Troy Wolverton: Real Bitcoin revolution might be blockchain software


You might never use Bitcoin, but there’s a good chance that eventually you’ll benefit from the
technology underlying the virtual currency.

The designers of Bitcoin didn’t create only a new kind of money. They also essentially created a
way of transmitting, recording and verifying information about ownership over the Internet.

That system, called the blockchain, in some ways is comparable to the protocols used to send Web
pages or email messages and could have similarly wide-ranging implications with the potential to
impact everything from real-estate transactions to voting.

At the Future of Money and Technology conference in San Francisco this month, investors,
analysts, artists, Bitcoin backers, entrepreneurs and technologists discussed and enthused about
the potential uses of blockchain technology.

Bill Tai, a venture investor and board member of BitFury, which helps maintain and distribute
the Bitcoin blockchain, compared the state of blockchain technology to the Internet in the early

“It’s crazy to see what evolved over next 15 to 20 years. I feel like we’re at the front of the
same thing,” he said. “When you’re looking at the applications of the blockchain, it’s a crazily
exciting time.”

You can think of a blockchain as a kind of accounting ledger that’s open to the public and
widely distributed.

Every Bitcoin transaction is tallied on the Bitcoin ledger. Each one is time-stamped, encrypted,
validated and recorded by multiple computers — and permanent.

In essence, the Bitcoin blockchain is a history of all the transactions that ever have taken
place with the digital money. You could use the blockchain to trace how a particular Bitcoin has
changed hands over time to when it was created.

The blockchain technology was designed to ensure trust among Bitcoin transactions. The system
prevents Bitcoin users from spending the same coins in multiple places or illegitimately creating
new money out of thin air.

It also was designed to work quickly, at least compared with the traditional means of
transmitting money. New lines — or blocks, which represent collections of new transactions — are
added to the blockchain ledger every 10 minutes.

Tainted by its volatility and use in illicit activities, Bitcoin has struggled to gain wide
acceptance beyond libertarians and anti-government types. But enthusiasts believe that the key
attributes of blockchains — the speed with which they confirm transactions; their ability to convey
trust among people who aren’t known to one another; the way they create a kind of verified paper
trail; and their automated nature — could give them a wide variety of uses outside of Bitcoin.

Artists and those in the media business envision using blockchains and “smart contracts” to
automatically distribute royalties to all eligible rights holders when a song is played or a video
is streamed.

Other ideas for the blockchain and smart contracts include using them to transfer title and
mortgages for real estate or even to pay property taxes automatically. Blockchains also could be
used as the foundation for an ultra-secure electronic-voting system.

Some of these applications are likely years away. Some will require new laws or regulations. And
many will need to get buy-in from a critical mass of companies, institutions or governments before
they take off.

But already, we’re starting to see some real-world uses of the blockchain outside of Bitcoin.
Nasdaq is using blockchain technology to enable the trading of shares of privately held

Align Commerce, a startup based in San Francisco, is using Bitcoin and the blockchain to help
small businesses send money to overseas suppliers, forgoing pricey fees for traditional wire
transfers. Chronicled, also based in San Francisco, is planning on using blockchain technology to
verify the ownership of and authenticate collectible sneakers.

Blockchain is increasingly drawing the attention of investors. Venture capitalists have been
shifting away from Bitcoin-related startups to those that are focusing on blockchain technology,
noted Robert Schwentker, president of Blockchain University, an organization founded to teach
software developers and entrepreneurs about the technology and help them develop applications and
services that utilize it.

Plug and Play, the startup accelerator based in Sunnyvale, Calif., has been connecting giant
financial services firms such as USAA, Citigroup and Capital One with young companies that are
developing services that use blockchain technology to keep track of mortgages and other important
documents and records or to track real-world purchases and tie them to loyalty programs.

Troy Wolverton is a technology columnist for the San Jose (Calif.) Mercury News.

[email protected]


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