Even if the craze for Bitcoin and Ethereum abates, the power of the “blockchain” tech behind those currencies is very real. Here’s how businesses are trying to harness it—and why they can’t afford to ignore it.

One summer morning in a coffee shop on Atlantic Avenue in Brooklyn, I sit behind my MacBook Pro as tens of thousands of machines around the globe prepare to indelibly inscribe a record of my tinkering into their collective consciousness. I am in the midst of creating my own digital tokens—­essentially online currency—on a sprawling, decentralized network known as Ethereum.

Mike Goldin, a software developer at ConsenSys, an Ethereum development studio based in Bushwick, walks me through the coding process. Goldin is my Sherpa today, graciously attending, with utmost patience, to my every query. (The 10-plus hours I spent downloading software the day prior was unnecessary, he tells me; we’re going to employ some work-arounds that will achieve my goal in a matter of minutes.)

After considering a variety of names for my token—“fortunecoin,” “hackettoken,” “neither”—I settle on a cheeky one that evokes a spectacular flameout of the great ’90s Internet bubble: “Petsdotcoin.” I click “create.”

Transaction hash


(Pending) … (Pending) … (Pending) …

Twenty-seven seconds and one block confirmation later, I am the proud owner of 500 newly minted “petsdotcoin” tokens. Their creation cost me $1.57 in Ether, the cryptocurrency that fuels the Ethereum network. Despite that expense, my tokens are valued at 0 Ether, or $0.00, as the program reminds me. They are worthless. But if I had tied those bits to some worthwhile business idea, petsdotcoin might have offered investors a radical new way to fund me, track their stake, and participate in a miniature, virtualized, in-app economy. In that respect, my funny-money vanity project is a tiny part of a movement of profound economic significance.

In case you haven’t been keeping track, digital tokens are a new asset class, powered by cryptocurrency networks like Bitcoin and Ethereum. The sector has attracted maniacal investor interest this year, giving these e-coins absurdly inflated valuations that have inspired endless comparisons to the “dotcom” era. (Hence, petsdotcoin.) At press time, the total market value of all virtual currencies had rocketed past $135 billion, up from just under $20 billion at the beginning of the year.

Hundreds of projects have collectively raised more than a billion dollars through “initial coin offerings” (ICOs). There are now tokens funding every conceivable endeavor: Decentralized cloud storage (FileCoin, Storj). Digital advertising (Basic Attention Token, adToken). A gentlemen’s club in Las Vegas (Legends Room). Marijuana (Potcoin). Satire (PonzICO). There’s even one for dentists (DentaCoin). In a photo recently posted to Instagram, Floyd May­weather, the boxer, sits on a private jet surrounded by stacks of dollar bills, touting the sale of tokens for a prediction market called Stox—a moment some saw as proof that ICO hype had reached peak zaniness.

That story goes like this: Underneath the crypto-hysteria is a grand innovation in the humble realm of accounting. The most bullish acolytes of this electronic book-balancing breakthrough, Dixon included, hold that token-based projects will anchor the web’s next revolution, spawning crowdfunded businesses and services that deliver more value to their users while being less dependent on advertisers or rent-seeking middlemen.

Facebook, meet Tokenbook.

Look beyond the ICO frenzy, and you can glimpse another paradigmatic shift inspired by that same accounting innovation. Incumbent businesses in countless industries, from finance to energy to health care to food, are peeling back the layers on this budding technology, seeing the potential to trim costs, share and secure information more efficiently, and unleash new products at unprecedented speed. And they’re doing so knowing that one day their survival may be at stake: Having witnessed what the advent of digital, cloud, and mobile did to laggard companies, no one wants to be the sucker left behind.

The J.P. Morgan team is already breaking ground—and, in the process, underscoring key differences between private and public blockchains. In March, Quorum began adding support for “zero knowledge proofs,” advanced cryptography commercialized by the Zerocoin Electric Coin Co., makers of the Zcash crypto­currency. That cryptography enables state-of-the-art privacy features—something the Ethereum Foundation, the Swiss nonprofit that maintains the public Ethereum blockchain, has yet to do, though it plans to. J.P. Morgan, after all, is designing Quorum to prioritize the needs of corporations, especially in data confidentiality and scalability—areas where private blockchains excel and, for now, public blockchains struggle.

Still, many industry insiders believe that public and private will eventually intersect—just as internal networks came to coexist with and feed the public Internet decades ago. “I think we’re going to see the distinction between public chain and private chain eradicated in the next two to three years,” says Jeremy Millar, chief of staff at ConsenSys, and a founding board member of the Enterprise Ethereum Alliance, a group of financial and tech firms that includes J.P. Morgan and is pushing Ethereum-based blockchains for business. “We’ll be talking about global chains vs. industry and company chains.”

At a recent blockchain event hosted by Microsoft in Manhattan, I ask a group of executives whether they’re similarly bullish. The responses span the gamut from “absolutely” to “I have no idea.” Patrick Nielsen, lead engineer of Quorum, overhears my line of questioning. He can barely conceal his amusement beneath an impressively leonine beard. We’ve got some academic institutions and military research agencies, he says with a wry smile, referencing the topology of the Internet in its early days. “Just have to add a few more nodes to the network.”

If and when all those nodes are in place, it could presage a major shift in the way humans, companies, and their data organize. Of all the analogies that come up in discussing blockchains, perhaps the most frequently cited is the design, in the 1970s, of TCP/IP—the watershed networking protocol that enabled computers to talk to one another and swap data and info. This technology helped upend the point-to-point telephone lines that predominated during the Bell era, paving the way for a network of networks—the Internet.

If the Internet is a supranetwork, then a blockchain, in its purest form, is a way to turn these networks into decentralized marketplaces. Ronald Coase, a 20th-century economist, won a Nobel Prize for formulating an explanation for why corporations existed. Their raison d’être, he said, was to maximize efficiencies in business and market negotiations: Dealmaking is more productive when done collectively. Blockchains could take that principle and multiply it exponentially.

Granted, there are many technical and cultural challenges standing between that vision and reality. The cryptocurrency boom has drawn attention to some of the drawbacks and limitations of blockchains—including the paucity of present demand for cryptocurrency in actual business dealings and transactions outside of pure speculation (lots of people invest in it, few use it) and the potential for security lapses. (For more on the latter, see “The 21st-Century Bank Robbery.”)

Vint Cerf, one of the coauthors of TCP/IP and now vice president and “chief Internet evangelist” at Google, has reservations. “I think that the claims that blockchains will change the world are hyperbolic for the most part,” he zapped in an email to Fortune. “It has become a kind of magic pixie dust for some proponents.” Still, even Cerf sees potential in blockchains, where “the parties involved in the system are known and can be evaluated for reliability and trustworthiness.”

If Cerf’s cautious hunches pan out, businesses could be innovating and growing with the help of blockchains, even if the digital token craze proves to be a fad. Maybe petsdotcoin won’t be the next big hit. But it’s no exaggeration to believe that blockchains could, in the long term, revamp business, government, and even society itself, just as surely as the Internet did last century, and double-entry bookkeeping did centuries earlier. Someday, you may literally be able to count on it.

This is part of Fortune’s new initiative, The Ledger, a trusted news source at the intersection of tech and finance. For more on The Ledger, click here.

Courtsey: Forbes

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