Professional Documents
Culture Documents
webpage capture
Original https://www.nytim
no
All snapshots from host via.hypothes.is
from host www.nytimes.com
Webpage Screenshot
SECTIONS
SEARCH
SKIP TO CONTENT SKIP TO SITE INDEX
SUBSCRIBELOG IN
Data Security Is Becoming the
Sparkle in Bitcoin
Image
The offices of Chain.com, a start-up that helps developers build Bitcoin applications. CreditJim Wilson/The New York
Times
By Sydney Ember
March 1, 2015
o
o
o
o
o
Some couples opt for a traditional wedding, while others go for the Elvis impersonator
in Las Vegas. But David Mondrus and Joyce Bayo may be the first to have incorporated
Bitcoin.
Before about 50 guests at a Walt Disney World hotel in Florida recently, the couple used
a Bitcoin automated teller machine to record their written vows on the currency’s so-
called block chain — an open ledger that permanently stores information.
“A diamond is forever, a marriage is forever, but when was the last time anyone looked
at their wedding vows?” Mr. Mondrus said. “This technology allows us to get that data
and store it in a way that is retrievable and noncorruptible.”
As Bitcoin’s price has declined over the last year, critics have been quick to declare the
virtual currency dead. Bitcoin’s true value, though, might be not in the currency itself
but in the engine that makes it possible.
Explaining how the block chain works can tangle the tongues of even those who are
most enthusiastic about Bitcoin. Most resort to metaphors or diagrams. At a basic level,
the block chain is a searchable ledger where all transactions are confirmed, in a matter
of minutes, by a network of computers working to perform complex algorithms. Each
part of the network maintains a copy of the ledger. About six times an hour, a new group
of accepted transactions — a block — is created, added to the chain and broadcast to the
other parts of the network. In this manner, all transactions are recorded and linked and
thus can be traced. It is nearly impossible to modify past blocks in the chain.
By simply downloading the Bitcoin software, anyone can gain access to the block chain,
search it and submit transactions to the network.
Entrepreneurs worldwide are now working to harness that technology for use beyond
Bitcoin transactions. The block chain, they say, could ultimately upend not only the
traditional financial system but also the way people transfer and record financial assets
like stocks, contracts, property titles, patents and marriage licenses — essentially
anything that requires a trusted middleman for verification.
“There’s a race going on to extend the block chain’s capabilities,” said Adam Ludwin, a
co-founder of Chain.com, a start-up that seeks to help developers build Bitcoin
applications.
On web forums and at Bitcoin conferences, talk is shifting to the next generation of
applications built on block-chain technology. So-called Bitcoin 2.0 projects dominated
the conversation at the Satoshi Roundtable, a retreat for Bitcoin enthusiasts at a resort
in the Dominican Republic in February, according to accounts from some participants.
About 20 percent of Chain’s roughly 5,000 users are developing nonfinancial block-
chain applications, compared with less than 10 percent a year ago, Mr. Ludwin said.
Banks and multinational telecommunications companies are quietly expressing interest
in ways to take advantage of the block chain.
Investors are also starting to bet on the technology. Through the end of February,
Bitcoin companies had raised $550 million in venture capital, according to Wedbush
Securities, a financial services firm. And although much of that financing has been
directed to trading platforms, exchanges and digital-wallet start-ups — $106 million
alone has gone to Coinbase, a popular provider of Bitcoin wallets — companies working
on block-chain applications are beginning to secure chunks of financing.
Among the venture capital firms that have backed Bitcoin-related companies is Khosla
Ventures, an investor in Blockstream and Chain. Keith Rabois, a partner at Khosla, said
the firm’s investments were based on the conviction that the block chain would alter the
way society thought about transactions — financial or otherwise.
“The way I think of the block chain is a really modern infrastructure to move money
around the globe,” said Marwan Forzley, the chief executive of Align Commerce, another
start-up seeking to make cross-border payments easier.
Although companies focused on financial applications for the block chain far outnumber
those experimenting with other uses, the gap is narrowing. For example, a start-up
called BlockSign verifies signed documents on the block chain. Another
company, Filecoin, is aiming to build a marketplace for storing data on the block chain.
PeerNova — which said it was planning to announce financing that would bring its total
to about $20 million — is developing a technology that will use the block chain to prove
the authenticity of a document, like a patent. The company is also toying with registry
applications for other records, including title deeds and financial data.
“Our entire system of contracts is based on a trusted third party,” said Naveed Sherwani,
the chief executive of PeerNova. But with the block chain, he added, “there is no third
party anymore.”
With the rise of the block chain has come a fundamental question: Should technology
replace human discretion? Some experts, even those who study cryptocurrency, are
skeptical.
“There are very good reasons why we have legal and social institutions and economic
intermediaries,” said Arvind Narayanan, an assistant professor of computer science at
Princeton who studies block-chain technology.
In his teaching, Professor Narayanan said he often used car ownership as an example. In
theory, block-chain technology could eliminate the need for, among other
inconveniences, title certificates and dealers to ensure the secure transfer of money and
property. The idea initially sounds appealing, but if the car is broken into or stolen, he
said, the block chain alone will not be able to resolve the dispute.
“It’s not just one human you’re getting rid of, but the entire economic, legal and social
structure that reinforces the idea of property,” he said.
There is also still broad support for Bitcoin. Many investors and entrepreneurs maintain
that Bitcoin will outgrow its early role as a speculative investment and become a viable
alternative currency for international payments. Others see countries turning to Bitcoin
when their own currency is unstable.
The virtual currency must also maintain some value for the network to work. Bitcoin
miners, the computers that drive the block chain, win Bitcoins if they successfully solve
complex cryptographic problems. If Bitcoin’s value continues to drop, it could become
too expensive to keep the computers running.
But there are also those wary of moving too fast. Though enthusiastic about the block
chain’s potential, a group of Bitcoin supporters, many of them early adopters, wants
start-ups to focus first on strengthening existing Bitcoin applications, like digital wallets
and trading platforms, before developing other uses for the underlying technology.
Exchanges, where traders can meet to buy and sell Bitcoins for dollars, euros and other
currencies, have been especially vulnerable. Anxiety from the collapse last year of Mt.
Gox, a prominent exchange based in Japan, is still high. And a security breach in
January at Bitstamp, another exchange, sent further ripples of doubt through the
Bitcoin industry.
“People are rightfully talking about the block chain,” said Jeremy Liew, a partner
at Lightspeed Venture Partners, a venture capital firm that has invested in a number of
Bitcoin start-ups, including Blockchain, a digital-wallet provider and software
developer, and BTCChina, a Chinese exchange. “The question is how do you realize the
first opportunity here?”
“You can’t jump to the top of the stairs,” he added. “Everything is a process.”
A version of this article appears in print on , on Page B1 of the New York edition with the headline: Data Security Is Becoming the Sparkle in
Bitcoin. Order Reprints | Today’s Paper | Subscribe
Related Coverage
SHOW ALL
ADVERTISEMENT
Site Index
Go to Home Page »
NEWS
OPINION
ARTS
LIVING
LISTINGS & MORE
Site Information Navigation
© 2018 The New York Times Company
Contact Us
Work with us
Advertise
Your Ad Choices
Privacy
Terms of Service
Terms of Sale
Site Map
Help
Subscriptions
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%