Why Nasdaq Is Betting On Bitcoin’s Blockchain

In its highest-profile application yet, Bitcoin’s public transaction record will help startups keep track of shares and shareholders.

Why It Matters

Those who use commercial database tools have to trust their valuable data to the companies that market those tools.

It’s much too early to tell whether Bitcoin is the future of money, but a recently launched Nasdaq experiment will test whether it can be the future of financial record keeping.

The stock exchange announced recently that it has begun experimenting with the blockchain—the publicly accessible and cryptographically verified record of every single Bitcoin transaction that has ever occurred. Transactions are verified and recorded in the blockchain by a network of “miners” all over the world who exchange their computing power for a chance to solve complex cryptographic puzzles and earn money—freshly minted bitcoins. Specifically, Nasdaq will take advantage of a feature in Bitcoin’s design that allows additional data to be recorded on the blockchain along with information about a Bitcoin transaction (see “Why Bitcoin Could Be Much More Than a Currency”).
Nasdaq intends to use this feature of the blockchain to streamline financial record keeping while making it cheaper and more accurate. Though the company says the blockchain initiative could ultimately be used to record trades of stocks in public firms listed on its exchange, it will begin by focusing on its relatively new private market platform, a service that connects private companies with investors. In this case, record keeping via the blockchain will complement a cloud-based data management tool that tracks who owns shares of a given company, and how much they own.
Keeping track of a company’s ownership structure can be a complicated, time-consuming, and expensive task, especially for fast-growing startups looking to attract new investors. In many cases, companies manage their own data in a spreadsheet program like Microsoft Excel, and pay lawyers to validate the information every time the table changes.