Comstock's magazine 0419 - April 2019 - Page 44

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 44 | April 2019 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-