It may seem like a still distant prospect, but the possibility that your enterprise IT staff will one day need to implement a blockchain financial system -- for example, Bitcoin -- has come a step closer to reality.
A San Francisco company with a protocol for building blockchains, where transactions may be executed between two business partners without resorting to a banking system, has joined an effort to bring computer science and logic to blockchain-style currencies.
The company, Chain, has advanced a protocol for building blockchain networks that it hopes will become an open standard. On Aug. 11, it joined the Initiative for CryptoCurrency & Contracts, a primarily academic research group formed about a year ago.
In addition, Chain has agreed to sponsor a workshop for industry collaborators on blockchain technology in San Francisco in February 2017. Workshop attendance will be by invitation-only, according to the announcement of Chain's joining the initiative.
The group has only a few private enterprise members, although one of them is IBM. IBM opened a Bluemix Garage in New York with the goal of attracting developers interested in producing next-generation, blockchain-based financial systems.
The other company that is part of the initiative is Digital Assets Holdings, which has produced a modeling language that describes financial assets for use in blockchains.
The Initiative for CryptoCurrency & Contracts, or IC3, was formed with leading computer science institutions behind it. These universities include Cornell University, UC Berkeley, University of Illinois at Champaign-Urbana, the University of Maryland, and Technion in New York.
All are seeking to apply the rules of science to building blockchains.
The initiative gained $3 million in funding from the National Science Foundation on July 29, 2015, which was enough to allow academic work to get underway. Researchers at Cornell and the University of Maryland have already produced a joint blockchain system known as Hawk.
"Decentralized cryptocurrencies such as Bitcoin and altcoins have rapidly gained popularity, and are often quoted as a glimpse into our future," according to a research paper entitled: "Hawk: The Blockchain Model of Cryptography and Privacy-Preserving Smart Contracts."
"Blockchains allow parties mutually unbeknownst to transact securely without a centrally trusted intermediary, ... avoiding high legal and transactional cost," the researchers wrote.
Emin Gun Sirer, co-director of IC3 and an associate professor of computer science at Cornell, wrote of Chain joining the organization:
We are delighted to have Chain join IC3 as a sponsor member. The Chain team shares our vision of ubiquitous blockchain-based networks that are fast, scalable, confidential and secure.
A blockchain is a form of distributed database that is composed of blocks of transaction data and rules governing the use of the data. Each block is time-stamped and encrypted.
In effect, the blocks overlap, with a block on one node that archives part of the chain containing a link to a predecessor block. The distributed nature of the chain makes it extremely difficult to disrupt, even if an intruder succeeds in getting into one computer on the chain. Chains can be rebuilt, even if a block is lost.
Blockchains are also considered a possible future format for contracts.
"Smart contracts are user-defined programs that specify rules governing transactions, and that are enforced by a network of peers," according to a paper by University of Maryland researchers. "In comparison with traditional financial contracts, smart contracts carry the promise of low legal and transaction costs and can lower the bar of entry for users."
[Want to learn more about the origins of blockchain? Read Bitcoin, Security Concerns Drive Blockchain Technology Adoption.]
If they carry a great cost advantage, blockchain transactions and contracts will find traction among early adopters as a way for companies to do business with each other without intermediaries, including the traditional banking system.
That's what blockchain's advocates believe will happen.
However, even though the technology is past its early experimentation stage, it still must be fleshed out with supporting parts -- including the languages with which applications could be built and the methods it would use to guarantee compliance with regulations governing financial transactions.
Despite the obstacles, the money and research behind blockchain technologies keep lining up behind the prediction that they will one day be a mainstream approach.