms of thought leadership. That said, in such a nascent industry it should come as no surprise that there is something of a shortage in terms of coordination and cooperation.
“Any list of the top five global hubs for blockchain innovation should include the Waterloo-Toronto corridor.”
In terms of adoption, it depends on the sector, and on the company. Overall, I think Canada is one of the countries whose business and start-up communities are leading in this space – particularly in tech and financial services. But, like in many countries, the lack of governance – and the prospect of looming regulation – has resulted in something of a stalemate. We need that leadership gap to be filled, to mitigate some of that uncertainty that exists today.
Overall, blockchain needs to be governed bottom-up by a self-organizing ecosystem. We have spent a lot of time researching this issue. There is also a need for good regulation. Unlike the Internet of Information, there is a clear public interest in the Internet of Value. So far, regulators like the Ontario Securities Commission have also been thoughtful in how they approach these innovations. They need to take the next steps and we’re holding a number of activities like our Regulation Roundtable to try and be helpful.
“Blockchain needs to be governed bottom-up by a self-organizing ecosystem.”
At this point, many people in the ecosystem are anxiously awaiting a stable, defined regulatory framework to begin building their organization around. We all understand how regulation can stifle innovation, but right now the uncertainty caused by a lack of regulation is also proving to be quite a challenge. That said, Canada has a once-in-a-generation opportunity to lead the next era of the digital revolution. We are uniquely well-positioned to benefit from this technology, so it’s absolutely crucial we avoid overregulation.
What is the one change you would advocate for that would best position Canada as a leader in blockchain technology and its application for our future economy?
The change I’ve been advocating for over the past few years has simply been in understanding this technology as the second era of the internet. This is an opportunity to realize the original promise of the digital revolution. It’s a second kick at the can, and Canada can be at the forefront. Once government and business leaders are able to grasp what this technology really means, then the incentive to lead is a given.
“This is an opportunity to realize the original promise of the digital revolution […] and Canada can be at the forefront.”