Bitcoin was launched as a currency that did not require government permission or minting.  Bitcoin came on the scene in 2008 and by 2009 software was available to enable “mining” for bitcoins.  To validate the authenticity of each mined bitcoin, miners must solve for the next step in a mathematical progression that links the new bitcoin to all prior bitcoins.  The search for that mathematical progression is what constitutes the “mining.”  That analytical result is recorded in bitcoin’s “blockchain,” a digital public ledger that all miners, merchants and bitcoin owners can inspect.  Bitcoin’s volatile and sometimes hysterical trading has nothing to do with blockchain.

Early on, bitcoins and blockchain were regarded as tightly linked, but blockchain is not a concept unique to the mining of bitcoins.  A purpose-built blockchain can contain an unalterable trail of dates of transactions, agreeing parties, quantities, values, shipments and conditions.  Unlike bitcoin’s blockchain, a commercial blockchain need not be open for the public to inspect.  A blockchain that addresses transactions among a group of agreeing parties can limit access to just those agreeing parties.

The value of an unalterable digital ledger that can validate transactions and commitments among multiple parties has high value in many fields, especially in the financial sector.  A blockchain can bring clarity as to what each party asserted, contributed and agreed to.  By 2015, about seventy financial institutions joined together in R3 to create a blockchain operating system called Corda.  Another firm, Ripple, mints its own cryptocurrency (the Ripple) and develops private blockchain software for the same market as R3.  Both groups foresee blockchains that take millions of transactions—settlements, transfers, swap and so on—and record them on a shared digital ledger.”

One advantage of a blockchain is the ability to sequester private information, such as the intent to conduct a major transaction, without that information being leaked to a competitor.  The information can be safeguarded in the blockchain.  If a competitor outside that blockchain group finds out before the intended deal is consummated, the value of the deal can be harvested by the wrong person (i.e. the information thief can ”front run” the deal).

Blockchains are of widespread interest.  An Exchange Traded Fund with symbol BLCN seeks long term growth from companies listed in “ the Reality Shares Nasdaq Blockchain Economy Index.”  That index tracks “returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their proprietary use or for use by others.”

Fifty-eight large exchange-listed firms with a serious involvement in blockchain are part of BLCN’s holdings.  Not yet part of the index are another ten exchange-traded smaller firms with blockchain experience or ambitions (e.g. RIOT Blockchain).  Government agencies will be enthusiasts for blockchain ledgered applications such as deals with their private sector contractors, and for lawsuits and regulatory enforcement projects.

Blockchains will not make complex matters simple, but they should eliminate time-wasting excuses such as “I didn’t get that page” or “we never agreed to that.”  Of course, when big payoffs are involved, human nature can trump great technology and undermine harmony.  It appears that R3 and Ripple did not take full advantage of their own blockchain and legal expertise.  They are currently suing each other over breaches of commitments in a contract that is worth about $1 billion of Ripple cryptocurrency if R3 prevails in court.

Blockchain is too complex for use by most “mom and pop” operations.  Keeping it simple with QuickBooks, Turbo Tax, and occasional advice from your attorney will cost a lot less.  A few years from now, a home version of R3 or Ripple’s blockchain may be available for consumers who do a lot of buying, selling, and mortgage arrangements.  Until then, it remains a pricey tool for accountants, traders and lawyers.