The Web3 Revolution with Alex Tapscott
Alex Tapscott is an entrepreneur, author and seasoned capital markets professional focused on the impact of blockchain technologies on business and financial markets. In 2016, Mr. Tapscott wrote the foundational best-seller, “Blockchain Revolution.” In his latest book, “Web3: Charting the Internet's Next Economic and Cultural Frontier,” Tapscott gives a road map for the emergence of the “read, write and own” web.
In their Money Movement conversation, he and Jeremy Allaire discuss:
- [9:16] – The coming primacy of the wallet
- [18:56] – Programmable money
- [16:30] – Why Web3’s impact will be so big
- [28:22] – A new way to organize and govern value
If you’re interested in learning more about the foundations and implications of Web3 from one of its foremost experts, tune in to this episode of The Money Movement.
Jeremy Allaire:
What we're really talking about is the creation of an economic layer on the Internet. Hello, I'm Jeremy Allaire, and this is The Money Movement. I'm really excited today to have as a guest Alex Tapscott, who is a author and thinker and speaker, and I think really someone who has helped on a more popular basis understand blockchain technology now for almost a decade, and recently published his latest book, Web3: Charting the Internet's Next Economic and Cultural Frontier, topics that are near and dear to me. Alex, really great to have you on The Money Movement.
Alex Tapscott:
Yeah, great to see you, Jeremy. Thanks for having me.
Jeremy Allaire:
Yeah, absolutely. I want to use this episode really to, I want to pursue some of the ideas in the book course and their sort of themes that I think I'm really passionate about that we can kind of riff on. But I also view this hopefully as an opportunity to create a narrative and a piece of content that can help a lot of people who are really not close to this. I mean, we're really up close and know this extremely well, but I find traveling around the world, interacting with a lot of different constituencies, whether it's in the media or in government or just civil society, when people say, you know, Web3 is this next iteration of the internet, it often leads to like blank stares.
And I think like there's a lot of jargon out there. Web 2.0 was like jargon back when we were doing blogs and the birth of social media and online media and stuff like that. And so to some degree, right, no one really cared about Web2. They cared about that they were using Facebook or Twitter or they were blogging or they could get YouTube or whatever the apps of Web2 were. But I do think that when three really gets at a fundamental change on the internet, like a very, very fundamental change. And I think there is an opportunity here to really, on a mass market basis, help explain this next evolution of the internet. So given, you know, journey here, maybe you could start, very high level. With your best two-minute rendition of what you think Web3 represents.
Alex Tapscott:
Sure. Starting the timer now. I think the future is bright, but it's not always clear. And I think when it comes to Web3, there's been a lot of fresh mud that has gotten slung onto the windshield and clouded people's view. So yeah, my hope is that the new book will help to reset the conversation about Web3 by highlighting the ways in which it's changing the world in positive ways. So yeah, the two-minute summary. Well, first era of the Web, what in jargon we call the read Web, but I think what a lot of people remember is the dot-com era, was basically a medium for the presentation of information on static websites. So you log on, type in a URL, you could see a website, you could see images, you could see text, but you didn't typically interact with it. You weren't uploading your own stuff, and you weren't really using the Web as a way to find a community or publish information. Still, despite that, it was revolutionary because it democratized access to information, at least for people who had an internet connection, which is a big if. Web2, which we've kind of been living with for the better part of two decades, changed the Web from a broadcast medium to a collaborative medium, basically a way for people not only to access stuff, but to share their own content, to share their ideas, photos, recipes, you know, you name it, and to find like-minded communities online. And in a way, it was successful in doing that. You know, Web2, broadened the number of people who use the internet and gave a platform to people who maybe didn't have a way to access an audience.
So in a sense, it kind of democratized access to publishing. But it came at a very steep, what happened in Web2 was that large platforms captured most of the value, user-generated data became the most important asset class, and all of the wealth creation happens at the platform level and not at the user level. And I think in a way, the idea of the Web as a decentralized open network was unfulfilling. What happened in Web2. So enter Web3, what they call the read-write-own Web. So now, not only is the Web a way to access content or to publish information and find your communities, but it's also a way to basically own the digital asset class of this age, own our own data, own our own digital creations, and to be able to own and control assets, financial assets like money, but anything really of value in a way that I think puts power into the hands of internet users at the expense of the internet. And I think that's a way to really build a community. And I platforms give them more freedom and autonomy and more privacy online. And I think in a way that helps to both fulfill the original vision of the Web, but also add to it. Because now we have this economic layer that I think, like all other eras of the Web, is going to be transformational for business, but also for culture, society, and much else.
Jeremy Allaire:
It's really interesting. As you know, I have myself sort of been through the Web 1.0, Web 2.0, in this Web 3.0 world and building infrastructure throughout. And I think something that you've just touched on and I think is animated throughout the book as well is this idea that there's like an economic layer of the internet, that there hasn't been an actual economic layer on the internet. There's been an information layer, a data layer, a communications layer, and to some degree, there's been a transaction layer in terms of people conducting e-commerce, but this idea that we're moving the actual foundation of the economy, the economic system, onto the internet. I think it's a big idea and really need to step away from crypto and Bitcoin and, and, you know, a lot of the things that if you start talking about this with the average person, right.
And you start saying Web through what is Web three, well, it's building on crypto technology and blockchain. And then people just start to go, no, you're, you're talking about that crazy gambling, criminal stuff, or whatever the filter is, right? But at a fundamental technical level, what we're really talking about is the creation of an economic layer on the internet. I'd love to explore that a little bit with you. It's in the title of the book, obviously, as well. What is that economic layer? You mentioned there's ownership, or there's having ownership of your data, or there's having ownership of your identity, or having ownership of value. But specifically, like, what does it mean to have a new economic layer? On the internet.
Alex Tapscott:
Yeah, absolutely. Well, for those folks who hear the word cryptocurrency and Bitcoin and start to get confused about Web3, the way that I sort of describe it basically is that it's true that having thousands and thousands of cryptocurrencies isn't a particularly useful thing because currency is supposed to be something specific, a unit of exchange or a medium of exchange. Currency is a misnomer. Yeah. In other words, currency is a misnomer. What these digital assets are trying to be is lots of different things. And so I think that term, the term token, even though the term token is a little lighthearted, you know, a token of my appreciation, I actually think it's a very appropriate term to describe this, digital tokens. Digital tokens. And a token can best be thought of as just a container for value.
So in the same way a shipping container can contain, you know, most goods, you know, a computer, a car, food and so forth, a token can be programmed to represent anything of value. And in the same way that the intermodal shipping container can be programmed to represent anything of value, it can be programmed to represent increased economic activity by four or five hundred percent, depending on which study you look at. The same, I think, will be true for tokens. Tokens are a standard unit that allow us to move and store value peer to peer. And that can be any kind of asset. In the case of Serbol, it can be US dollars, which have clearly found product market fit at over 130 billion of circulating supply for the whole market. But it can be anything else that can be programmed into a token. So that economic layer starts fundamentally with the idea of the asset. So the token. Now, in terms of what it means in practice, well, I think it means that individuals have more autonomy and more control over their economic lives online. The desktop is the way we access Web 1 and the smartphone was how we access Web 2 primarily. I think of the wallet as the sort of interface in a way for Web 3. And in the same way that your wallet, your physical wallet can contain things of value like money, but also ways to prove value. So the token can be a way to their identity. You know, your driver's license.
We're in Canada where we have universal healthcare health card, which allows you to get health care, any hospital in the country. Same can be true for Web 3 and wallets. So you have a way to have custody and control over your assets, your value, but also credentials and other parts of your data. And that's going to, I think, change the dynamic between plat like Internet services and users. One example of this that you really know is the DeFi space. DeFi is its own frontier within Web 3. Where smart people are trying to reimagine financial services from the ground up. You know, we hear a lot about fintech, and I think a lot of fintech is mostly just digital wallpaper. It's a way to sort of make the experience of accessing the old world.
Jeremy Allaire:
And I pour, impolite, I say lipstick on tag.
Alex Tapscott:
Yeah, well, there you go. But like under the surface, you've got all the same infrastructure, it's still the same pig, right? And so with DeFi, what people are trying to do is reimagine from the ground up how we move value, how we store value, how we access credit, how we trade, how we organize financial information, how we do identity, you know, like credit scoring even, all this stuff from the ground up. But what's different about DeFi is that is that DeFi turns users into owners. So the more you use a DeFi platform, the more of that platform you own. So a good example is something like Uniswap. So Uniswap is a decentralized exchange. Instead of having a central order book like Nasdaq or the Toronto Stock Exchange, it's a smart contract that connects buyers and sellers.
So it can have a theoretically unlimited number of trading pairs. But in order for trading pairs to be useful, you need market depth, you need liquidity. And so Uniswap basically incentivizes people who are large traders on the platform or liquidity providers with ownership in the platform. So the more you contribute to something, the more of it you own. And so in a way, these platforms, which are worth billions of dollars, even in this market that we're in, are in pretty much entirely user-owned. And so to me, that's the concept we can then apply to other applications and services. You know, I don't think that Facebook is about to turn itself into a platform. It's not going to turn itself into some user-owned network or Uber is going to turn itself into some driver-owned network or something like that. But I think that the next iteration of services and applications will start with that premise. Indeed, they already have in DeFi, but they will in other areas. And I'll just add one more thing, which is other than ownership is great, what's the purpose of this?
If you wanted today to basically make owners out of your users and you were a traditional corporation and you were, let's say, a software company launching in 50 countries, you could not do it. Like you would have to do options agreements in 50 countries in a dozen languages and have lawyers enforcing the terms and so forth. But with a token-based model, you can create an easy way to align the incentives of users, developers, and other contributors with the platform itself. And I just think like we've seen it work in several areas within Web3. And I believe it's something that will get applied much more to other parts of the Web.
Jeremy Allaire:
It's good explanations. And I think like helping people, from like the way in which you can kind of dramatically restructure our experience of things by moving to these sort of fully internet native models, by analogy, right? I think when you made it possible for anyone just to, with a mobile device, to download a piece of software and, participate in massive global communications networks, right? It wasn't so much like, oh, I'm replacing my telephone company. It's just like, no, this is just like this radically better thing where, you know, whether it's WhatsApp groups and it's messenger groups and it's all of these things like that, or, you know, people weren't saying like, well, I really want to have a new entertainment network.
Well, no, one was created by people having something like Instagram or TikTok, like basically creators, creating probably these two things, probably the biggest entertainment platforms ever created in the history of humanity and where it's user-driven, right? I think people can relate to the user-driven nature of this. And it can also be at not just the mass consumer level, right? It can be very, very specific ways. It could be, as you write about in the book as well, there can be these DAOs or basically these decentralized organizations of people of shared purpose, shared interest, or that are working towards common goals that happen to find themselves connected on the internet. And now they have a way to structure their work, to structure ownership, compensation, economic arrangements, and all that can be done entirely directly on the internet on a multinational, truly open basis. And so I like to think about Web3 as sort of creating, you know, new building blocks, again, capturing a little bit of the title of the book, new building blocks for society and the economy to construct new ways to make things, new ways to participate in economic value or artistic value or in all these different domains. There's really at the foundation of it or yes, it's digital tokens, smart contracts, wallet technology. And so in many ways, that part of it, the technology part of it, tokens, smart contracts, stable coins, wallets, like That's gonna increasingly go into the background, just like pipes and plumbing and stuff, and developers will care a lot about it. They'll care a lot about those things, about making sure that they're fast and reliable and safe and globally available and trusted and all those things. Like, I almost think about that as like, developers care about iOS and Android, but users just care that they've got great applications that work and sing, right?
So I think the Web3 technology It's front and center for people like us. It would go in the background. And what we'll end up with is these completely new capabilities that society is interacting with that they haven't had before. Just like we had with Web2, right? No one asked, no one sort of thought, oh, there's going to be a decentralized transportation and logistics system that people just use with VPSs and touchscreens and mobile applications. Like that got created and that it was like a new capability for society to orchestrate transportation. Right? Same kind of thing here. These apps are going to surface and the creators are going to kind of think through what to build. And we're really in the early stages of that exploration, obviously.
Alex Tapscott:
That reminds me of a very famous quote from Clay Christensen, where he said that markets that do not exist cannot be analyzed. Not only are they unknown at the time of their creation, they're unknowable. And I think that's something that we have to keep in mind. You know, when the first era of the Web came along and people were looking at it, I think a lot of the early examples were what they call skeuomorphic, right? Meaning sort of rooted in the old way of doing-
Jeremy Allaire:
PDF of the New York Times front page.
Alex Tapscott:
Yeah, exactly. Classified sports scores, etc. But all of these other sort of social apps or geospatial apps, as you're describing, you know, Uber. I don't think we're on the, there were smart people probably thinking ahead, but most people, that was not part of their, you know, vision of what the internet was. The internet was a broadcast medium for information that anyone could access. It was of dubious quality because anyone could upload stuff, right?
Jeremy Allaire:
Just didn't work well. And it was the worldwide web and dial-up modems were terrible and Windows was buggy and it was like really bad.
Alex Tapscott:
Exactly. So I actually think of like Web3 and I see some of the early examples. It's a cliche, but if email was the first sort of killer app of the Web, then maybe Bitcoin was sort of that first killer app of-
Jeremy Allaire:
I like to think stable coins
Alex Tapscott:
Of Web3. Well, you know, in a way you're probably right about that. And stable coins, I mean, this as a compliment, they're kind of a skeuomorphic thing in a way. It's like, look, we're going to take this, we're going to take this token, this artifact, and we're going to do something with it that we know the world wants. Everybody in the world wants a US Dollar bank account. And everyone wants a way to move in store value where they can get a lot of money. And I think that's a really good point. They can control it where they are not subject to inflation or corrupt banking or corrupt governments where they have autonomy. Okay, let's deliver that service, right? And so, yes, there's clear problems.
Jeremy Allaire:
They do know they want those programmable, composable, open, interoperable money as well. That's the part that they don't know that they want. What I call latent aspiration. The latent aspiration is actually like this extraordinarily high velocity programmable money, but that's the Web 3. That's really the Web 3 unlock, right? As opposed to like ads to the better version of wires and PayPal or whatever.
Alex Tapscott:
Don't sell yourself short. Like a better version, a far better version of how people move US Dollars around the world is kind of a big market. But I agree with you that all that other stuff is, you know, where we go from there. It's sort of like everybody in the world wants a US Dollar bank account. Once they have it, what else they want? They want a U.S. Dollar investment account, or they want a way to use those.
Jeremy Allaire:
They want to borrow and lend, or they want to conduct, they want to enter into economic contracts. They want to supply their labor and get compensated. They want to make things and sell things and distribute things. And, you know, they want to be in the digital economy.
Alex Tapscott:
Yes, exactly.
Jeremy Allaire:
Now we can intermediate the economy, the real economy in software with smart contracts and these Web three primitives as well.
Alex Tapscott:
That's something we said with blockchain revolution. It's like, in all likelihood, this should be more impactful than the prior eras of the Web.
Jeremy Allaire:
And that's since I started the company. That was actually one of the reasons why I started Circle is literally, I was like, I think this is going to be bigger than the Web over the long run. I want to get started now. It was 10 years ago. It was early, right? I want to get started now because this is going to take a while, but I think the ultimate impact. Of this should be far, far greater than the Web because the Web is just about information and this is the actual economy.
Alex Tapscott:
Yeah, that's right. And so on the democratization front, the low hanging fruit is now we all have a way to move value pure. And it could be, you know, right now, US Dollar stable coins are the ones that have found product market fit. But I think that there will be other, you know, obviously other assets will expand that franchise for people who want different stuff. But bigger picture, like what that means is that we can have people in disparate parts of the world, all connected into the same economy and operating on a somewhat more level playing field. You know, I'm not like delusional. We live in a very unequal world. But if the internet, you know, the first areas of the Web, you know, made it so that people could access information and publish and whatever, then what Web3 does is it empowers them with a different kind of toolkit, a way to move value, store value, and maybe build wealth. And that was the part that would just like get compensated in the asset. So if you have a way to trade your labor for money for a global distributed organization that doesn't really care if you're in Lagos or Manila or Toronto, then all of a sudden you have a way to plug into a labor market that doesn't exist at the local level. And now we have a payment tool to ensure you get compensated. That's a good thing. I think we have to say that. But there's also all sorts of negative externalities from that potentially. One is what happens to the software engineer in Toronto.
If there's someone in, you know, another part of the world competition, it's globalized. Could it grow the pie? Like that's my view generally when it comes to these things, but it could on the meantime cause some dislocation. There's another thing too or that they have less control over the money supply and the balance of accounts than they would like. And what happens if everyone starts using US Dollars? And that's the same thing that's true in Nigeria as well. In the book, I actually talk about a company called Acorapay, which helps companies that operate in Africa repatriate dollars to the United States. And these can be big companies, hypothetically, like Coca-Cola or Colgate or something like that. And the easiest way to do that is actually to exchange the local currency into USDC and USDT and then repatriate it in the United States. It's a way to do it within seconds or minutes or what have you at that cost. And so I always thought that was interesting. And to me, that's an example of taking the Web3 toolkit and putting it into regular business. But the more interesting insight from him was that all of his employees, if given the opportunity, would prefer to get paid in USD or even Bitcoin, even though it's a volatile.
Jeremy Allaire:
It's Naira.
Alex Tapscott:
Versus Naira, because they view it as a better store of value. And in the case of US Dollars, it's actually more fungible like it's more useful for a lot of things which is surprising i think to a lot of people the dollar's got network effects yeah well exactly u.s dollar exactly so you know this will have an impact that is positive but also straight affected and who knows how it's all going to kind of shake.
Jeremy Allaire:
If you really drive deeply into that, what I almost think of as like systems of monetary policy, systems of law, systems of governance, like these are, The monetary systems, the legal systems, contractual systems, governance systems, these are systems that basically until recently have only existed offline. They've only existed mostly in human-mediated bureaucracies and on paper, literally, right? And in some ways, society's never had the toolkits to manifest governance contracts. Ownership and monetary mechanisms of the monetary system. They never had the actual toolkits to do those entirely in software and do those at internet scale and do that with the reach of every device in the world, right? To me, that's like the massive inflection point that Web3 represents is we have these toolkits. We can actually, like Clean Slate, I love DAOs, just as an example.
If you take a Clean Slate and you sort of say, hey, I want to create a global organization and I want to enlist people to contribute to that organization. I want to make widgets. They could be a knowledge output, like a knowledge worker output. It could be something that's created that is itself digital or informational or software or what have you. It could be, I want to do architecture. I want to build a global architecture firm or whatever it is. And I want to create that. And I want all the participants to participate in it through a system of governance that's mediated by tokens and smart contracts. And I want the entire treasury, meaning the money of that organization, to be all managed and intermediated by smart contracts on a blockchain using safe digital dollar cash instruments in a treasury system. And if I have people who work for me, I want the labor contracts implemented in code, and I want my invoices and trade agreements implemented in code. And if I need to borrow capital, I can let someone see with zero knowledge proofs what my cash flows have been, and then someone can write credit against it, and I can borrow money, and I can employ people everywhere as long as they have a smartphone or an internet connection. And people can contribute value, they can produce things, they can participate in decisions, and you literally can take governance, contracts, money, and you can operate that entirely as you want.
And that is that digital organization. And that to me is in, I think it might be over the next 10 to 20 years, you know, like you said, Web 2.0 has taken us 20 years to where we are today. Like over the next 10 to 20 years, that's what I'm excited to see. I want to see breakthrough organizations that get created that just couldn't be created under technology. The existing realm. And then to your point about governments and what happens that whether it's positive or negative externalities, like, Governments will have to adapt, right? Because then people in their societies are saying, hey, this is a better system. I want to be in this system. Just like governments didn't stop audio streaming because they wanted to control audio broadcast in their country. They just, they sort of said, okay, anyone can broadcast to my people in my country. I can't stop that now. It's genies out of the bottle. What do we do? And so I'm interested in seeing those kinds of organizational innovations evolve as well.
Alex Tapscott:
Well, so am I. And I mean, you outlined it so well. In a way, this makes sense that there should be a new way to organize and govern value and resources for the digital age, because there was also a new way to organize and govern value for the industrial age. It was called the joint stock corporation, joint stock corporation, like little history lessons for listeners. It's like the first joint stock corporations really were formed during the age of exploration because it was extremely risky to send a bunch of ships out into the middle of nowhere and hope that they return. But if you pulled all that risk across a bunch of different people, then, you know, everyone only stood to lose a little bit. Right. And that also led to the creation of the modern insurance business. You know, Lloyd's of London was coffee shops where people would basically underwrite policies on ships. That was all that would deal. That was the only business in town was shen stock could be traded on an exchange. That's right. And then you get all this other stuff and it's all this. It all kind of comes from that. Right.
And so like in a way, like the joint stock corporation, it's like, oh, I'm going to do this. I'm going to do it. It's like the killer app for industrial age undertakings. You know, you need to, you need to build a railroad or a coal mine or a steel works or something. You need a mechanism to do that. You couldn't do that with a sole proprietorship. You need a joint stock company with a limited liability. So that makes perfect sense. But now we're in a digital age where a lot of new innovation is happening as software, as networks that are global, that are maybe a bit more capital light than industrial undertakings. So you need a new asset class and a new set of tools to govern an organized value. Right.
Jeremy Allaire:
That are global scale by nature.
Alex Tapscott:
Yeah, that's right. That went back to just my one small example is like, how do you even make everyone an owner in a global organization under the corporate framework? It's actually impossible. You need this other way to do things.
Jeremy Allaire:
Yeah. So I've obviously, there's a lot of shared excitement around all these ideas, right? I think one of the things, and it gets to one of the earlier comments is like the innovators are going to go plow ahead, right? And then governments are going to say, well, hold on. What you're doing is you're selling a security or what you're doing is you're forming a corporation and we've got laws on corporations in Delaware or in whatever country you're in. And by the way, we have those laws because we have. Treasury departments that collect taxes and we got to finance the roads and schools and militaries and like the sort of real world starts to interact and like the ability to collect taxes, enforce and resolve disputes. Like, reality tethers itself to all of this. And so I think this is one of the most interesting areas of work, which is, How will... And how will governments adapt to these new organizational forms? And will there, almost certainly there will, but I'm posing it as a question, but it's also a how question is, Will there be new systems of law that adapt to this? How long is that gonna take? Because it's gonna have to happen, right? We had new systems of law for e-commerce and the internet have adapted. There's a bit of a laissez-faire approach there, but this feels higher stakes in some cases, but it really feels like for this to take hold, you need to be able to have a way to recognize what a digital entity is and how enforcement of various disputes or other things happen. And there's obviously the purist view, which is you could have decentralized courts and you could have decentralized mediation and the like, and maybe that's part of the answer, but sort of when reality and the law runs up against this pure digital economy,
Alex Tapscott:
Yeah. Well, it's something we've seen time and again with other technologies. When the first automobiles were invented, they introduced in England these things called red flag laws, which required every car to have a driver and also a person walking in front of the car waving a red flag. And the reason was that they didn't want to startle horses or pedestrians. The laws in that case were designed to accommodate the old paradigm, not the new paradigm. And those laws were repealed. But that to me is an example of what happens when you regulate too quickly. I would say that in the case of the Web, it is true that the first era, it definitely was laissez-faire in the sense that what you said earlier, because it was an information medium, information is regulated. There's an FTC and so on and so forth, but it's way more lightly regulated than everything else. There's a freedom of speech, which gives broad latitude people to do a lot of things with information. When it comes to value, I mean, maybe there should be, but I don't know that there's a freedom to transfer value in trying...
Jeremy Allaire:
Right. Law. Governments have that law.
Alex Tapscott:
Yeah, exactly. So it's highly regulated industry, financial services, incorporating companies, the law, like legal professions, all these things you're describing, governance contracts and value movement are all highly regulated. So Albert Wenger at Union Square Ventures told me when I interviewed him for the book that the first era of the Web had regulatory tailwinds, but he thinks that this next era has regulatory headwinds.
Jeremy Allaire:
I felt some of those breezes over the last 10 years.
Alex Tapscott:
Yes, I'm sure that you have. And it's like, yeah, there were some issues in the Web. I believe that the first version of Netscape that shipped internationally, they had to take out SSL encryption because it was still weapons-grade cryptography. But that got amended. You know, there were people who said that if you launch a website, you needed a CB radio license because you were a broadcaster. But that never got off the ground. And in the end, what we ended up with was a set of new laws in the 90s that kind of built on or modified what existed before and made it so that the commercial Web could really thrive. To my knowledge, I'm not aware of any attempt to do that. Certainly not in the US, but even anywhere. Like, I'm not sure anyone's thinking in that kind of way.
Jeremy Allaire:
I would love to see a corporate law, for example, modified to support digitally native organizations. I would love to see securities laws and so on amended to allow for, like, digital tokens as a mechanism. Yeah. It doesn't have to actually be an equity contract. It can be something else. Right. So I think we need acknowledgment of some of these things. And some of these are clearly, you know, mechanisms of economic investment and value exchange that are equity-like. And some of these digital tokens are clearly just information and data. And some of these digital tokens are clearly just commodities of different types. And we need, I think, just some statutory definitions for, like, classifications of different types of digital tokens. And when issuing and selling them is one activity. So I think that body of work. And I'd really like to see, again, like corporate law modified. As you've seen Delaware first, like you had a cap table on a blockchain that was sort of a marginal improvement. And then you have the Wyoming Dow laws. You're seeing some countries create Dow laws, again, modifying kind of corporate law. So I think some of these things can happen incrementally and adapt to the innovation. And then if some of that happens and you start to see more scale happening, then I think you could see more rapid progress internationally and then some normalization around that. Again, this can be decades, right? This doesn't necessarily happen super fast, but it does seem like I have this concept that law and policy more or less just follows the will of society. And it's actually, you know, technology innovations and social and coordination innovations are driven by people and entrepreneurs. And that's just what happens.
It sort of these things birth and they grow and they take hold. And then law and policy adapts to those, right? So I think there's a push and a pull to that. And, you know, we're seeing that with AI right now. Now we decades of work that was completely outside of really any real regulatory arena at all. And then you hit an inflection point. And now AI is like, it's sort of like the weapons grade encryption back in the day. It's like, okay, we, you know, they're looking at ways that you might regulate this. Crypto is the same thing. It's a very, very powerful, very, very disruptive technology that just breaks everything. The way in which the old system had been designed. But these things will keep happening and then law and policy will adapt. I'm always the optimist and it's just, I'm optimistic over the long run and then how you chip away at it.
Alex Tapscott:
I'm with you. Yeah. The point about AI is well taken. Every technology looks like an overnight success story from that. But the reality is they're typically decades in the making. To me, AI being the ultimate example of this, you know, Alan Turing, the inventor of cryptography and computing and AI in a way, by developing the Turing test, was the first to kind of muse on this idea of artificial generalized intelligence. And it took 80 years for us to get kind of anywhere close to that. So that's an interesting sort of thing to reflect on when you're viewing the long arc of history for Web3 and crypto. But then the other thing when it comes to, you know, laws and regulation in the book, I say that Silicon Valley was once called the tech Galapagos because of the very unique set of conditions that existed there and nowhere else that led to the species of, you know, companies that kind of dominated the first eras of the Web. But now those conditions exist elsewhere, maybe everywhere. And so one place isn't going to necessarily dominate this next era the way it maybe had in the past. And that's certainly true when it comes to a technology and capital and talent perspective.
But on a regulatory perspective, you know, we still have governments are extremely important stakeholders and laws matter. And I think to your point, if you actually want this stuff to reach its potential, the law needs to adapt to create the conditions. And as someone, you and I both have this in common, which is we talk to enterprises like big companies and most big companies won't invest in a new technology over the long run in a regulatory vacuum. They want clarity. I don't think it's enough to say, well, if it doesn't happen here, it'll just happen somewhere else. I mean, I think that's true, but for it to reach its potential, it needs to happen everywhere.
Jeremy Allaire:
Absolutely agree. And I was on a panel yesterday and the final question, it had to do with the adoption of like stable or digital dollars or whatever. And, and the, the last question was what's the most important thing that needs to happen in 2024 for this to achieve the mainstream scale. And one of the panelists was a former regulator and a lawyer, very prominent person. And they were like legal certainty. We need to have legal certainty because if we have legal certainty and we we've created these laws, then like exactly what you said, like corporations and households and financial institutions, they'll know where they stand. They know what this is. They know how to treat this and use this. And I think that's true. So that is like, that has to happen. I'm of course the technologist.
So my answer was all about technology and, and sort of technology per the conversation we've just had, right. I view if the technology progress continues, then the law has to follow. And it just like, it gets so usable that anyone can download a piece of software and without knowing anything about crypto or blockchains or which chain or gas fees or any of the stuff that makes this complex and early adoption. Enterprise or you're a brand or you're a retailer or you're a media company or an entertainment company or just a plain vanilla widget maker, like there's a lot there's a lot of really exciting things that can happen and and frankly, don't even need necessarily a lot of regulatory clarity because NFT technology is like a general purpose technology that can be used to do a lot of things. Maybe you could just talk for a minute about what's the low hanging fruit if you're advising, as I'm sure you do many corporations, you know, what's the low hanging fruit that isn't like go build a room in a metaverse. It's just like, what can I actually what can I use this technology to do that can activate my business in some new way?
Alex Tapscott:
Yeah, totally. Well, I think before I answer that question, it's it's important to just talk about the evolution of what enterprises have done in this space. So in the very early days, meaning like six years ago, they loved the idea of shared record of truth and, you know, tokens, but they didn't like the idea of obliterating the idea of sharing the truth. So they didn't like the idea of sharing the themselves up to public blockchain infrastructure because they viewed it as sort of a little too early for prime time. And in a way, that's very reminiscent of what happened during the early era of the Web with intranet. Yeah, it's like the idea of the intranet, but they didn't want to Go to that place where all those libertarians and yahoos will sound familiar. You know, it's not a feature sound. History doesn't repeat, but it rhymes. Or maybe it just repeats in this case. But anyway, the point is that nowadays, most enterprises, when they try to do something in this space, they're doing it on public infrastructure. So that's a big plus. You know, in like Circle, I think most of your circulating supply is very unfazed. And on other public chains, you know, Cosmos, Solana, et cetera. You're an example of that. But even like traditional legacy companies, that's where they're doing Starbucks NFTs or whatever. Starbucks NFTs, LVMH, Tiffany's CryptoPunks collaborations, Solana Merchant Settlements for Visa, PYUSD, also Ethereum main chain. So a lot of it's all happening on public blockchains. I think that's an important thing to just remind ourselves of. Except for like J.P. Morgan and Citibank and those groups, they seem to be still doing their own thing, which I even view that as a positive because it's part of the journey.
Jeremy Allaire:
And they're still like proprietary, physically separated, segregated, wide area networks that are used for the military or whatever. And like, they need to do that, right? They don't need the, they're not going to use the public internet always. So there is always going to be that segmentation. But I think the scale opportunities, right, are when you get internet scale and internet reach.
Alex Tapscott:
Yeah, exactly. And so, so to me, it's, why do you do it? Well, you do it to create a new product, service, or tap into a new customer segment or market that you couldn't before, basically. You know, I look at the example. I have Nike with Artifact and Dot Swoosh. What business is Nike into? It's in the business of, you know, honoring creators and athletes pretty much. And having ways for you as a customer to express your, you know, alignment with those brands. That can really be in the physical or the digital world. And in fact, as more and more young people spend time online, and if, you know, prognosticators are right, that eventually we'll have a spatial Web and, you know, our avatars will be a big part of our lives. Then, of course, your presentation of digital self is going to be as important as your present, you know, digital self. So, you know, being able to get ahead of that with collections of digital assets that do the same thing that, you know, sneakers do. That's basically an example. Steve Jobs once said, you know, shoes are a commodity.
So why is Nike worth so much money? It's like, they're not a shoe company. They're in the business. I stole that from them. They're in the business of honoring creators now. Yeah. You know, and so there's lots of ways to do that. Same with luxury brands. Like, what are luxury brands in the business of? Selling scarcity, pretty much. Artificial scarcity. And maybe this is a bit cynical, but they make fewer items, sell them for more money to create the illusion of scarcity. And digital goods are a way to create scarcity. And then more fundamentally, the big payments companies who are interested in stablecoins, I've always found their foray into this space kind of amusing because it's like, oh, PayPal's here. Now stablecoins are, they're being adopted by the big guys. I'm like, have you seen Circle and Tether? Do you remember Disney Go?
Jeremy Allaire:
Yeah, exactly. It's like, yeah, it's getting popular. They've been involved. They launched these big initiatives. And then what happens?
Alex Tapscott:
Yeah, yeah, exactly. And it's like, FYI, this is a massive market that's been around for several years. You know, you might have a hard time actually catching up with the new guys. So just to finish the thought, what I'm seeing is A, public blockchains. B, what I view is like the Web3 toolkit. I remember the old pilots from 2015-16. It was always trying to boil the ocean. You know, let's move our whole trade settlement for our entire business onto some proprietary closed blockchain. It's like that was never going to really happen. What they needed to do was to experiment and start by experimenting, but become more and more broad commercial applications of the toolkit. And I think that's kind of how I view it today with Web3. They're reaching into the toolkit to create new product services, target new markets, or access new customers. I'm like, that's a very good thing because all of that is helping to drive both user adoption, enterprise adoption, and in the end is going to help to scale the technology too.
Jeremy Allaire:
That's awesome. And now we're coming up on time. And we've covered a lot of ground here and we can talk for hours. Really appreciate you coming on. I feel like this is an exciting moment. I really feel like this is an exciting moment. And I remember the transition from Web 1.0 to Web 2.0 and you could feel it. And then people are turning on their broadband connections and you're like, and the software was getting better. And like, you're like, this is, you could really, really feel it. And I feel like that's right where we are with Web3. It's like the broadband is just getting turned on and people are really, really starting to build more interesting things. And if I go back to like 2003, 2002, 2003, 2004, which is sort of the early stages of Web 2, like I think that's kind of where we are. And, and it really accelerated fast after that. It accelerated dramatically over like the next five to 10 years. So I think we'll have a lot to reflect on together in the coming years.
Alex Tapscott:
I look forward to it.
Jeremy Allaire:
Awesome. Thank you, Alex.
Alex Tapscott:
Thank you, Jeremy.
What we're really talking about is the creation of an economic layer on the Internet. Hello, I'm Jeremy Allaire, and this is The Money Movement. I'm really excited today to have as a guest Alex Tapscott, who is a author and thinker and speaker, and I think really someone who has helped on a more popular basis understand blockchain technology now for almost a decade, and recently published his latest book, Web3: Charting the Internet's Next Economic and Cultural Frontier, topics that are near and dear to me. Alex, really great to have you on The Money Movement.
Alex Tapscott:
Yeah, great to see you, Jeremy. Thanks for having me.
Jeremy Allaire:
Yeah, absolutely. I want to use this episode really to, I want to pursue some of the ideas in the book course and their sort of themes that I think I'm really passionate about that we can kind of riff on. But I also view this hopefully as an opportunity to create a narrative and a piece of content that can help a lot of people who are really not close to this. I mean, we're really up close and know this extremely well, but I find traveling around the world, interacting with a lot of different constituencies, whether it's in the media or in government or just civil society, when people say, you know, Web3 is this next iteration of the internet, it often leads to like blank stares.
And I think like there's a lot of jargon out there. Web 2.0 was like jargon back when we were doing blogs and the birth of social media and online media and stuff like that. And so to some degree, right, no one really cared about Web2. They cared about that they were using Facebook or Twitter or they were blogging or they could get YouTube or whatever the apps of Web2 were. But I do think that when three really gets at a fundamental change on the internet, like a very, very fundamental change. And I think there is an opportunity here to really, on a mass market basis, help explain this next evolution of the internet. So given, you know, journey here, maybe you could start, very high level. With your best two-minute rendition of what you think Web3 represents.
Alex Tapscott:
Sure. Starting the timer now. I think the future is bright, but it's not always clear. And I think when it comes to Web3, there's been a lot of fresh mud that has gotten slung onto the windshield and clouded people's view. So yeah, my hope is that the new book will help to reset the conversation about Web3 by highlighting the ways in which it's changing the world in positive ways. So yeah, the two-minute summary. Well, first era of the Web, what in jargon we call the read Web, but I think what a lot of people remember is the dot-com era, was basically a medium for the presentation of information on static websites. So you log on, type in a URL, you could see a website, you could see images, you could see text, but you didn't typically interact with it. You weren't uploading your own stuff, and you weren't really using the Web as a way to find a community or publish information. Still, despite that, it was revolutionary because it democratized access to information, at least for people who had an internet connection, which is a big if. Web2, which we've kind of been living with for the better part of two decades, changed the Web from a broadcast medium to a collaborative medium, basically a way for people not only to access stuff, but to share their own content, to share their ideas, photos, recipes, you know, you name it, and to find like-minded communities online. And in a way, it was successful in doing that. You know, Web2, broadened the number of people who use the internet and gave a platform to people who maybe didn't have a way to access an audience.
So in a sense, it kind of democratized access to publishing. But it came at a very steep, what happened in Web2 was that large platforms captured most of the value, user-generated data became the most important asset class, and all of the wealth creation happens at the platform level and not at the user level. And I think in a way, the idea of the Web as a decentralized open network was unfulfilling. What happened in Web2. So enter Web3, what they call the read-write-own Web. So now, not only is the Web a way to access content or to publish information and find your communities, but it's also a way to basically own the digital asset class of this age, own our own data, own our own digital creations, and to be able to own and control assets, financial assets like money, but anything really of value in a way that I think puts power into the hands of internet users at the expense of the internet. And I think that's a way to really build a community. And I platforms give them more freedom and autonomy and more privacy online. And I think in a way that helps to both fulfill the original vision of the Web, but also add to it. Because now we have this economic layer that I think, like all other eras of the Web, is going to be transformational for business, but also for culture, society, and much else.
Jeremy Allaire:
It's really interesting. As you know, I have myself sort of been through the Web 1.0, Web 2.0, in this Web 3.0 world and building infrastructure throughout. And I think something that you've just touched on and I think is animated throughout the book as well is this idea that there's like an economic layer of the internet, that there hasn't been an actual economic layer on the internet. There's been an information layer, a data layer, a communications layer, and to some degree, there's been a transaction layer in terms of people conducting e-commerce, but this idea that we're moving the actual foundation of the economy, the economic system, onto the internet. I think it's a big idea and really need to step away from crypto and Bitcoin and, and, you know, a lot of the things that if you start talking about this with the average person, right.
And you start saying Web through what is Web three, well, it's building on crypto technology and blockchain. And then people just start to go, no, you're, you're talking about that crazy gambling, criminal stuff, or whatever the filter is, right? But at a fundamental technical level, what we're really talking about is the creation of an economic layer on the internet. I'd love to explore that a little bit with you. It's in the title of the book, obviously, as well. What is that economic layer? You mentioned there's ownership, or there's having ownership of your data, or there's having ownership of your identity, or having ownership of value. But specifically, like, what does it mean to have a new economic layer? On the internet.
Alex Tapscott:
Yeah, absolutely. Well, for those folks who hear the word cryptocurrency and Bitcoin and start to get confused about Web3, the way that I sort of describe it basically is that it's true that having thousands and thousands of cryptocurrencies isn't a particularly useful thing because currency is supposed to be something specific, a unit of exchange or a medium of exchange. Currency is a misnomer. Yeah. In other words, currency is a misnomer. What these digital assets are trying to be is lots of different things. And so I think that term, the term token, even though the term token is a little lighthearted, you know, a token of my appreciation, I actually think it's a very appropriate term to describe this, digital tokens. Digital tokens. And a token can best be thought of as just a container for value.
So in the same way a shipping container can contain, you know, most goods, you know, a computer, a car, food and so forth, a token can be programmed to represent anything of value. And in the same way that the intermodal shipping container can be programmed to represent anything of value, it can be programmed to represent increased economic activity by four or five hundred percent, depending on which study you look at. The same, I think, will be true for tokens. Tokens are a standard unit that allow us to move and store value peer to peer. And that can be any kind of asset. In the case of Serbol, it can be US dollars, which have clearly found product market fit at over 130 billion of circulating supply for the whole market. But it can be anything else that can be programmed into a token. So that economic layer starts fundamentally with the idea of the asset. So the token. Now, in terms of what it means in practice, well, I think it means that individuals have more autonomy and more control over their economic lives online. The desktop is the way we access Web 1 and the smartphone was how we access Web 2 primarily. I think of the wallet as the sort of interface in a way for Web 3. And in the same way that your wallet, your physical wallet can contain things of value like money, but also ways to prove value. So the token can be a way to their identity. You know, your driver's license.
We're in Canada where we have universal healthcare health card, which allows you to get health care, any hospital in the country. Same can be true for Web 3 and wallets. So you have a way to have custody and control over your assets, your value, but also credentials and other parts of your data. And that's going to, I think, change the dynamic between plat like Internet services and users. One example of this that you really know is the DeFi space. DeFi is its own frontier within Web 3. Where smart people are trying to reimagine financial services from the ground up. You know, we hear a lot about fintech, and I think a lot of fintech is mostly just digital wallpaper. It's a way to sort of make the experience of accessing the old world.
Jeremy Allaire:
And I pour, impolite, I say lipstick on tag.
Alex Tapscott:
Yeah, well, there you go. But like under the surface, you've got all the same infrastructure, it's still the same pig, right? And so with DeFi, what people are trying to do is reimagine from the ground up how we move value, how we store value, how we access credit, how we trade, how we organize financial information, how we do identity, you know, like credit scoring even, all this stuff from the ground up. But what's different about DeFi is that is that DeFi turns users into owners. So the more you use a DeFi platform, the more of that platform you own. So a good example is something like Uniswap. So Uniswap is a decentralized exchange. Instead of having a central order book like Nasdaq or the Toronto Stock Exchange, it's a smart contract that connects buyers and sellers.
So it can have a theoretically unlimited number of trading pairs. But in order for trading pairs to be useful, you need market depth, you need liquidity. And so Uniswap basically incentivizes people who are large traders on the platform or liquidity providers with ownership in the platform. So the more you contribute to something, the more of it you own. And so in a way, these platforms, which are worth billions of dollars, even in this market that we're in, are in pretty much entirely user-owned. And so to me, that's the concept we can then apply to other applications and services. You know, I don't think that Facebook is about to turn itself into a platform. It's not going to turn itself into some user-owned network or Uber is going to turn itself into some driver-owned network or something like that. But I think that the next iteration of services and applications will start with that premise. Indeed, they already have in DeFi, but they will in other areas. And I'll just add one more thing, which is other than ownership is great, what's the purpose of this?
If you wanted today to basically make owners out of your users and you were a traditional corporation and you were, let's say, a software company launching in 50 countries, you could not do it. Like you would have to do options agreements in 50 countries in a dozen languages and have lawyers enforcing the terms and so forth. But with a token-based model, you can create an easy way to align the incentives of users, developers, and other contributors with the platform itself. And I just think like we've seen it work in several areas within Web3. And I believe it's something that will get applied much more to other parts of the Web.
Jeremy Allaire:
It's good explanations. And I think like helping people, from like the way in which you can kind of dramatically restructure our experience of things by moving to these sort of fully internet native models, by analogy, right? I think when you made it possible for anyone just to, with a mobile device, to download a piece of software and, participate in massive global communications networks, right? It wasn't so much like, oh, I'm replacing my telephone company. It's just like, no, this is just like this radically better thing where, you know, whether it's WhatsApp groups and it's messenger groups and it's all of these things like that, or, you know, people weren't saying like, well, I really want to have a new entertainment network.
Well, no, one was created by people having something like Instagram or TikTok, like basically creators, creating probably these two things, probably the biggest entertainment platforms ever created in the history of humanity and where it's user-driven, right? I think people can relate to the user-driven nature of this. And it can also be at not just the mass consumer level, right? It can be very, very specific ways. It could be, as you write about in the book as well, there can be these DAOs or basically these decentralized organizations of people of shared purpose, shared interest, or that are working towards common goals that happen to find themselves connected on the internet. And now they have a way to structure their work, to structure ownership, compensation, economic arrangements, and all that can be done entirely directly on the internet on a multinational, truly open basis. And so I like to think about Web3 as sort of creating, you know, new building blocks, again, capturing a little bit of the title of the book, new building blocks for society and the economy to construct new ways to make things, new ways to participate in economic value or artistic value or in all these different domains. There's really at the foundation of it or yes, it's digital tokens, smart contracts, wallet technology. And so in many ways, that part of it, the technology part of it, tokens, smart contracts, stable coins, wallets, like That's gonna increasingly go into the background, just like pipes and plumbing and stuff, and developers will care a lot about it. They'll care a lot about those things, about making sure that they're fast and reliable and safe and globally available and trusted and all those things. Like, I almost think about that as like, developers care about iOS and Android, but users just care that they've got great applications that work and sing, right?
So I think the Web3 technology It's front and center for people like us. It would go in the background. And what we'll end up with is these completely new capabilities that society is interacting with that they haven't had before. Just like we had with Web2, right? No one asked, no one sort of thought, oh, there's going to be a decentralized transportation and logistics system that people just use with VPSs and touchscreens and mobile applications. Like that got created and that it was like a new capability for society to orchestrate transportation. Right? Same kind of thing here. These apps are going to surface and the creators are going to kind of think through what to build. And we're really in the early stages of that exploration, obviously.
Alex Tapscott:
That reminds me of a very famous quote from Clay Christensen, where he said that markets that do not exist cannot be analyzed. Not only are they unknown at the time of their creation, they're unknowable. And I think that's something that we have to keep in mind. You know, when the first era of the Web came along and people were looking at it, I think a lot of the early examples were what they call skeuomorphic, right? Meaning sort of rooted in the old way of doing-
Jeremy Allaire:
PDF of the New York Times front page.
Alex Tapscott:
Yeah, exactly. Classified sports scores, etc. But all of these other sort of social apps or geospatial apps, as you're describing, you know, Uber. I don't think we're on the, there were smart people probably thinking ahead, but most people, that was not part of their, you know, vision of what the internet was. The internet was a broadcast medium for information that anyone could access. It was of dubious quality because anyone could upload stuff, right?
Jeremy Allaire:
Just didn't work well. And it was the worldwide web and dial-up modems were terrible and Windows was buggy and it was like really bad.
Alex Tapscott:
Exactly. So I actually think of like Web3 and I see some of the early examples. It's a cliche, but if email was the first sort of killer app of the Web, then maybe Bitcoin was sort of that first killer app of-
Jeremy Allaire:
I like to think stable coins
Alex Tapscott:
Of Web3. Well, you know, in a way you're probably right about that. And stable coins, I mean, this as a compliment, they're kind of a skeuomorphic thing in a way. It's like, look, we're going to take this, we're going to take this token, this artifact, and we're going to do something with it that we know the world wants. Everybody in the world wants a US Dollar bank account. And everyone wants a way to move in store value where they can get a lot of money. And I think that's a really good point. They can control it where they are not subject to inflation or corrupt banking or corrupt governments where they have autonomy. Okay, let's deliver that service, right? And so, yes, there's clear problems.
Jeremy Allaire:
They do know they want those programmable, composable, open, interoperable money as well. That's the part that they don't know that they want. What I call latent aspiration. The latent aspiration is actually like this extraordinarily high velocity programmable money, but that's the Web 3. That's really the Web 3 unlock, right? As opposed to like ads to the better version of wires and PayPal or whatever.
Alex Tapscott:
Don't sell yourself short. Like a better version, a far better version of how people move US Dollars around the world is kind of a big market. But I agree with you that all that other stuff is, you know, where we go from there. It's sort of like everybody in the world wants a US Dollar bank account. Once they have it, what else they want? They want a U.S. Dollar investment account, or they want a way to use those.
Jeremy Allaire:
They want to borrow and lend, or they want to conduct, they want to enter into economic contracts. They want to supply their labor and get compensated. They want to make things and sell things and distribute things. And, you know, they want to be in the digital economy.
Alex Tapscott:
Yes, exactly.
Jeremy Allaire:
Now we can intermediate the economy, the real economy in software with smart contracts and these Web three primitives as well.
Alex Tapscott:
That's something we said with blockchain revolution. It's like, in all likelihood, this should be more impactful than the prior eras of the Web.
Jeremy Allaire:
And that's since I started the company. That was actually one of the reasons why I started Circle is literally, I was like, I think this is going to be bigger than the Web over the long run. I want to get started now. It was 10 years ago. It was early, right? I want to get started now because this is going to take a while, but I think the ultimate impact. Of this should be far, far greater than the Web because the Web is just about information and this is the actual economy.
Alex Tapscott:
Yeah, that's right. And so on the democratization front, the low hanging fruit is now we all have a way to move value pure. And it could be, you know, right now, US Dollar stable coins are the ones that have found product market fit. But I think that there will be other, you know, obviously other assets will expand that franchise for people who want different stuff. But bigger picture, like what that means is that we can have people in disparate parts of the world, all connected into the same economy and operating on a somewhat more level playing field. You know, I'm not like delusional. We live in a very unequal world. But if the internet, you know, the first areas of the Web, you know, made it so that people could access information and publish and whatever, then what Web3 does is it empowers them with a different kind of toolkit, a way to move value, store value, and maybe build wealth. And that was the part that would just like get compensated in the asset. So if you have a way to trade your labor for money for a global distributed organization that doesn't really care if you're in Lagos or Manila or Toronto, then all of a sudden you have a way to plug into a labor market that doesn't exist at the local level. And now we have a payment tool to ensure you get compensated. That's a good thing. I think we have to say that. But there's also all sorts of negative externalities from that potentially. One is what happens to the software engineer in Toronto.
If there's someone in, you know, another part of the world competition, it's globalized. Could it grow the pie? Like that's my view generally when it comes to these things, but it could on the meantime cause some dislocation. There's another thing too or that they have less control over the money supply and the balance of accounts than they would like. And what happens if everyone starts using US Dollars? And that's the same thing that's true in Nigeria as well. In the book, I actually talk about a company called Acorapay, which helps companies that operate in Africa repatriate dollars to the United States. And these can be big companies, hypothetically, like Coca-Cola or Colgate or something like that. And the easiest way to do that is actually to exchange the local currency into USDC and USDT and then repatriate it in the United States. It's a way to do it within seconds or minutes or what have you at that cost. And so I always thought that was interesting. And to me, that's an example of taking the Web3 toolkit and putting it into regular business. But the more interesting insight from him was that all of his employees, if given the opportunity, would prefer to get paid in USD or even Bitcoin, even though it's a volatile.
Jeremy Allaire:
It's Naira.
Alex Tapscott:
Versus Naira, because they view it as a better store of value. And in the case of US Dollars, it's actually more fungible like it's more useful for a lot of things which is surprising i think to a lot of people the dollar's got network effects yeah well exactly u.s dollar exactly so you know this will have an impact that is positive but also straight affected and who knows how it's all going to kind of shake.
Jeremy Allaire:
If you really drive deeply into that, what I almost think of as like systems of monetary policy, systems of law, systems of governance, like these are, The monetary systems, the legal systems, contractual systems, governance systems, these are systems that basically until recently have only existed offline. They've only existed mostly in human-mediated bureaucracies and on paper, literally, right? And in some ways, society's never had the toolkits to manifest governance contracts. Ownership and monetary mechanisms of the monetary system. They never had the actual toolkits to do those entirely in software and do those at internet scale and do that with the reach of every device in the world, right? To me, that's like the massive inflection point that Web3 represents is we have these toolkits. We can actually, like Clean Slate, I love DAOs, just as an example.
If you take a Clean Slate and you sort of say, hey, I want to create a global organization and I want to enlist people to contribute to that organization. I want to make widgets. They could be a knowledge output, like a knowledge worker output. It could be something that's created that is itself digital or informational or software or what have you. It could be, I want to do architecture. I want to build a global architecture firm or whatever it is. And I want to create that. And I want all the participants to participate in it through a system of governance that's mediated by tokens and smart contracts. And I want the entire treasury, meaning the money of that organization, to be all managed and intermediated by smart contracts on a blockchain using safe digital dollar cash instruments in a treasury system. And if I have people who work for me, I want the labor contracts implemented in code, and I want my invoices and trade agreements implemented in code. And if I need to borrow capital, I can let someone see with zero knowledge proofs what my cash flows have been, and then someone can write credit against it, and I can borrow money, and I can employ people everywhere as long as they have a smartphone or an internet connection. And people can contribute value, they can produce things, they can participate in decisions, and you literally can take governance, contracts, money, and you can operate that entirely as you want.
And that is that digital organization. And that to me is in, I think it might be over the next 10 to 20 years, you know, like you said, Web 2.0 has taken us 20 years to where we are today. Like over the next 10 to 20 years, that's what I'm excited to see. I want to see breakthrough organizations that get created that just couldn't be created under technology. The existing realm. And then to your point about governments and what happens that whether it's positive or negative externalities, like, Governments will have to adapt, right? Because then people in their societies are saying, hey, this is a better system. I want to be in this system. Just like governments didn't stop audio streaming because they wanted to control audio broadcast in their country. They just, they sort of said, okay, anyone can broadcast to my people in my country. I can't stop that now. It's genies out of the bottle. What do we do? And so I'm interested in seeing those kinds of organizational innovations evolve as well.
Alex Tapscott:
Well, so am I. And I mean, you outlined it so well. In a way, this makes sense that there should be a new way to organize and govern value and resources for the digital age, because there was also a new way to organize and govern value for the industrial age. It was called the joint stock corporation, joint stock corporation, like little history lessons for listeners. It's like the first joint stock corporations really were formed during the age of exploration because it was extremely risky to send a bunch of ships out into the middle of nowhere and hope that they return. But if you pulled all that risk across a bunch of different people, then, you know, everyone only stood to lose a little bit. Right. And that also led to the creation of the modern insurance business. You know, Lloyd's of London was coffee shops where people would basically underwrite policies on ships. That was all that would deal. That was the only business in town was shen stock could be traded on an exchange. That's right. And then you get all this other stuff and it's all this. It all kind of comes from that. Right.
And so like in a way, like the joint stock corporation, it's like, oh, I'm going to do this. I'm going to do it. It's like the killer app for industrial age undertakings. You know, you need to, you need to build a railroad or a coal mine or a steel works or something. You need a mechanism to do that. You couldn't do that with a sole proprietorship. You need a joint stock company with a limited liability. So that makes perfect sense. But now we're in a digital age where a lot of new innovation is happening as software, as networks that are global, that are maybe a bit more capital light than industrial undertakings. So you need a new asset class and a new set of tools to govern an organized value. Right.
Jeremy Allaire:
That are global scale by nature.
Alex Tapscott:
Yeah, that's right. That went back to just my one small example is like, how do you even make everyone an owner in a global organization under the corporate framework? It's actually impossible. You need this other way to do things.
Jeremy Allaire:
Yeah. So I've obviously, there's a lot of shared excitement around all these ideas, right? I think one of the things, and it gets to one of the earlier comments is like the innovators are going to go plow ahead, right? And then governments are going to say, well, hold on. What you're doing is you're selling a security or what you're doing is you're forming a corporation and we've got laws on corporations in Delaware or in whatever country you're in. And by the way, we have those laws because we have. Treasury departments that collect taxes and we got to finance the roads and schools and militaries and like the sort of real world starts to interact and like the ability to collect taxes, enforce and resolve disputes. Like, reality tethers itself to all of this. And so I think this is one of the most interesting areas of work, which is, How will... And how will governments adapt to these new organizational forms? And will there, almost certainly there will, but I'm posing it as a question, but it's also a how question is, Will there be new systems of law that adapt to this? How long is that gonna take? Because it's gonna have to happen, right? We had new systems of law for e-commerce and the internet have adapted. There's a bit of a laissez-faire approach there, but this feels higher stakes in some cases, but it really feels like for this to take hold, you need to be able to have a way to recognize what a digital entity is and how enforcement of various disputes or other things happen. And there's obviously the purist view, which is you could have decentralized courts and you could have decentralized mediation and the like, and maybe that's part of the answer, but sort of when reality and the law runs up against this pure digital economy,
Alex Tapscott:
Yeah. Well, it's something we've seen time and again with other technologies. When the first automobiles were invented, they introduced in England these things called red flag laws, which required every car to have a driver and also a person walking in front of the car waving a red flag. And the reason was that they didn't want to startle horses or pedestrians. The laws in that case were designed to accommodate the old paradigm, not the new paradigm. And those laws were repealed. But that to me is an example of what happens when you regulate too quickly. I would say that in the case of the Web, it is true that the first era, it definitely was laissez-faire in the sense that what you said earlier, because it was an information medium, information is regulated. There's an FTC and so on and so forth, but it's way more lightly regulated than everything else. There's a freedom of speech, which gives broad latitude people to do a lot of things with information. When it comes to value, I mean, maybe there should be, but I don't know that there's a freedom to transfer value in trying...
Jeremy Allaire:
Right. Law. Governments have that law.
Alex Tapscott:
Yeah, exactly. So it's highly regulated industry, financial services, incorporating companies, the law, like legal professions, all these things you're describing, governance contracts and value movement are all highly regulated. So Albert Wenger at Union Square Ventures told me when I interviewed him for the book that the first era of the Web had regulatory tailwinds, but he thinks that this next era has regulatory headwinds.
Jeremy Allaire:
I felt some of those breezes over the last 10 years.
Alex Tapscott:
Yes, I'm sure that you have. And it's like, yeah, there were some issues in the Web. I believe that the first version of Netscape that shipped internationally, they had to take out SSL encryption because it was still weapons-grade cryptography. But that got amended. You know, there were people who said that if you launch a website, you needed a CB radio license because you were a broadcaster. But that never got off the ground. And in the end, what we ended up with was a set of new laws in the 90s that kind of built on or modified what existed before and made it so that the commercial Web could really thrive. To my knowledge, I'm not aware of any attempt to do that. Certainly not in the US, but even anywhere. Like, I'm not sure anyone's thinking in that kind of way.
Jeremy Allaire:
I would love to see a corporate law, for example, modified to support digitally native organizations. I would love to see securities laws and so on amended to allow for, like, digital tokens as a mechanism. Yeah. It doesn't have to actually be an equity contract. It can be something else. Right. So I think we need acknowledgment of some of these things. And some of these are clearly, you know, mechanisms of economic investment and value exchange that are equity-like. And some of these digital tokens are clearly just information and data. And some of these digital tokens are clearly just commodities of different types. And we need, I think, just some statutory definitions for, like, classifications of different types of digital tokens. And when issuing and selling them is one activity. So I think that body of work. And I'd really like to see, again, like corporate law modified. As you've seen Delaware first, like you had a cap table on a blockchain that was sort of a marginal improvement. And then you have the Wyoming Dow laws. You're seeing some countries create Dow laws, again, modifying kind of corporate law. So I think some of these things can happen incrementally and adapt to the innovation. And then if some of that happens and you start to see more scale happening, then I think you could see more rapid progress internationally and then some normalization around that. Again, this can be decades, right? This doesn't necessarily happen super fast, but it does seem like I have this concept that law and policy more or less just follows the will of society. And it's actually, you know, technology innovations and social and coordination innovations are driven by people and entrepreneurs. And that's just what happens.
It sort of these things birth and they grow and they take hold. And then law and policy adapts to those, right? So I think there's a push and a pull to that. And, you know, we're seeing that with AI right now. Now we decades of work that was completely outside of really any real regulatory arena at all. And then you hit an inflection point. And now AI is like, it's sort of like the weapons grade encryption back in the day. It's like, okay, we, you know, they're looking at ways that you might regulate this. Crypto is the same thing. It's a very, very powerful, very, very disruptive technology that just breaks everything. The way in which the old system had been designed. But these things will keep happening and then law and policy will adapt. I'm always the optimist and it's just, I'm optimistic over the long run and then how you chip away at it.
Alex Tapscott:
I'm with you. Yeah. The point about AI is well taken. Every technology looks like an overnight success story from that. But the reality is they're typically decades in the making. To me, AI being the ultimate example of this, you know, Alan Turing, the inventor of cryptography and computing and AI in a way, by developing the Turing test, was the first to kind of muse on this idea of artificial generalized intelligence. And it took 80 years for us to get kind of anywhere close to that. So that's an interesting sort of thing to reflect on when you're viewing the long arc of history for Web3 and crypto. But then the other thing when it comes to, you know, laws and regulation in the book, I say that Silicon Valley was once called the tech Galapagos because of the very unique set of conditions that existed there and nowhere else that led to the species of, you know, companies that kind of dominated the first eras of the Web. But now those conditions exist elsewhere, maybe everywhere. And so one place isn't going to necessarily dominate this next era the way it maybe had in the past. And that's certainly true when it comes to a technology and capital and talent perspective.
But on a regulatory perspective, you know, we still have governments are extremely important stakeholders and laws matter. And I think to your point, if you actually want this stuff to reach its potential, the law needs to adapt to create the conditions. And as someone, you and I both have this in common, which is we talk to enterprises like big companies and most big companies won't invest in a new technology over the long run in a regulatory vacuum. They want clarity. I don't think it's enough to say, well, if it doesn't happen here, it'll just happen somewhere else. I mean, I think that's true, but for it to reach its potential, it needs to happen everywhere.
Jeremy Allaire:
Absolutely agree. And I was on a panel yesterday and the final question, it had to do with the adoption of like stable or digital dollars or whatever. And, and the, the last question was what's the most important thing that needs to happen in 2024 for this to achieve the mainstream scale. And one of the panelists was a former regulator and a lawyer, very prominent person. And they were like legal certainty. We need to have legal certainty because if we have legal certainty and we we've created these laws, then like exactly what you said, like corporations and households and financial institutions, they'll know where they stand. They know what this is. They know how to treat this and use this. And I think that's true. So that is like, that has to happen. I'm of course the technologist.
So my answer was all about technology and, and sort of technology per the conversation we've just had, right. I view if the technology progress continues, then the law has to follow. And it just like, it gets so usable that anyone can download a piece of software and without knowing anything about crypto or blockchains or which chain or gas fees or any of the stuff that makes this complex and early adoption. Enterprise or you're a brand or you're a retailer or you're a media company or an entertainment company or just a plain vanilla widget maker, like there's a lot there's a lot of really exciting things that can happen and and frankly, don't even need necessarily a lot of regulatory clarity because NFT technology is like a general purpose technology that can be used to do a lot of things. Maybe you could just talk for a minute about what's the low hanging fruit if you're advising, as I'm sure you do many corporations, you know, what's the low hanging fruit that isn't like go build a room in a metaverse. It's just like, what can I actually what can I use this technology to do that can activate my business in some new way?
Alex Tapscott:
Yeah, totally. Well, I think before I answer that question, it's it's important to just talk about the evolution of what enterprises have done in this space. So in the very early days, meaning like six years ago, they loved the idea of shared record of truth and, you know, tokens, but they didn't like the idea of obliterating the idea of sharing the truth. So they didn't like the idea of sharing the themselves up to public blockchain infrastructure because they viewed it as sort of a little too early for prime time. And in a way, that's very reminiscent of what happened during the early era of the Web with intranet. Yeah, it's like the idea of the intranet, but they didn't want to Go to that place where all those libertarians and yahoos will sound familiar. You know, it's not a feature sound. History doesn't repeat, but it rhymes. Or maybe it just repeats in this case. But anyway, the point is that nowadays, most enterprises, when they try to do something in this space, they're doing it on public infrastructure. So that's a big plus. You know, in like Circle, I think most of your circulating supply is very unfazed. And on other public chains, you know, Cosmos, Solana, et cetera. You're an example of that. But even like traditional legacy companies, that's where they're doing Starbucks NFTs or whatever. Starbucks NFTs, LVMH, Tiffany's CryptoPunks collaborations, Solana Merchant Settlements for Visa, PYUSD, also Ethereum main chain. So a lot of it's all happening on public blockchains. I think that's an important thing to just remind ourselves of. Except for like J.P. Morgan and Citibank and those groups, they seem to be still doing their own thing, which I even view that as a positive because it's part of the journey.
Jeremy Allaire:
And they're still like proprietary, physically separated, segregated, wide area networks that are used for the military or whatever. And like, they need to do that, right? They don't need the, they're not going to use the public internet always. So there is always going to be that segmentation. But I think the scale opportunities, right, are when you get internet scale and internet reach.
Alex Tapscott:
Yeah, exactly. And so, so to me, it's, why do you do it? Well, you do it to create a new product, service, or tap into a new customer segment or market that you couldn't before, basically. You know, I look at the example. I have Nike with Artifact and Dot Swoosh. What business is Nike into? It's in the business of, you know, honoring creators and athletes pretty much. And having ways for you as a customer to express your, you know, alignment with those brands. That can really be in the physical or the digital world. And in fact, as more and more young people spend time online, and if, you know, prognosticators are right, that eventually we'll have a spatial Web and, you know, our avatars will be a big part of our lives. Then, of course, your presentation of digital self is going to be as important as your present, you know, digital self. So, you know, being able to get ahead of that with collections of digital assets that do the same thing that, you know, sneakers do. That's basically an example. Steve Jobs once said, you know, shoes are a commodity.
So why is Nike worth so much money? It's like, they're not a shoe company. They're in the business. I stole that from them. They're in the business of honoring creators now. Yeah. You know, and so there's lots of ways to do that. Same with luxury brands. Like, what are luxury brands in the business of? Selling scarcity, pretty much. Artificial scarcity. And maybe this is a bit cynical, but they make fewer items, sell them for more money to create the illusion of scarcity. And digital goods are a way to create scarcity. And then more fundamentally, the big payments companies who are interested in stablecoins, I've always found their foray into this space kind of amusing because it's like, oh, PayPal's here. Now stablecoins are, they're being adopted by the big guys. I'm like, have you seen Circle and Tether? Do you remember Disney Go?
Jeremy Allaire:
Yeah, exactly. It's like, yeah, it's getting popular. They've been involved. They launched these big initiatives. And then what happens?
Alex Tapscott:
Yeah, yeah, exactly. And it's like, FYI, this is a massive market that's been around for several years. You know, you might have a hard time actually catching up with the new guys. So just to finish the thought, what I'm seeing is A, public blockchains. B, what I view is like the Web3 toolkit. I remember the old pilots from 2015-16. It was always trying to boil the ocean. You know, let's move our whole trade settlement for our entire business onto some proprietary closed blockchain. It's like that was never going to really happen. What they needed to do was to experiment and start by experimenting, but become more and more broad commercial applications of the toolkit. And I think that's kind of how I view it today with Web3. They're reaching into the toolkit to create new product services, target new markets, or access new customers. I'm like, that's a very good thing because all of that is helping to drive both user adoption, enterprise adoption, and in the end is going to help to scale the technology too.
Jeremy Allaire:
That's awesome. And now we're coming up on time. And we've covered a lot of ground here and we can talk for hours. Really appreciate you coming on. I feel like this is an exciting moment. I really feel like this is an exciting moment. And I remember the transition from Web 1.0 to Web 2.0 and you could feel it. And then people are turning on their broadband connections and you're like, and the software was getting better. And like, you're like, this is, you could really, really feel it. And I feel like that's right where we are with Web3. It's like the broadband is just getting turned on and people are really, really starting to build more interesting things. And if I go back to like 2003, 2002, 2003, 2004, which is sort of the early stages of Web 2, like I think that's kind of where we are. And, and it really accelerated fast after that. It accelerated dramatically over like the next five to 10 years. So I think we'll have a lot to reflect on together in the coming years.
Alex Tapscott:
I look forward to it.
Jeremy Allaire:
Awesome. Thank you, Alex.
Alex Tapscott:
Thank you, Jeremy.
Jeremy Allaire
Co-Founder, CEO & Chairman at Circle
Alex Tapscott
Writer & Managing Director, Digital Assets Group at Ninepoint Partners