“I’ve been at this 35 years, writing about the digital age. I’ve never seen a technology that I thought had greater potential for humanity.” (Tapscott, n.d). Don Tapscott’s Ted Talk, How the Blockchain is changing money and business, focuses on the ‘world-changing, trust-building technology’ of The Blockchain, and its potential to transform money, business, government, and society. Tapscott explains how individuals in today’s society rely entirely on big intermediaries to establish trust and enable business transactions in the economy. Furthermore, Tapscott discusses the growing issues involving these intermediaries, leading with how their centralized state increases the vulnerability of being hacked. Additionally, these intermediaries exclude billions of people from the global economy, slow things down, charge substantial fees, capture the data of citizens, and continue to fuel social inequality (Tapscott, 2016). Tapscott believes the solution lies in The Blockchain; a global distributed ledger running on millions of computers, available to everybody. Tapscott describes it as a ‘native medium for value’, where every kind of asset could be managed without the need for powerful intermediaries. Don Tapscott’s ideology of Blockchain being the solution to eliminating intermediaries in the economy is an insightful, logical outlook.
The first era of the internet brought economic wealth, but not shared prosperity, due to the growing social inequality in society (Tapscott, 2016). In today’s economy, the only approach to solving this inequality is by redistributing wealth and taxes and spreading it amongst civilization. Furthermore, Hernando de Soto, a great Latin American economist, stated that the number one issue in the world in terms of economic mobility is not having a valid title to land (Tapscott, 2016). Additionally, the ‘sharing economy’ giants are not embracing the potential behind a true sharing economy, and are simply intermediaries in their industries. Remittances, the biggest investments from the developed to the developing world (Tapscott, 2016), take days to arrive and charge large transaction fees. Finally, the era of the internet broke the intellectual property belonging to content creators, disincentivizing individuals, and decreasing prosperity. However, Blockchain technology has the potential to increase prosperity; by limiting intermediaries, as witnessed through cryptocurrency.
Monetary Policy can be defined as a process by which the government affects the economy by influencing the expansion of money and credit. Global currencies today are based on “fiat”, which means they are not backed by another commodity or valuable good (Bayless, 2018). The supply of these currencies is created and regulated by national central banks such as the Bank of Canada, which change the supply by trading government bonds to alter the interest rates in which chartered banks borrow money from the central bank. However, through Blockchain, the creation of cryptocurrencies has enabled people to ‘establish trust and do transactions without a third party’ (Tapscott, 2016). This is significant in that cryptocurrencies such as Bitcoin are no longer fiat currencies controlled by a nation-state, but instead, described by Tapscott, are controlled in a peer to peer network, contradicting monetary policy. This is the way that monetary systems were meant to be built; ruled directly by the participants in the system, rather than policies decided behind closed doors without community input.
The demand for resources, including labour, is known as derived demand, as it is dependent on consumer demand for the goods or services being produced. The demand for labour is therefore heavily dependent on consumer demand and productivity. With the transformation into an economy revolving around Blockchain, there has already been a shift in demand for the global product of labour; Blockchain Miners. Currently, with Blockchain eliminating intermediaries in the economy such as banks, credit card companies, etc., the demand for developers and Blockchain Miners is at an all-time high. Furthermore, Tapscott divulges into explaining how these miners have massive computing power at their fingertips (on a relative scale) about 10 to 100 times larger than all of Google worldwide. He also explains how these miners must be extremely productive and time-efficient, being that every 10 minutes individuals are competing across the globe to solve blocks in the blockchain, in order to be incentivized through digital currency. Therefore, the demand for labour is seen shifting from the financial industry to the computer science industry, driven by the demand for Blockchain technology and the productivity of workers.
Injections and leakages, used as methods of inputting and extracting money from the income-expenditure stream, are greatly impacted through the remittances sent and received internationally. Remittances, the biggest form of investment from the developed to the developing world (Tapscott, 2016), are sent from the majority of individuals who have left their ancestral land. Remittances account for over $600 billion in transactions a year (Tapscott, 2016), and is continuing to grow. The transaction fees are approximately 10%, and the money takes four to seven days to arrive at its destination. This is timely and costly and may disincentivize individuals from transferring funds in future years. However, by using an application called Abra, individuals are now able to send money along the Blockchain from their mobile devices in a matter of seconds. The transaction fee on the Blockchain is only 2%, and in addition to the timeliness of the process, by eliminating the intermediaries, injections into developing countries will substantially increase through investment spending in the form of remittances. Therefore, Tapscott pushes the combination of Blockchain and remittances, contrary to the government, as it will lead to a global economic balance, from the substantial investment fuelled into developing countries.
The Well-Being Index, used as a partner to GDP, provides individuals with a better understanding of wellbeing which measures real life. Instead of measuring simply one-dimension of our wellbeing — our economy, the CIW measures eight domains that focus on all aspects of prosperity. Currently, creators of content are not receiving fair compensation, as the system for intellectual property is ‘broken’. With high fees from management and intermediaries, individuals are not gaining access to the compensation they truly deserve, which negatively affects the CIW. However, with a new Blockchain ecosystem created for music, all music uploaded has a smart contract surrounding it, protecting the artists’ intellectual property rights. All aspects of copyright are automatically covered, suddenly turning a song into a business, with a payment system built-in. The importance here, however, is that the artists now control the industry, rather than ‘powerful intermediaries’. The same ecosystem has been developed for creators of any content, not just music. Tapscott is seen furthering the ideas mentioned throughout the course, creating the conclusion that this will have an extremely positive impact on the Well-Being Index, by increasing prosperity in the economy.
Gross Domestic Product is an essential aspect of macroeconomics. The GDP of a country measures the total market value of all goods and services produced in that country in one year. As a result of the reduced interest rates, lower transaction costs, and reduced tax rates of implementing a digital currency, GDP is expected to increase, while at the same time creating jobs through blockchain miners, leading to an AD close to the Full Employment Output. In addition, Tapscott believes that by being able to lower transaction costs and eliminating intermediaries, not only will the GDP be positively impacted, but the Well-Being Index as well, through an economy built off of peer to peer networking, established on trust.
Unemployment, used as a common indicator of economic health for the economy, will experience a large structural shift, due to the skills being demanded by the market to shift away from the Wall Street financial industry, and towards that of Blockchain miners. In the current financial industry, when one makes a purchase with their card, the transaction is transferred through a dozen companies, and three days later, a settlement occurs (Tapscott, 2016). With a blockchain financial industry, there is no settlement, as the payment and the settlement occur as one activity; a change in the ledger. As a result, Tapscott furthers the same ideology of unemployment, by explaining how the entire financial industry, including Wall Street, is ‘in a state of panic’, as they will either be replaced by Blockchain miners or pushed to learn the skills themselves. This will result in structural unemployment, and until the demand for mining jobs is fulfilled, a Recessionary Gap will occur, as AD will intersect to the left of full employment.
To conclude, Don Tapscott’s Ted Talk, How the Blockchain is changing money and business, builds off of the ideology that an economy built entirely around the ‘trust-building, world-changing’ Blockchain will have an extremely positive impact on the future of the global economy. His foundation is built off of the principles of shared prosperity throughout the economy, which is only possible in an economy modelled after a peer to peer relationship. With social inequality continuing to grow, it is with great certainty that Don Tapscott pushes Blockchain’s possibilities, in saying, “[Technology][has][provided]… another opportunity to rewrite the economic power grid and the old order of things, and solve some of the world’s most difficult problems, if we will it.” (Tapscott, 2016)