Bitcoin’s Shared Technology System

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bitOn July 31, 2014 Adam Ludwin, Devon Gundry and Ryan Smith?no-names in the world of finance?walked into a windowless conference room in a Los Angeles office building near LAX and sat down on black leather executive chairs at a mahogany table that could seat 12. A dual-screen teleconferencing unit came to life, and five New York-based executives of Nasdaq materialized.

Just a few months before, the three Millennials (ages 33, 34 and 29) and their company, Chain.com, had begun selling software tools to help developers create Bitcoin apps. It was a seemingly inauspicious time to be staking your future on the digital currency. Within the previous year the FBI had shut down the biggest Bitcoin enterprise, underground drug bazaar Silk Road; the dominant Bitcoin exchange, Mt. Gox, had gone belly-up with more than $450 million missing; and Bitcoin, the currency, had started to plummet in value from a $1,240 speculative peak in December 2013 to its current $230.

Yet during the teleconference the jeans-clad entrepreneurs told the Nasdaq suits that they believed the technology underlying Bitcoin would bring about a once-in-a-lifetime seismic shift in the financial industry, shrinking its current profits and workforce but also creating many new markets and opportunities. Bitcoin isn?t merely the cryptocurrency that has caught the imagination of the antiestablishment and enriched a few lucky speculators. In fact, that Bitcoin is merely an app. The underpinnings?known as ?the blockchain? or ?distributed ledger? technology?are nothing less than a vastly faster, cheaper and more secure way to manipulate money electronically. The blockchain is poised to become the dial tone for the 21st-century global economy.

Gil Luria, a financial tech analyst at L.A.-based Wedbush Securities, estimates that a fifth of U.S. GDP?around $3.6 trillion?is generated by industries that will be disrupted, or at least made more efficient, by this new technology. But it is the financial services industry, and its hundreds of billions of profits, that faces the most immediate threat.

The Nasdaq execs had been studying Bitcoin for a year, and they knew all this. But picking the right partners was crucial. So they peppered Chain.com?s founders with questions about their vision and, more important, whether they could execute. The answer: The wild-haired Gundry and Smith had the product and software chops, while CEO Ludwin, with his neatly trimmed beard and tortoiseshell glasses, was a Harvard M.B.A. and former venture capitalist with a keen strategic view.

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