BETTING ON BLOCKCHAIN: Mining the possibilities of blockchain technology.

• Author: Andra, Jacob
• Position: Technology

Jonathan Johnson thinks blockchain will change the world. He leads Utah venture capital firm Medici Ventures, which invests in startups seeking to leverage blockchain "to develop products that will transform everything from capital markets to land transfer to voting systems." The firm is a wholly owned subsidiary of Utah-based Overstock.com, whose executives are betting big on the technology.

I've been following blockchain for years like Johnson, I believe it will transform transactions to a similar degree that the internet transformed communication and I still have only a basic grasp of its functionality. Despite its complexity, we'll all be adopting it soon enough if Johnson and his fellow enthusiasts are right. After all, you don't need to understand something to use it. (How many of us truly understand cell phone transmission, internet protocols or even electricity?)

LET'S START WITH CRYPTOCURRENCY

We've all heard of bitcoin by now. It's an example of blockchain applied to currency. Cryptocurrencies of which there are nearly a thousand, with bitcoin being the largest use "cryptography, networking and open-source software," writes Andy Greenberg in a 2011 Forbes article, "Crypto Currency."

To assist in a rudimentary cryptocurrency explanation, I'm relying heavily on the excellent overview on cryptocurrencyfacts.com.

Cryptocurrency is an encrypted, decentralized digital currency transferred between peers and confirmed in a public ledger via a process known as mining.

Simple, right?

At the core of a cryptocurrency, people (or rather their computers) solve puzzles. Really hard puzzles. Remember the 2014 movie The Imitation Game? We're talking about cryptographic complexity way beyond that. People who solve the puzzles are known as miners, and the successful solution of the latest computational problem rewards the victorious miner with some amount of the currency. Miners can be anywhere on the globe; so long as a person has internet access and sufficient processing power, he or she can participate.

Meanwhile, people pay one another in the cryptocurrency, and their transactions are recorded in a public ledger. When a miner solves a puzzle, the latest group of transactions, known as a block, is added to the ledger. The solution of the puzzle secures the transactions as legitimate and makes them permanent and of public | record. The ledger is the history of all blocks, otherwise known as the blockchain.

WHY BASE A CURRENCY ON PUZZLES?

At first...