The technology behind bitcoin might be used by IBM to develop a new digital currency system, according to a Reuters exclusive report Thursday.
IBM is considering adopting the “blockchain” technology to create a digital currency that could be linked to a person’s bank account, possibly using a wallet software, an unnamed source told Reuters. The proposed system would be controlled by the Federal Reserve and other country’s central banks.
“These coins will be part of the money supply,” the source told Reuters. “It’s the same money, just not a dollar bill with a serial number on it, but a token that sits on this blockchain. It’s making a lot more sense for some type of digital cash in the system, that not only saves our government money, but also is a lot more convenient and secure for individuals to use.”
The system would enable people to transfer cash or make payments instantaneously using the blockchain technology without a bank or clearing party involved, saving on transaction costs, the source told Reuters. The transactions would be in an open ledger of a specific country’s currency.
“IBM is one of a number of tech companies looking to expand the use of the blockchain technology beyond bitcoin, the digital currency launched six years ago that has spurred a following among investors and tech enthusiasts,” Reuters wrote.
“However, there are signs that central banks are already thinking about the innovations that could arise through digital currency systems. The Bank of England, in a report in September 2014, described the blockchain’s open ledger as a ‘significant innovation’ that could transform the financial system more generally.”
The blockchain is essentially bitcoin’s transaction database. Investopedia explains the blockchain technology using conventional banking as an analogy:
“The blockchain is like a full history of banking transactions. Bitcoin transactions are entered chronologically in a blockchain just the way bank transactions are. Blocks, meanwhile, are like individual bank statements.”
According to Investopedia, “The full copy of the blockchain has records of every Bitcoin transaction ever executed. It can thus provide insight about facts like how much value belonged to a particular address at any point in the past.”
Companies and programmers are also working on other applications besides currency that build on the bitcoin blockchain, according to a story in VentureBeat.
For example, a company called Factom has built a data layer on top of the Bitcoin blockchain that “can secure millions of records in the blockchain with a single hash, making the bitcoin blockchain massively more scalable in a cost efficient manner without losing much security and auditability,” says VentureBeat.
“Beyond just currency or digital tokens, this allows for storage of such critical information as title records, legal records, medical records, etc.,” VentureBeat says.