Beyond cryptocurrencies, capturing the imagination of experts is the innovative technology behind it all, the blockchain.
Venture capitalists are taking note too. In 2017, VCs poured $900 million into blockchain companies, and they’re on pace to eclipse that figure for 2018.
At its core, the blockchain is an unchangeable record of transactions stored across a network of computers. It gets its name from the way it works: a block is a record of new transactions that, when completed, is added to the previous transaction, creating a chain of blocks.
While the bitcoin blockchain stores records of financial transactions, a blockchain is essentially just a special kind of database that can be used to store any kind of information. A blockchain can also store and run computer code called “smart contracts” — and that’s what has excited investors and experts.
“Smart contracts avoid some of the trust issues that normally come with contracting,” says Brian Wolfe, assistant professor of finance. “They’re built so users can set up an agreement, and when the terms are met, the contract will be fulfilled.”
So, say two people want to exchange $100 at a specific time in the future when a set of conditions is met. The conditions, payout and parties’ details would be programmed in, and once the conditions are met, funds would be sent automatically.
Technologists envision a future where blockchain is used in a variety of applications, including stock trading, bank operations, digital music copyrighting, arranging ride-sharing or even voting.
But, according to Wolfe, there are still technical hurdles to overcome before many of these big ideas become reality.
“One of the problems we’re having is getting external event information into the blockchain,” he says. “How do I get a real-world occurrence like the price of a currency or the result of an election into this list of transactions that all these computers agree have happened?
“It’s tricky but, if we can resolve that, this has a lot of potential to help with contracting issues we run into all the time. It’s like we’re at the beginning of the Internet again — who could’ve predicted we’d go from email to Uber and Airbnb?”