Bitcoin technology captures investors

Anyone interested in modern technology has heard of the digital currency called bitcoin, even if few people understand how it works.

[...] as bitcoin and other digital currencies evolve, the technology that underlies them may soon spread into other transactions: trading stock, buying and selling real estate, purchasing music and much more.

A mini industry is forming to take advantage of the technology called blockchain, aiming to make a wide variety of transactions faster, cheaper and more secure.

The idea is to remove, as much as is practical, people and their bureaucracies from the transference of money, contracts and other data where tracking ownership is important.

The several days it takes for a $40,000 payment to clear a bank, for example, could be cut to 10 minutes by relying on blockchain’s specialized, ostensibly highly secure computer networks.

Big players including the Nasdaq stock market and Goldman Sachs, both of which engage in an unfathomable number of transactions each day, are investing in blockchain experiments.

Blockchain startups include Ambisafe Inc. of Los Angeles, engaged in projects such as a tamper-proof national voting system, and Blockchain Technology Group, a San Diego company working on a blockchain-based music streaming service, with rock-solid transaction records that could help artists recover royalty money that somehow leaks away undetected under the existing tracking system.

[...] consider that a currency like bitcoin, which lives only on computers and is backed by no government or central bank, could not exist for long — even as a cult phenomenon — if users couldn’t trust it.

Like those who sold picks and shovels to miners in the Gold Rush, some blockchain startups like Factom are altering the basic technology so entrepreneurs can develop new applications on top of it.

Retail banks and other established institutions make money from the friction in the system, on fees and on the float they get by holding money in the several days it takes for transactions to transfer.