Impact Podcast | Are we on the edge of a blockchain revolution?

KANINA BLANCHARD: Exclusive insights, actionable strategies, and ideas that ignite change. You're listening to the Ivey Impact Podcast from Ivey Business School.

JULIAN BIRKINSHAW: Hello and welcome to Dialogue with the Dean. The inaugural series on the Ivey Impact Podcast. I'm Julian Birkinshaw, dean of the Ivey Business School. And in this series, I sit down with Ivey's leading faculty to explore their latest research and tackle the pressing issues shaping business and society. On today's episode, we're diving into the complex and often misunderstood world of blockchain and digital finance. From cryptocurrencies to decentralized transactions this technology is reshaping the way we think about money, security and trust in the digital age. So, whether you're a beginner or just blockchain curious, we're looking to break it down in a way that makes sense. No tech jargon required. And to help me crack the blockchain code today is Hubert Pun, Professor of Management Science, here at Ivey. His research explores how blockchain technology has the ability to revolutionize so many aspects of the business and consumer world. Importantly, Hubert believes Canada might be missing this technological boat.

Hubert, welcome to Dialogue with Dean. It's wonderful to have you here.

HUBERT PUN: Thank you very much. That is my pleasure to be here, to share my insight.

JULIAN BIRKINSHAW: Thanks. And before we get into blockchain itself, just give us a little bit of your background. How did you come to be here at Ivey?

HUBERT PUN: Sure. I got my undergrad and master degree in engineering, and then I work as a computer network engineer for a few years. And then I got my PhD, graduated in 2010 and then have been with Ivey ever since.

JULIAN BIRKINSHAW: Perfect. Thanks. And you should just help the listeners who, of course, have all heard of blockchain with a bit of a definition. What is blockchain? What's unique about it?

HUBERT PUN: Well, like a blockchain is a decentralized network. Let me give you an example. I'm a professor and I have a Excel file that consists of the grades of all students. Everyone trust in the integrity of this file because they trust myself as a professor. I’m not going to do anything fishy or funny with this file. Well, but then you can imagine right now, if there's a group of several students like to work together on a scientific project. Well, then they need to trust in one another in order to form a group. Because otherwise, if one of them do something funny, then like I there's no trust within this network. What happen if there are someone in some other part of the world that have the expertise required to do this scientific experiment, but then they do not trust this person. Is that able to be done? Well, blockchain with a decentralized network, that means rather than one person keeping the experimental result, then we actually have everyone keep a copy of the result. If one person trying to mess up with the file, then we can compare the majority rule and whoever that have the most copy, we trust that that is the true genuine copy. That is the idea where blockchain is decentralized and that makes the information onto the blockchain to be immutable, permanent, and also immutable.

JULIAN BIRKINSHAW: Got it. So, the record stays on the blockchain, and that blockchain is replicated in many different computers around the world so that nobody can tamper with it. And that is a sort of an alternative way of storing records, rather than having one central authority that controls it.

HUBERT PUN: That is exactly correct.

JULIAN BIRKINSHAW: So, if we take it to the most well-known example, Bitcoin obviously is a very famous cryptocurrency. And that is essentially a means by which I can, at least in theory, pay somebody for a product because I am paying them over this blockchain. And the opportunity to do that, as opposed to using the traditional system, is that this is a decentralized system. No central bank can kind of interfere with that transaction. Once I've made that transaction. It is there forever.

HUBERT PUN: That is correct. So, usually if I were to transfer money to you, I need to get to the bank. And the bank needs to get to your bank, and then your bank gets to you. And I like a so right now with the Bitcoin is a peer to peer transaction. So, then I can simply transfer the money to you that actually help a lot of people in the unbanked area. Not everyone has the privilege to have a bank account. So therefore that helps those people that they can also experience the like a banking experience, as well.

JULIAN BIRKINSHAW: Got it. And the blockchain. A Bitcoin transaction can happen anywhere in the world. Anybody who obviously has access to a digital system can use it. And we need to get to this sooner or later. So let's do it now. I mean, the current value of Bitcoin is hovering around $100,000, and I think that's about as high

HUBERT PUN: US dollar $100,000 USD

JULIAN BIRKINSHAW: which is for me. I mean, I've been following Bitcoin's progress, for me it's just an insane number. Why is it so valuable? What are people seeing in Bitcoin that makes it so valuable?

HUBERT PUN: Well like, so what makes it valuable is like supply and demand. So, there are so many people demanding for Bitcoin, but the question is, why people like to have a Bitcoin? That actually illustrates the distrust of a centralized authority. As an example, right now, with the US government changing between like a from the Democrats, to the Republicans, a lot of things have changed. But then like the US government actually have a lot of say about how the currency is going to be, about how much currency can be released. So therefore, like I if I were not able to trust what happened in the government, then I'll like to have something that trusting the technology rather than trusting a central authority.

JULIAN BIRKINSHAW: Good. So, in the old days, we would buy gold because we knew that gold had some sort of sort of immutable value, a sort of intrinsic value, I guess. When we didn't trust governments, we put our money into gold or we buried our money underground or whatever. Nowadays, people are saying, we think that that Bitcoin might have the equivalent value of gold, and yet, you know, it doesn't have any intrinsic value. It is literally just a bunch of ones and zeros. It is literally just a digital thing. So, you're saying that somehow people trust in, you know, digital currencies in cryptocurrencies in a way that they don't trust government. It's quite, a quite a scary proposition in some ways.

HUBERT PUN: That is true. Like a now-a-day if you look at the news, and then like us saw the policy flip back and forth. So therefore there's no certainty when people like to invest, they like to make sure that my money actually gets stable like a return. But then like if I were to invest into something, but then if the policies swap, then like it just make it so much uncertain. So that for Bitcoin, perhaps, would be another way that people can invest, so that there is some kind of certainty.

JULIAN BIRKINSHAW: And what about the so-called meme coins? Like, Donald Trump famously launched a meme coin when he became president. I mean, what's going on there? Is that is that just a scam, or is there some something valuable here as well?

HUBERT PUN: Like a meme coin is different from a, like a, like a usual cryptocurrency. A cryptocurrency you should have some real use. But the meme coin is community driven. It's like an internet jokes. And the most famous one you may have heard is called a Dogecoin. So Elon Musk make it really famous like a few years ago. And then earlier this year, Donald Trump actually released a meme coin like the Trump meme coin. That is a very interesting situation because right now he's the President of the United States doing something that have some kind of personal benefit as well. So therefore, while the boundary between a politician and also the personal gain becomes really blurry. So that would be a concerning sign.

JULIAN BIRKINSHAW: Yeah, perhaps we shouldn't go any further into this because I am deeply skeptical of these things and the conflict of interest are obvious. But going back to Bitcoin and other cryptocurrencies, there is at least some potential that these become a currency of the future that is used, to trade across boundaries, in a way that sort of takes it outside of the traditional banking system. And of course we're talking about cryptocurrencies. That is different than just a central bank digital currency. Right? I mean, a bank can issue a digital currency which it controls, which is different from a cryptocurrency.

HUBERT PUN: So, the central bank digital currency is controlled by a central authority, which is a central bank. While for the cryptocurrency, let's say the bitcoin, there's no one single owner. So that would be a very different.

JULIAN BIRKINSHAW: Got it. And then again that gets back to this idea that it's a decentralized.

HUBERT PUN: It's decentralized.

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JULIAN BIRKINSHAW: Let's build on that and get into your research, because obviously we've been talking mostly about Bitcoin and cryptocurrencies, but as you said right at the outset, blockchain is a technology for decentralizing essentially control over records of many types. You've particularly locked in your research at counterfeiting. I know you've got a title of your paper, Blockchain Adoption for Combating Deceptive Counterfeiting. Let's just spend a few minutes, what is that paper about? What is the problem, the business problem you're trying to solve with this paper?

HUBERT PUN: Yeah, like I said in the title, I talk about deceptive counterfeit. If we think about counterfeit, there are two types. One type is called deceptive. I'm a customer. I buy a product I thought that was real, but then it turns out to be fake. The other type is non-deceptive. That means I'm a customer, I buy a product knowing that it is fake, but I still choose to buy it because that is cheap. Well, I guess you can see it from the customer perspective. I get really frustrated if I buy a deceptive counterfeit. Because I paid the full amount, I thought that is going to be a real product, but it turns out to be fake. So, what my paper does is that how blockchain can be used to address this problem. I’ll give you some illustration. So that like in real life, LVMH the really big luxury firm and that what they have done is they partner with Microsoft to have a blockchain network. And basically, if I'm a customer, I buy a product, then I can swipe the QR code and then that can link to the LV company to know that this is actually a genuine LV bag. So, how blockchain can be used to solve this counterfeiting situation in the luxury industry or in different industry as well?

JULIAN BIRKINSHAW: So, my Louis Vuitton bag or whatever has a QR code and that's sort of sits on a blockchain as proof that it was a real bag. Is that it? In simplistic terms?

HUBERT PUN: Yes. That is exactly.

JULIAN BIRKINSHAW: So, I as a customer can verify that the that this really was created by Louis Vuitton, not one of these knockoff companies, right?

HUBERT PUN: Exactly. So, they're protecting a confidence, because if I'm a customer buying a fake bag I thought that is real, I get really frustrated. But then now if there is a guarantee that that is real, then like oh yeah, like a so I have confidence in the brand.

JULIAN BIRKINSHAW: Right. And so, this is actually happening. Louis Vuitton is working with Microsoft. They've created a blockchain on which all of their products sit. And this is then used by customers to verify, and obviously the hope is that they will reduce the number of people who are creating knockoff versions. I get it.

So, what are some of the other use cases today? Setting aside currency, we've talked about currency. But you know we're talking now about counterfeit goods, what are some of the other applications of blockchain that you see companies experimenting with at the moment?

HUBERT PUN: Sure. I have written a case, and a case is looking at how the diamond industry use blockchain to address the situation that this is not a blood diamond. You may know that a blood diamond are those that is from the West Africa or the rebel region. And then I'm a customer. I buy a diamond. A diamond has a deep meaning to me because that signals my love to my wife, my love to my fiancee. And I like to make sure that this diamond is from a clean place. What my case is about is that there is a company called Chotai Fok (sp?) in Hong Kong, is a blockchain implement on the diamond. So when a customer buys the diamond, I swiped a code, then I know where the diamond is like a being mined and the entire processing process and then how it gets to my hand. So that increased my confidence that I'm buying a clean diamond rather than something that helped to fund the rebels in West Africa.

JULIAN BIRKINSHAW: Got it. Let me just go to this bigger question about blockchain becoming this alternative way in which records are stored. Because, you know, I've read up a little bit about it and it's quite clear that there are some concerns about whether it will ever really take off. We've got famous cases of, you know, collapses of various companies, FTX, Sam Bankman-Fried is a is a famous example. We've also got this concern that the blockchain requires huge amounts of processing power to make it work. And the question about whether it's ever going to actually be as efficient as a much more centralized record system, what's your response to that? I mean, perhaps you can help the listeners to understand what the biggest problems are and how we're attempting to resolve them.

HUBERT PUN: Well, so basically, there is a trilemma for the Bitcoin. Is that scalable, security, and decentralization. So, when we talk about like, well, the scalability or the mining situation, like the environmental impact, that is one of the weakness about like the Bitcoin network, or like a some of the implementation about blockchain because like in order to be decentralized and secure, it takes a lot of mining, in order to make it secure. But then that makes it not as scalable and that has the environmental impact.

JULIAN BIRKINSHAW: So, you said trilemma, and this is not a word that many people know. But you're saying you can have scalable. You want scalability ability, you want security and you want decentralization. And you can always have two of these three, but not all three at the same time.

HUBERT PUN: Yeah. So that would be a balance between which one is more important. So, therefore like in different network or different implementation about blockchain, so that maybe one is more important than the other than there would be a trade-off between those.

JULIAN BIRKINSHAW: So, you can always have stability and security, scalability and security, but that's then you almost certainly cannot do it in a decentralized way.

HUBERT PUN: Exactly. So if I am a centralized firm, I have a blockchain network, then it can be more scalable, it can be more secure, but then it's not decentralized. So, that would be the trilemma that people are trying to face.

JULIAN BIRKINSHAW: Very interesting. And we're trying to find a way of getting all three, but at some level there are trade-offs. And the more secure, sorry, the more decentralized you make it, the more actually it creates work for lots of people to maintain the decentralized nature of it. Yes. Yeah. So that would be the challenge about blockchain. Got it.

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JULIAN BIRKINSHAW: So let's get to Canada, because I know you've written a policy piece on this topic essentially saying Canada is kind of falling behind in terms of not just thinking about, but employing and using blockchain. Just tell us a little bit about where you think the problem is and what Canada might do differently.

HUBERT PUN: Well, actually Canada a few years ago is a leader in the blockchain sector. While 2021 Bitcoin ETF, the first Bitcoin ETF, was actually an

JULIAN BIRKINSAHW: ETF is an exchange traded fund, so, you could actually just buy and sell it.

HUBERT PUN: Yes. And I like the purpose, Bitcoin ETF is in Canada. That is the first one in the world that takes place in 2021. While as a benchmark US have the first Bitcoin ETF in 2024. So therefore we are actually the leader a few years ago. Well, but then as you know that is a race between different countries. So, if you are not moving forward fast enough, other people are going to take your place. And then like after the 2021, things actually go downhill. As an example, like a Singapore and Estonia, they are right now the leader in doing like digital identification, which is blockchain driven or like the DeFi, decentralized finance, US and a Europe right now is the leader. Or like the CBDC, the central bank digital currency, China right now is doing as a leader as well. So that talks about if as a Canadian, if you are not moving fast enough, other people will move faster than you, then you fall behind the race.

JULIAN BIRKINSHAW: Right. And so what should the Canadian government be doing? Should they be deregulating because of course, the more you deregulate and legitimize these things, the more risk you are taking. Are you are you suggesting that Canada should be actively experimenting in some of these new technologies in a, in a more proactive way?

HUBERT PUN: Yeah. Like a so what I recommend a Canadian government can do is to focus on two all three key industries. Let's say the health care industry, the energy industry which were really good at and then trying to encourage more blockchain adoption within those key industries. And also to have some kind of regulation sandbox so that people would feel that, would promote innovation, but at the same time protecting the customer as well

JULIAN BIRKINSHAW: Right. Yeah. And of course, this is always the, the tension, isn't it? You know, you want to encourage experimentation. You don't want to take any huge risks. And my sense is Canada is being a little bit cautious here, and you would to see more experimentation.

HUBERT PUN: Yes. And then focusing on some of the key industries I believe that would be a good first step.

JULIAN BIRKINSHAW: Yeah. And healthcare and energy. I mean energy, as you said, Canada is big in energy. Why health care? Because it's because it's an industry which requires innovation to make it more, more efficient.

HUBERT PUN: Yeah. Like as an example, like a when you go to a different hospital, you always have to do the body check again, and then all the records are all scattered apart. But imagine if one day there's a unified health care record that you can use from one hospital to the other that saves so much time. So therefore like a that would be a place where the blockchain, well, a digital identity or the unified health care record can be really taking off, saving taxpayer money and also make the whole system more efficient.

JULIAN BIRKINSHAW: Got it. So, my big takeaway and we'll close after this, is that blockchain is a technology, it is a technological innovation.  It allows kind of for the first time, the possibility to create, records without central control. And the reason, perhaps this is so enticing today is our trust in central governments and indeed in centralized companies is a little bit sort of falling, falling apart thanks to, unfortunately, quite a lot of governments around the world, not being as responsible as they used to be. Is that is that right?

HUBERT PUN: That is correct. So, the record onto the blockchain network is immutable. So therefore I know that whatever that is written will not be changed. So that also give myself as a patient in a health care setting, or as a customer, I have more control about what data I can released to the public, or what data I can keep myself so I can have more control as a citizen.

JULIAN BIRKINSHAW: Yeah, no, I mean, it seems attractive. I mean, most of us like the idea that we are in control of our own records, our own livelihoods. There's a bit of distrust of central authorities for understandable reasons, but we are clearly still in the early stages of this technology because my sense is that lots of companies are, are starting to put in place, shall we say, experiments and prototypes and even sort of working prototypes, but this has not scaled up in the way that perhaps its biggest proponents would have hoped.

HUBERT PUN: Yeah, technology adoption takes time. Yes. As an example, if we think about internet. Well, for the internet, it started in the 1990s, but then it is until like 2010 that like there's some new killer apps for the internet. Blockchain, right now, we are still in the very early phase, and maybe in a few years there will have a killer app and at that time blockchain will really take off . We are not at that point yet.

JULIAN BIRKINSHAW: Got it? I mean, there is a parallel to artificial intelligence, isn't there? Because obviously artificial intelligence is again, is this fundamental technology, and we're still trying to figure out the best ways of using it. And the killer app that emerges at some point, when it arrives will genuinely revolutionize kind of usage.

HUBERT PUN: Yes. And then I deeply hope that a killer app is coming from Canada. We do have the people that is really smart, really entrepreneurial as well. So, therefore I hope that with the right incentive then to students now, will they are able to develop the next killer app and make Canada great again.

JULIAN BIRKINSHAW: And that's good. Excellent. So I think you've given us the kind of the key takeaway which is we've got to continue to invest in and innovate using blockchain technology. Any other last takeaway for the listeners before we close?

HUBERT PUN: Well, like I so I believe that being a leader, you may or may not be aware about what blockchain is, but then like a you're responsibility is to see five years from now, how does this technology is going to disrupt my company? If you do not have the foresight well that like a you may become the next Blockbuster. Yeah. So that Blockbuster gets destroyed by Netflix. So hopefully that you have to foreseeing will so that you know what will be ahead with the technology. And then you can reposition your company to best adopt this new technology.

JULIAN BIRKINSHAW: Perfect. We will leave it there. Thank you very much. You've been listening to Dialogue with the Dean from Ivey Business School. A big thank you to my guest, Hubert Pan, for sharing his time and insights. And of course, thank you for tuning in. On our next episode, I'll be joined by Zoe Kinias, Associate Professor, Organizational Behavior and Sustainability, and the John F. Wood Chair for Innovation in Business Education, discussing pressing issues around leadership and gender in the workplace.

Until next time, goodbye.

KANINA BLANCHARD: This was Dialogue with the Dean and I the Impact Podcast series. For more insights from Ivey, including thought leadership on critical issues and additional podcast episodes, visit IveyImpact.ca or subscribe on your preferred podcast platform. Thanks for tuning in.