Blockchain Revolution

Value Innovation: The bitcoin blockchain was designed for moving bitcoins, not for handling other financial assets. However, the technology is open source, inviting experimentation. Some innovators are developing separate blockchains, known as altcoins, built for something other than bitcoin payments. Others are looking to leverage the bitcoin blockchain’s size and liquidity to create “spin-off” coins on so-called sidechains that can be “colored” to represent any asset or liability, physical or digital—a corporate stock or bond, a barrel of oil, a bar of gold, a car, a car payment, a receivable or a payable, or of course a currency. Sidechains are blockchains that have different features and functions from the bitcoin blockchain but that leverage bitcoin’s established network and hardware infrastructure without diminishing its security features. Sidechains interoperate with the blockchain through a two-way peg, a cryptographic means of transferring assets off the blockchain and back again without a third party exchange. Others still are trying to remove the coin or token altogether, building trading platforms on private blockchains. Financial institutions are already using blockchain technology to record, exchange, and trade assets and liabilities, and could eventually use it to replace traditional exchanges and centralized markets, upending how we define and trade value.