The technology behind bitcoin and other cryptocurrencies is being looked at by more conventional companies and businesses.
Known as blockchain, it is a public digital ledger that keeps a running tally of all cryptocurrency transactions within a distributed network of computers. Once they are recorded, transactions cannot be edited or removed, thus adding to the “chain.”
“It’s kind of like if you share an Excel file with a group of your employees at the office, but you don’t know exactly who updated it,” explained Hudson Jameson, chief operating officer and blockchain lead at Oaken Innovations. “Every time that you update the file, it gets updated on every other computer.”
Cut out the middle man
Blockchains eliminate the need for intermediary parties, by relying on a decentralized network of computers, or nodes, to verify all transactions. Bitcoin uses blockchain technology to enable anonymous, peer-to-peer payments, which is why the digital currency is often associated with illicit activity.
But developers are realizing blockchain technology can be equally useful in traditional, commercial applications.
“There’s this whole trend of enterprise blockchains, which is essentially using certain aspects of blockchain technology, like this global shared ledger, but without native cryptocurrency, so a way to represent their actual balance sheets and just kind of transact them more efficiently with their peers,” said Alex Sunnarborg, research analyst at Coindesk.
“More people are using these networks and the space has really just boomed,” Sunnarborg added.
Competition from startups
Bitcoin’s blockchain protocol is also seeing competition from startups like Ethereum, which issues ether, a competing digital currency. Like bitcoin, the Ethereum protocol is open-source. Users can not only conduct transactions with ether, but interested developers can program and build applications that run on the same blockchain protocol and use ether as a form of payment.
Jameson’s startup developed a hardware and software platform for cars based on the Ethereum blockchain.
“We put an Ethereum node on a Tesla, and whenever it would go through a toll bridge, the Ethereum node ... would interact with the toll bridge and autonomously pay the toll bridge,” Jameson said. “If you think about what a toll bridge does today, you go through the toll bridge and you have to pay a credit card transaction fee. There [are] these systems in the toll bridge that work with multiple companies ... but with our system, it’s literally machine-to-machine.”
This machine-to-machine communication allows direct access to the digital currency stored in one’s digital wallet. Transactions are processed on the spot without going outside of the network.
“Automakers are now starting to get interested in blockchain, they’re seeing what it can do for ... the future for autonomous cars and some data-sharing applications ... and blockchain’s going to be integral to that,” Jameson said.
Corporations explore its uses
Companies like Toyota, UnitedHealth Group and Fidelity are exploring blockchain technologies as a way to streamline operations and cut costs. In doing so, they are also lending legitimacy to the space.
“It’s no longer just bitcoin ... it really started as currency, but this whole, decentralized peer-to-peer technology thing really kicked off a whole trend of much more than just money,” Sunnarborg said.
Only time will tell whether blockchain can set off a chain reaction.
“How it evolves into government frameworks is yet to be seen,” added Sunnarborg. “But it’s really hard to stop it at this point, it’s like once the cat’s out of the bag with this new technology it’s out there, and people are going to continue to transact.”