In many ways, the crypto currencyBitcoin had a very bad year in 2014. It has fallen from a value of over $1,000 per Bitcoin last January to just over $300 today. This volatilityand the attendant speculation has led some critics, notably Nobel Prize-winning economist Paul Krugman, to consider the cash alternative to be a form of the long con. In positive economic terms, he questions whether Bitcoin can be a stable store of value.

I often agree with Krugman, but I sense that his deeper unease is with what he terms the normative economics: is Bitcoin a good idea for society? He identifies his unease with the observation that, Bitcoin fever was and is intimately tied up with libertarian anti-government fantasies.It is hard to ignore the libertarian agenda behind Bitcoin and yet it is also hard for me not to see programmable currency as a necessary building block of the 21st century global economy.

My use of the word block is intended to evoke the foundational technology that underpins Bitcoin, the block chain. For the uninitiated (thats most of us), there is a public ledger of Bitcoin transactions that are published to a distributed network of participating computers. Once every minute or so a batch of transactions are released in a block to be validated by the network and added to the block chain. A unique cryptographic hash identifies each block andtransactionand permanently fixes them in chronological order.

To confuse matters slightly, block chain (two words) is different from Blockchain (one word capitalized) which is a software and wallet company that hosts a real-time browser of Bitcoin transactions. Blockchain, the company, just secured thebiggest capital raise everin the annals of Bitcoin. Indeed, as Biz Carson writes in GigaOM, investment in bitcoin is up as the price goes down.

Block chain, the concept, is even more important than Blockchain, the company. One way to understand why is to consider one of the most ambitious projects related to Bitcoin, Ethereum. Ethereum is an open source platform for smart contracts built on top of block chain technology. It recently completed a $15-18 million round of crowd fundingusing its own value token, poetically called ether.Stephan Tual, CCO of Ethereum, describes block chain technology as a method by which trust can be reached on an open network. Bitcoin is the first and best know use case, but Ethereum, says Tual, makes this technology applicable to just about anything else. Tual describes Etherum in the video below:

At the center of Ethereum are contracts that Tual says are programs that follow a series of steps every time they receive a message called a transaction. Ethereum itself is a programmable distributed network, in which all mannerof transactions and peer-to-peer agreements can be automated. The fact that Ethereum is by its very design fraud and tampering resistant, Tual continues, means that it offers a new range of solutions to everyday problems that are currently solved at great expense. According to Tual, these include voting machines, domain name registration, registration of legal documents, medical software and transfer of goods and services.

Networking innovator Paul Baran

If we are gettingtoo far out into the ether here, lets take a step back in time to the 1960s and one of the most important figures in the history of computer networking. Paul Baran was an engineer who joined the RAND Corporation in 1959. According to his Wikipedia entry, Baran took on the task of designing a survivable communications system that could maintain communication between end points in the face of damage fromnuclear weapons. He went on to become one of the inventors of the packet switching network, one of the key technologies that underpinthe Internet. He also articulated the key differences between centralized, decentralized and distributed networks. In terms of survivability, centralized networks expose a vulnerable single point of failure not present in less centralized networks.

See the rest here:

Tech 2015: Block Chain Will Break Free From Bitcoin To Power Distributed Apps