This layer of cryptography offers a certain amount of privacy because no names are recorded. But the cryptography offers a greater value in that it ensures transactions are endorsed only by the person who controls the private half of the key pair. Enterprises thrive on trust and assurance, and the cryptography built into the blockchain offers a great foundation for fostering trust among vested parties.
Another key component of the blockchain is the distributed way in which new entries are added to the ledger. There is no central record keeper like there may be with other ledger-based schemes such as travelers’ checks or PayPal. Instead, anyone can organize the next block of bitcoin transactions and update the blockchain through a process known as mining. This open, collaborative structure makes the blockchain attractive for more than supporting an alternative currency. Any organization or group of organizations can place trust in the blockchain because everyone in the network can play a part in the way it is extended.
Adding a bunch of new transactions to the blockchain may not sound exciting enough to generate wide interest in the task, but bitcoin sweetens the pot by offering rewards to those who do. To add the next block of transactions to the chain, you must solve an obtuse mathematical puzzle built from complex cryptographic primitives. The first to solve the puzzle gets to add the block to the chain and receives 25 coins, worth several thousand dollars. The prize is so lucrative that some groups use custom hardware that runs much faster, increasing their chances of finding the answer to the puzzle first, thereby mining more coins. Because the mathematical puzzles are hard and very fair, everyone gets a chance to compete, and that means everyone has a role and investment in the blockchain.
Pushing the blockchain beyond cryptocurrency
The digital signatures that certify each transaction and the collaborative process by which the blockchain is created offer an enticing amount of certainty and assurance for those interested in using the blockchain for tasks beyond banking and currency.
While bitcoin’s blockchain is generally filled with bitcoin transactions, many companies are exploring ways of using the blockchain to track other swaps, trades, or exchanges. Some are looking to bundle their transactions in bitcoin’s blockchain, while others plan to create an entirely separate blockchain using most of the same principles.
The more interesting work being done is in adding new features to the blockchain itself, features that do more than simply create another competing currency with another competing name.
More than 100 companies are exploring ways to extend the blockchain. Some want to build a trading platform; others want to create a more reliable secure identification card; some want to build "self-executing contracts"; some want to handle bitcoin accounting so that businesses can adopt the currency with a minimum of fuss. The applications are exploding.
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