The common perception of bitcoin is that it’s a strange, volatile currency which few people understand. Opinions of the digital money are often influenced by stories about criminal hackers who get paid in bitcoin for breaching and ransoming sensitive user data. But the transactional database which runs bitcoin – the blockchain – has emerged as an object of significant interest within the global corporate and financial communities, led by two big names in technology: Intel and IBM.
The interest of these two companies in the platform running cryptocurrency has become clearer in recent weeks as both firms made significant announcements in this area. More recently, at a major conference on the blockchain held in San Francisco earlier this month, corporate leaders gathered from around the world and heard executives from both companies shed additional light on why they see a future in the bitcoin engine.
As Luis Carranza, the founder and organizer of the one-day event, put it in his opening remarks, “If you disrupt financial services, people are going to fly six thousand miles to figure out what the hell is going on.”
Last month, IBM announced a new cloud computing service tied to an open source project called Hyperledger. It’s built on the blockchain and is designed to create software which can more efficiently and reliably track large financial assets (stocks, bonds, homes).
“Bank executives know they’d better get in front of this or they will get disrupted,” explained IBM’s global blockchain director John Wolpert during the Blockchain Conference.
IBM’s announcement was followed barely days later by the news that Intel has been running an internal blockchain trial centered on the growing fantasy sports market. At the time, company representatives vaguely described the experiment as NCAA basketball type of pool where Intel employees acquire shares in teams and exchange them using the blockchain technology.
And earlier this month, a blockchain startup called R3 announced that they had successfully completed a trial for trading fixed income assets among 40 of the world’s largest banks using Intel’s processor technology.
“We’re taking more of a research approach on the blockchain,” said Kelly Olson of Intel’s new technology group. “The challenge has been scalability.”
The interest among financial institutions in the blockchain centers on the technology’s ability to perform multiple transactions per second across a complicated, interlinked network of computerized systems which handle the significant volume of global monetary exchange. IBM’s Wolpert also believes that expanding use of the blockchain may go well beyond the financial uses that he and other large organizations are pursuing.
“We don’t see blockchain so much as a financial instrument, but rather as a means to transform the Internet,” said Wolpert. “We see this as a way to create viral business networks with a lot less energy to start them.”
There’s evidence to support Wolpert’s point as expanding use of the blockchain has led to the creation of some interesting new businesses. One of the name brand companies who has dived with enthusiasm into the blockchain pool is Overstock.com, whose CEO – Patrick Byrne – has been an unabashed critic of Wall Street.
Overstock was one of the first companies in the nation to begin accepting bitcoin as payment and the firm announced in December that the SEC had approved their plan to issue stock over the blockchain. The potential for this new venture to be profitable sent Overstock’s market value higher by 23% last month.
At the San Francisco conference on March 7, attendees heard presentations from several blockchain startup companies as well. Hedgy is building a smart contract business which can be used for a wide range of applications including instantaneous settlement of over-the-counter (OTC) trades. Salesforce founder Marc Benioff and venture capitalist Tim Draper are investors.
Another startup – Hellosent – is also designing smart contracts using the blockchain. CEO Peter Peh offered an example where expensive wine could be shipped with a tracking device that continuously monitored temperature and humidity while in transit. If either measurement dropped below the acceptable standard, then the transaction would be voided and automatically cancelled before delivery.
An Israeli company – CyGuard – is building their startup business on a model which uses the blockchain to automate accountability in advertising by tying content directly to the brand vendor. Aside from the annoying robo-trolls we all despise, this technology has the potential to close off much of the virus and malware traffic which often delivers malicious code using corrupted and unverified ad platforms.
The growing number of startups and weekly news from big companies seeking to capitalize on the blockchain signals a new phase in the evolution of this intriguing technology. “It’s a game of efficiency now,” said Also Carrascoso, the founder of Align Commerce, during the Blockchain Conference earlier this month. Based on the dialogue from the gathering’s participants, it’s also a game of trust and acceptance, something that companies such as Intel and IBM seem currently more than eager to provide.