How the blockchain will radically transform the economy
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0:01 - 0:06Economists have been exploring
people's behavior for hundreds of years: -
0:07 - 0:08how we make decisions,
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0:08 - 0:12how we act individually and in groups,
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0:12 - 0:13how we exchange value.
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0:15 - 0:18They've studied the institutions
that facilitate our trade, -
0:18 - 0:20like legal systems,
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0:20 - 0:21corporations,
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0:22 - 0:23marketplaces.
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0:24 - 0:27But there is a new,
technological institution -
0:27 - 0:31that will fundamentally change
how we exchange value, -
0:31 - 0:33and it's called the blockchain.
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0:34 - 0:37Now, that's a pretty bold statement,
-
0:37 - 0:40but if you take nothing else
away from this talk, -
0:40 - 0:42I actually want you to remember
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0:42 - 0:46that while blockchain technology
is relatively new, -
0:46 - 0:50it's also a continuation
of a very human story, -
0:50 - 0:52and the story is this.
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0:52 - 0:54As humans, we find ways
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0:54 - 0:57to lower uncertainty about one another
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0:57 - 0:59so that we can exchange value.
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1:01 - 1:05Now, one of the first people
to really explore the idea -
1:05 - 1:08of institutions as a tool in economics
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1:08 - 1:10to lower our uncertainties
about one another -
1:10 - 1:12and be able to do trade
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1:12 - 1:15was the Nobel economist Douglass North.
-
1:16 - 1:18He passed away at the end of 2015,
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1:18 - 1:23but North pioneered what's called
"new institutional economics." -
1:23 - 1:27And what he meant by institutions
were really just formal rules -
1:27 - 1:29like a constitution,
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1:29 - 1:32and informal constraints, like bribery.
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1:33 - 1:36These institutions are really the grease
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1:36 - 1:39that allow our economic
wheels to function, -
1:39 - 1:42and we can see this play out
over the course of human history. -
1:43 - 1:47If we think back to when we were
hunter-gatherer economies, -
1:47 - 1:50we really just traded
within our village structure. -
1:50 - 1:52We had some informal constraints in place,
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1:52 - 1:56but we enforced
all of our trade with violence -
1:56 - 1:57or social repercussions.
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1:58 - 2:00As our societies grew more complex
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2:00 - 2:04and our trade routes grew more distant,
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2:04 - 2:07we built up more formal institutions,
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2:07 - 2:10institutions like banks for currency,
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2:10 - 2:13governments, corporations.
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2:13 - 2:15These institutions
helped us manage our trade -
2:15 - 2:18as the uncertainty
and the complexity grew, -
2:18 - 2:21and our personal control was much lower.
-
2:22 - 2:26Eventually with the internet,
we put these same institutions online. -
2:27 - 2:31We built platform marketplaces
like Amazon, eBay, Alibaba, -
2:31 - 2:35just faster institutions
that act as middlemen -
2:35 - 2:37to facilitate human economic activity.
-
2:40 - 2:42As Douglass North saw it,
-
2:42 - 2:46institutions are a tool
to lower uncertainty -
2:46 - 2:50so that we can connect and exchange
all kinds of value in society. -
2:51 - 2:53And I believe we are now entering
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2:53 - 2:56a further and radical evolution
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2:56 - 2:59of how we interact and trade,
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2:59 - 3:02because for the first time,
we can lower uncertainty -
3:02 - 3:06not just with political
and economic institutions, -
3:06 - 3:10like our banks, our corporations,
our governments, -
3:10 - 3:12but we can do it with technology alone.
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3:14 - 3:16So what is the blockchain?
-
3:16 - 3:20Blockchain technology
is a decentralized database -
3:20 - 3:24that stores a registry
of assets and transactions -
3:24 - 3:25across a peer-to-peer network.
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3:26 - 3:28It's basically a public registry
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3:28 - 3:31of who owns what and who transacts what.
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3:32 - 3:35The transactions are secured
through cryptography, -
3:35 - 3:41and over time, that transaction history
gets locked in blocks of data -
3:41 - 3:44that are then cryptographically
linked together and secured. -
3:45 - 3:50This creates and immutable,
unforgeable record -
3:50 - 3:53of all of the transactions
across this network. -
3:53 - 3:58This record is replicated
on every computer that uses the network. -
3:59 - 4:00It's not an app.
-
4:01 - 4:02It's not a company.
-
4:03 - 4:07I think it's closest in description
to something like Wikipedia. -
4:08 - 4:10We can see everything on Wikipedia.
-
4:10 - 4:14It's a composite view that's constantly
changing and being updated. -
4:16 - 4:20We can also track those changes
over time on Wikipedia, -
4:20 - 4:22and we can create our own wikis,
-
4:22 - 4:25because at their core,
they're just a data infrastructure. -
4:27 - 4:32On Wikipedia, it's an open platform
that stores words and images -
4:32 - 4:35and the changes to that data over time.
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4:36 - 4:37On the blockchain,
-
4:37 - 4:40you can think of it
as an open infrastructure -
4:40 - 4:43that stores many kinds of assets.
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4:44 - 4:46It stores the history of custodianship,
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4:47 - 4:49ownership and location
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4:49 - 4:52for assets like
the digital currency Bitcoin, -
4:52 - 4:54other digital assets
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4:54 - 4:57like a title of ownership of IP.
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4:58 - 5:02It could be a certificate, a contract,
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5:02 - 5:03real world objects,
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5:03 - 5:06even personal identifiable information.
-
5:07 - 5:11There are of course other
technical details to the blockchain, -
5:11 - 5:13but at its core, that's how it works.
-
5:13 - 5:17It's this public registry
that stores transactions in a network -
5:17 - 5:22and is replicated so that it's very secure
and hard to tamper with. -
5:23 - 5:25Which brings me to my point
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5:25 - 5:28of how blockchains lower uncertainty
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5:28 - 5:32and how they therefore promise
to transform our economic systems -
5:33 - 5:34in radical ways.
-
5:36 - 5:38So uncertainty is kind of a big term
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5:38 - 5:40in economics,
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5:40 - 5:42but I want to go through three forms of it
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5:42 - 5:45that we face in almost all
of our everyday transactions, -
5:45 - 5:47where blockchains can play a role.
-
5:47 - 5:51We face uncertainties
like not knowing who we're dealing with, -
5:51 - 5:53not having visibility into a transaction
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5:53 - 5:56and not having recourse
if things go wrong. -
5:58 - 6:01So let's take the first example,
not knowing who we're dealing with. -
6:02 - 6:05Say I want to buy
a used smartphone on eBay. -
6:06 - 6:09The first thing I'm going to do
is look up who I'm buying from. -
6:10 - 6:11Are they a power user?
-
6:11 - 6:15Do they have great reviews and ratings,
or do they have no profile at all? -
6:17 - 6:20Reviews, ratings, checkmarks:
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6:20 - 6:23these are the attestations
about our identities -
6:23 - 6:25that we cobble together today
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6:25 - 6:28and use to lower uncertainty
about who we're dealing with. -
6:30 - 6:33But the problem is
they're very fragmented. -
6:33 - 6:35Think about how many profiles you have.
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6:37 - 6:42Blockchains allow for us
to create an open, global platform -
6:42 - 6:46on which to store any attestation
about any individual -
6:46 - 6:48from any source.
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6:48 - 6:52This allows us to create a user-controlled
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6:52 - 6:53portable identity.
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6:56 - 6:58More than a profile,
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6:58 - 7:01it means you can selectively reveal
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7:01 - 7:03the different attributes about you
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7:03 - 7:06that help facilitate trade or interaction,
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7:06 - 7:09for instance that a government
issued you an ID, -
7:09 - 7:11or that you're over 21,
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7:11 - 7:14by revealing the cryptographic proof
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7:14 - 7:17that these details exist
and are signed off on. -
7:19 - 7:21Having this kind of portable identity
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7:21 - 7:24around the physical world
and the digital world -
7:24 - 7:27means we can do all kinds of human trade
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7:27 - 7:29in a totally new way.
-
7:31 - 7:33So I've talked about how blockchains
could lower uncertainty -
7:34 - 7:35in who we're dealing with.
-
7:35 - 7:38The second uncertainty that we often face
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7:38 - 7:41is just not having transparency
into our interactions. -
7:42 - 7:44Say you're going to send me
that smartphone by mail. -
7:44 - 7:46I want some degree of transparency.
-
7:46 - 7:50I want to know that the product I bought
is the same one that arrives in the mail -
7:50 - 7:53and that there's some record
for how it got to me. -
7:53 - 7:55This is true not just
for electronics like smartphones, -
7:55 - 7:59but for many kinds of goods and data,
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7:59 - 8:01things like medicine, luxury goods,
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8:02 - 8:06any kind of data or product
that we don't want tampered with. -
8:07 - 8:09The problem in many companies,
-
8:09 - 8:12especially those that produce
something complicated like a smartphone, -
8:12 - 8:15is they're managing
all of these different vendors -
8:15 - 8:17across a horizontal supply chain.
-
8:18 - 8:21All of these people
that go into making a product, -
8:21 - 8:22they don't have the same database.
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8:23 - 8:25They don't use the same infrastructure,
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8:25 - 8:30and so it becomes really hard to see
transparently a product evolve over time. -
8:32 - 8:34Using the blockchain, we can create
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8:34 - 8:38a shared reality
across nontrusting entities. -
8:39 - 8:40By this I mean
-
8:40 - 8:43all of these nodes in the network
do not need to know each other -
8:43 - 8:45or trust each other,
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8:45 - 8:47because they each have the ability
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8:47 - 8:50to monitor and validate
the chain for themselves. -
8:51 - 8:53Think back to Wikipedia.
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8:53 - 8:55It's a shared database,
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8:55 - 8:58and even though it has multiple readers
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8:58 - 9:00and multiple writers at the same time,
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9:00 - 9:02it has one single truth.
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9:03 - 9:05So we can create that using blockchains.
-
9:05 - 9:11We can create a decentralized database
that has the same efficiency of a monopoly -
9:11 - 9:14without actually creating
that central authority. -
9:14 - 9:17So all of these vendors,
all sorts of companies, -
9:17 - 9:21can interact using the same database
without trusting one another. -
9:22 - 9:26It means for consumers,
we can have a lot more transparency. -
9:26 - 9:28As a real-world object travels along,
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9:28 - 9:33we can see its digital certificate
or token move on the blockchain, -
9:33 - 9:35adding value as it goes.
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9:36 - 9:40This is a whole new world
in terms of our visibility. -
9:42 - 9:46So I've talked about how blockchains
can lower our uncertainties about identity -
9:47 - 9:50and how they change
what we mean about transparency -
9:50 - 9:54in long distances and complex trades,
like in a supply chain. -
9:56 - 9:58The last uncertainty that we often face
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9:58 - 10:00is one of the most open-ended,
and it's reneging. -
10:01 - 10:03What if you don't send me the smartphone?
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10:03 - 10:05Can I get my money back?
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10:06 - 10:09Blockchains allow us to write code,
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10:10 - 10:11binding contracts,
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10:11 - 10:13between individuals
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10:13 - 10:17and then guarantee
that those contracts will bear out -
10:17 - 10:19without a third party enforcer.
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10:20 - 10:24So if we look at the smartphone example,
you could think about escrow. -
10:24 - 10:26You are financing that phone,
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10:26 - 10:28but you don't need to release the funds
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10:28 - 10:31until you can verify
that all the conditions have been met. -
10:31 - 10:32You got the phone.
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10:34 - 10:37I think this is one
of the most exciting ways -
10:37 - 10:39that blockchains lower our uncertainties,
-
10:40 - 10:41because it means to some degree
-
10:41 - 10:45we can collapse institutions
and their enforcement. -
10:48 - 10:50It means a lot of human economic activity
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10:50 - 10:55can get collateralized and automated,
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10:55 - 10:59and push a lot of human
intervention to the edges, -
10:59 - 11:03the places where information moves
from the real world to the blockchain. -
11:05 - 11:07I think what would probably
floor Douglass North -
11:07 - 11:10about this use of technology
-
11:10 - 11:13is the fact that the very thing
that makes it work, -
11:13 - 11:17the very thing that keeps the blockchain
secure and verified, -
11:17 - 11:19is our mutual distrust.
-
11:22 - 11:25So rather than all of our uncertainties
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11:25 - 11:26slowing us down
-
11:26 - 11:29and requiring institutions
-
11:29 - 11:32like banks, our governments,
our corporations, -
11:33 - 11:38we can actually harness
all of that collective uncertainty -
11:38 - 11:43and use it to collaborate and exchange
more and faster and more open. -
11:45 - 11:47Now, I don't want you
to get the impression -
11:47 - 11:49that the blockchain
is the solution to everything, -
11:49 - 11:54even though the media has said
that it's going to end world poverty, -
11:56 - 11:59it's also going to solve
the counterfeit drug problem -
11:59 - 12:01and potentially save the rainforest.
-
12:02 - 12:06The truth is, this technology
is in its infancy, -
12:06 - 12:10and we're going to need to see
a lot of experiments take place -
12:10 - 12:11and probably fail
-
12:11 - 12:15before we truly understand
all of the use cases -
12:15 - 12:16for our economy.
-
12:17 - 12:19But there are tons of people
working on this, -
12:19 - 12:21from financial institutions
-
12:21 - 12:24to technology companies,
start-ups and universities. -
12:25 - 12:30And one of the reasons is
that it's not just an economic evolution. -
12:30 - 12:34It's also an innovation
in computer science. -
12:37 - 12:41Blockchains give us
the technological capability -
12:41 - 12:44of creating a record of human exchange,
-
12:44 - 12:46of exchange of currency,
-
12:47 - 12:50of all kinds of digital
and physical assets, -
12:50 - 12:53even of our own personal attributes,
-
12:53 - 12:54in a totally new way.
-
12:56 - 12:57So in some ways,
-
12:57 - 13:00they become a technological institution
-
13:00 - 13:02that has a lot of the benefits
-
13:02 - 13:05of the traditional institutions
we're used to using in society, -
13:06 - 13:09but it does this in a decentralized way.
-
13:10 - 13:14It does this by converting
a lot of our uncertainties -
13:14 - 13:15into certainties.
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13:16 - 13:20So I think we need to start
preparing ourselves, -
13:20 - 13:22because we are about to face a world
-
13:22 - 13:26where distributed, autonomous institutions
-
13:26 - 13:28have quite a significant role.
-
13:29 - 13:30Thank you.
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13:30 - 13:32(Applause)
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13:38 - 13:40Bruno Giussani: Thank you, Bettina.
-
13:41 - 13:45I think I understood that it's coming,
-
13:45 - 13:46it offers a lot of potential,
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13:47 - 13:49and it's complex.
-
13:49 - 13:54What is your estimate
for the rate of adoption? -
13:55 - 13:58Bettina Warburg: I think
that's a really good question. -
13:58 - 13:59My lab is pretty much focused
-
13:59 - 14:03on going the enterprise
and government route first, -
14:03 - 14:06because in reality,
blockchain is a complex technology. -
14:06 - 14:09How many of you actually understand
how the internet works? -
14:09 - 14:11But you use it every day,
-
14:11 - 14:14so I think we're sort of facing
the same John Sculley idea -
14:15 - 14:18of technology should either be
invisible or beautiful, -
14:18 - 14:22and blockchain is kind of
neither of those things right now, -
14:22 - 14:26so it's better suited
for either really early adopters -
14:26 - 14:28who kind of get it and can tinker around
-
14:28 - 14:31or for finding those best use cases
-
14:31 - 14:34like identity or asset tracking
or smart contracts -
14:35 - 14:39that can be used at that level
of an enterprise or government. -
14:39 - 14:40BG: Thank you. Thanks for coming to TED.
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14:40 - 14:42BW: Thanks.
-
14:42 - 14:44(Applause)
- Title:
- How the blockchain will radically transform the economy
- Speaker:
- Bettina Warburg
- Description:
-
Say hello to the decentralized economy -- the blockchain is about to change everything. In this lucid explainer of the complex (and confusing) technology, Bettina Warburg describes how the blockchain will eliminate the need for centralized institutions like banks or governments to facilitate trade, evolving age-old models of commerce and finance into something far more interesting: a distributed, transparent, autonomous system for exchanging value.
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 14:57
Brian Greene edited English subtitles for How the blockchain will radically transform the economy | ||
Brian Greene edited English subtitles for How the blockchain will radically transform the economy | ||
Brian Greene approved English subtitles for How the blockchain will radically transform the economy | ||
Brian Greene edited English subtitles for How the blockchain will radically transform the economy | ||
Brian Greene edited English subtitles for How the blockchain will radically transform the economy | ||
Brian Greene edited English subtitles for How the blockchain will radically transform the economy | ||
Brian Greene edited English subtitles for How the blockchain will radically transform the economy | ||
Joanna Pietrulewicz accepted English subtitles for How the blockchain will radically transform the economy |