The Disruptive Potential of Bitcoin and Blockchain

The World Economic Forum predicts that by 2025, ten percent of GDP will be in digital currency, and bitcoin and cryptocurrencies are on pace to raise more than $1 billion in venture funding this year. It's therefore no shock that this topic was top of mind for experts at The New Yorker Festival, which was held in a variety of Manhattan hot-spots the weekend of October 2-4. This year's festival, which brings together the brightest minds in culture - from Toni Morrison to Larry Kramer - hosted Tech@Fest, a series of events focused on the radical implications of technological advancements and their potential to reshape society.

During a panel discussion moderated by NewYorker.com editor Nicholas Thompson, Joi Ito, director of the MIT Media Lab came out swinging when he was asked for his thoughts on the future of bitcoin.

"Here's my prediction", Ito said, "I think that blockchain will be to banking and law what the Internet was to media. I think that we'll survive it, but we're going to be fundamentally different."

It all comes back to the blockchain, the digital ledger that supports and records all bitcoin transactions. Still in its infancy, blockchain provides a way to create a public ledger of transactions that is trackable, transparent and entirely tamperproof.

According to Ito, we've only seen the tip of the iceberg when it comes to the potential for blockchain. Similar to the advent of any technology, many early adopters of bitcoin are mocked today because people still don't understand its value.

Before the Internet gained widespread popularity, "no one anticipated how disruptive it could truly be", Ito added. "We could imagine where it would go and that all content could one day flow freely, because it was cheap, but we didn't understand exactly how it would happen."

This is where we stand today with bitcoin. "We have this killer, functional app", Ito stated, but what's truly interesting to him and those in the Media Lab is the potential for disruption - how this technology could fundamentally eliminate lawyers and bankers.

"So, two thirds of the people in this room will lose their jobs because of bitcoin", Thompson quipped in response.

But, Ito would argue: not any time soon.

He stated the real value of bitcoin is that it has taken "an entire generation of hackers and pointed them at the bookkeeping problem, which hasn't really been changed since the House of Medici."

"Traditionally, the really smart people at MIT would graduate and go to Wall Street and exploit the inefficiencies of the financial process to make money," Ito remarked. But, "the important thing about bitcoin is that the nerds that are working on it right now, my kids, they're not really in it to make money. They're in it to try to make the system work better."

"Compared to the Internet, we're way ahead of our skis", he continued. "The Internet had years and years and years of hackers beating it up and trying to figure it out before we started building houses on top of it. Right now we have big houses coming up on top of bitcoin, but we haven't really figured out the fundamentals."

Ito stresses, however, that this is an opportunity, not a flaw, in the bitcoin system. Right now, bitcoin and blockchain are like "putty", he claims. Those who are working to improve the system are building things into the code that will influence what it will ultimately become, so the banks, countries and policy makers who are immersed in the bitcoin conversation are truly being heard and are raising points of concern to be resolved before the code is set in stone.

Ito's parting words for lawyers and bankers should not be overlooked: "My advice would be to learn about it, become part of the conversation and raise some of the ideas that will likely become the biggest problems". With this insight, Ito says, we can create a system that will strengthen and augment the industries we have come to rely on.