Most people aren’t aware that the technology behind Bitcoin can be used to build a new generation of software applications. The blockchain is the most promising of these new technologies. It has the potential to fundamentally change how businesses and governments manage data.
What is a blockchain?
The blockchain is the database at the heart of the bitcoin network. Unlike most databases, the blockchain is distributed across the Internet, making it practically impossible to shut down.
The blockchain is the ultimate permanent record
Anyone can notarize data in the blockchain by storing a small amount of data in a Bitcoin transaction. Records in the blockchain cannot be changed. Like diamonds, the blockchain is forever.
Where are all the apps that use the blockchain?
The blockchain is an ideal solution for applications that store records, including financial systems, medical records, legal records, and accounting systems. But, there’s a catch. Three problems are preventing the Bitcoin blockchain from being used as a general platform for storing business data. Scale, size, and cost.
Scale. The Bitcoin blockchain can only handle seven transactions per second. This is sufficient for the current volume of financial transactions, but it’s too slow for for the world’s applications to use the blockchain as a platform to store data.
Size. Each record in the Bitcoin blockchain can only store 80 bytes of data. That’s about 1/3 of a Tweet.
Cost. The cost of writing data to the Bitcoin blockchain is expensive. Each Bitcoin transaction has a fee of about 3.5 cents. At current rates, it would cost $875 to store a 1MB photo from your iPhone.
Who is trying to solve these problems?
Several companies are building new technologies to alleviate these issues. Blockstore and Proof of Existence make it easier to store data in the Bitcoin blockchain, but they don’t address the aforementioned speed, size, or cost issues.
Factom is the most ambitious company is this space. Their platform solves the speed, size, and cost issues by creating a data layer on top of the Bitcoin blockchain. If you’re interested in the technical details, you can download their whitepaper or checkout the source code on Github.
Tierion is a cloud database that notarizes each record in the blockchain.
While none of these solutions is a panacea for making the blockchain a platform for storing data, together they point to a promising future for blockchain technology.