Bitcoin has many other uses beyond that of a currency. The power of blockchain technology allows it to be used for proof of existence, copyrights, IPO (stock initial public offering), smart contracts, and much much more. Let us talk about a few of the possibilities.
Proof of existence
Imagine you wanted to create a non-forgeable piece of evidence that a certain document existed at a given point of time. This document could be a testament, a will, a certificate, a piece of literature, a picture.. virtually anything that can be digitalised. Bitcoin makes this process incredibly easy.
Every Bitcoin transaction is allowed to include a 40Byte field (the OP_RETURN field) which can be filled with arbitrary data chosen by the sender. This is much like in traditional banking transfers, where you are allowed to include a text message, or a description. The field can be used to store the cryptographic hash of any digital files. A SHA256 hash is 32Byte long, so this even leaves 8Bytes for additional information. If you are still confused about how this works, consider the following scenario:
Alice is a researcher who just conducted a very promising line of experiments. It is very likely for her to win the Nobel prize. She wants to protect her work from plagiarism and to make sure that she will receive full credit. The folder on her computer containing the entire research is several gigabytes in size.
1. She hashes the entire research folder through SHA256.
2. She creates a small Bitcoin transaction of just one Satoshi (1/100.000.000BTC), including the obtained 32Byte hash of her research into the OP_RETURN field. The remaining 8Bytes she uses for the current date.
3. The transaction is sent into the Bitcoin network and starts being confirmed.
4. The hash (digital fingerprint) of her important research is now eternalised on the blockchain of every single Bitcoin user.
Alice publishes her research and receives a lot of publicity. Of course there are also people overwhelmed by envy, who try to claim some of her fame. They argue to have found the same results way before Alice and accuse her of stealing their intellectual property. Luckily Alice can show the proof of existence of her work at a specific date, namely the entry on the Blockchain that she created. A court decides to give Alice the full right to claim the work as her own, since the other party can not supply any such evidence.
As mentioned, the same ‘proof of authorship‘ and ‘authenticated timestamps‘ can be created for contracts, last wills, ideas, etc. This serves as a sort of “digital patent”, without the usual costs involved.
IPO/stocks, securities, bonds, etc.
A company wishing to sell stock can do this over the Bitcoin network. Using the OP_RETURN field of a transaction, they can “mark” the value of a transaction to represent their stock. For example the OP_RETURN content can consist of the hash of a signed document stating “The amount of this transaction represents 35.000 stocks of company XYZ Inc.; Terms:…. , Rights:…. , Conditions:…. , etc.” If the output of the transaction consists of 35.000 Satoshis, each one will then represent 1 Stock of XYZ Inc. Thus they can continue to be traded just as regular BTC, but their intrinsic value will be much higher, since they also represent stocks of a company.
Colored Coins is an abstract layer built on top of Bitcoin, which accomplishes exactly this. Colored Coin Wallets (the software) are able to distinguish and track “marked” Bitcoins on the blockchain, just as the ones in the example above. This does not pose any changes to the traditional Bitcoin network. For a regular Bitcoin software, it would seem as if normal Bitcoin trades were made. Only the Colored Coin software can distinguish them as other assets and track those “marked” coins. The video below gives a nice description of how this works.
A voting system
Even the process of voting can be accomplished on the blockchain. One way to do this was already discussed here. Another is to simply ask voters to transfer a small amount of BTC (1 Satoshi) to one of several addresses, each representing a different voting option. There are sophisticated methods, which ensure complete voter anonymity while offering excellent protection against voting manipulation.
These were just a few examples of the possible uses of Bitcoin beyond those of a regular currency. The greatest thing is that there are many more applications to be discovered. The next digital revolution may be just around the corner, and be part of Bitcoin.