n BLOCKCHAIN
hen an economy craters, its curren-
cy often goes with it. That’s been
nowhere more true than in Vene-
zuela. The bolivar has lost almost
all its value against the dollar since
April 2013. Because Venezuelan law
forbids most people from exchang-
ing bolivars for dollars, thousands of
Venezuelans are trading in Bitcoin,
the world’s most popular digital cryp-
tocurrency. In February, Bitcoin trad-
ing in the country hit an all-time high, by one
account, 157 times higher than the country’s
largest stock exchange.
Bitcoin’s value in the real world derives in
part from the fact that it runs on a blockchain,
a distributed and transparent online account-
ing register, according to its proponents. One
area startup — Woodbridge-based company
Splash Factory — is helping Venezuelans make
the switch to Bitcoin. The company designed
an app called Monarch Wallet that lets busi-
nesses accept cryptocurrency payments and
convert those to dollars and vice versa. It works
the same way on the consumer side — buyers
can pay in cryptocurrency and the app pays
the vendor in dollars. Invented in the teeth of
the 2008 financial crisis, “Crypto puts the pow-
er back in the hands of the people,” says Splash
Factory founder Robert Beadles.
But Splash Factory and developers like it
have a broader aim too: building blockchain
applications that let people and businesses
conduct transactions without intermediaries
— brokers, agents, notaries, even web plat-
forms. They imagine a real estate sale without
agents, a sale of stock without brokers, or a
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peer-to-peer loan without a company website
to transact on.
These evangelists say that blockchain tech-
nology makes transactions, especially complex
ones, more secure, cheaper and faster than is
possible with the current system. But the vast
majority of blockchain startups fail, and crit-
ics say its enthusiasts are selling solutions that
won’t deliver. If those concerns come true,
businesses that buy their products and ser-
vices could be headed toward big cash outlays
with little to show at the end.
BLOCKCHAIN 101
The “block” in blockchain refers to a digital
block of information — say a seller, buyer and
price. That block gets stored on computers
around the country or world, and a block of
data is valid only if the encoding is the same
across all storage points. Imagine that, instead
of computers accessing shared files from a
server, those files are on a network of comput-
ers and revised synchronously. Each block is
chained to the next with complex code, making
it impossible to alter one without breaking its
link to the next one.
Think of it as an old-time accountant’s led-
ger: If the blocks are the pages, as Paul Colleti
of the BBC puts it, then the chain is the bind-
ing. A 2016 Goldman Sachs report defines it as a
database of transactions or other records, with
copies of the database replicated across many
computers. Individuals and companies have
created many different blockchains, some pub-
lic, some private, others a mix.
Central to the technology’s power are the
“smart contracts” that can run on it: mini-com-