Booting Up: Take Bitcoin tech to the bank

The digital currency Bitcoin is a risky bet, but the technology it’s built on is poised to fuel the next startup revolution.

The public ledger of all Bitcoin transactions is called a blockchain, a secure and verifiable record of all buying and selling. It’s the primary technical innovation of the cryptocurrency, and it has the potential to disrupt a host of industries ranging from finance to entertainment.

Blockchain verifies transactions are valid when computers on the network solve a complex math problem. There is no central authority required to oversee the chain because each new block is connected to the prior one in a digital chain algorithm, becoming part of the global ledger.

A simple way to think of this is in terms of StubHub. If the ticket reseller used blockchain technology, it would never have to worry about counterfeit tickets popping up for sale on its website because every ticket would be easily traced back to the original vendor.

Blockchain records can never be modified, which has the result of “automating” trust, eliminating the need for intermediaries. At its core, the blockchain framework is decentralized — requiring no centralized body or authority to verify and update records. In essence, this technology is about cutting out the middleman, with enormous implications for any industry with a centralized overseeing authority.

Even cloud storage is already being disrupted by blockchain, with startup Storj offering a suite of decentralized applications that allow users to store data securely. Another interesting blockchain startup is ShoCard, a digital identity card that is so secure banks can rely on it.

Banks and credit cards have shown a keen interest in the technology, chiefly because they have no choice. Blockchain technology will affect them whether they like it or not. Three blockchain-related startups were accepted for a startup accelerator backed by Barclays earlier this year, for instance.

With roots in digital currency, the first wave of blockchain startups will center around finance, but the implications could be far-reaching for industries such as health care, entertainment, real estate and more.

For now, I’m most excited for the potential of blockchain technology to democratize our financial markets, opening up transactions once accessible only to a privileged few to anyone who wants to invest. Nasdaq began building blockchain technology into its infrastructure in June. Late last week, the exchange acquired SecondMarket, a blockchain platform that lets startup employees trade their stock for cash before going public. In June, the Nasdaq announced a partnership with Chain, a blockchain financial startup that recently closed a $30 million round of funding.

As Bitcoin continues to sputter as a currency, it’s becoming clear its true value may be the blockchain.

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