The beverage company Long Island Iced Tea said Thursday that it's renaming itself Long Blockchain, in recognition of the fact that pretty much everyone is trying to get into blockchain technology despite knowing barely anything about it. While the company will still make its own brand of iced tea, its “primary corporate focus” going forward will be the “exploration of and investment in opportunities that leverage the benefits of blockchain technology,” it said in a statement. The company didn't immediately respond to a request for comment.
To put it mildly, the announcement is paying off. Long Island Iced Tea — sorry, Long Blockchain — saw its stock price triple overnight. At the moment, shares of the company are up roughly 180 percent. Have a look:
To see this kind of stock movement taking place based on nothing more than a name change tells you virtually everything about the craze surrounding cryptocurrencies.
The price of bitcoin is soaring. To buy a single one costs well over $15,000. That's down from its peak of roughly $20,000 earlier this month but still bonkers in light of how quickly bitcoin's value has grown. Lots of people are buying bitcoin in the hope that they will be able to sell it before the price crashes; other die-hards are buying and holding no matter what happens, with the expectation that its long-term value will rise even more.
Many have called bitcoin a bubble, similar to the “tulip mania” of the 17th-century Netherlands, when the novel availability of tulip bulbs from Turkey led to spikes in demand that dramatically drove up the price. But while the extremely volatile price of bitcoin might make investing in it seem more like a form of gambling, what's helping to propel bitcoin's popularity is the technology that drives it and other cryptocurrencies, according to Adam White, vice president of Coinbase, one of the most high-profile digital currency exchanges.
“What makes Ethereum and bitcoin, these open blockchains, so powerful is that at the end of the day they're really a protocol,” White told Bloomberg TV this summer. “They look much more like TCP/IP, the backbone of the Internet, or SMTP, what powers email. And from that it introduces so many opportunities, so many new business models.”
Although bitcoin can technically be used as a currency to buy things such as T-shirts and coffee, just like U.S. dollars can, what many companies find more appealing is the computerized system of accountability built into the currency that helps those payments clear.
Every time a transaction using bitcoin occurs, the computers linked to the system go to work to verify that the money has, in fact, changed hands. Unlike traditional transactions with hard currency, which require a central authority of some kind to back or oversee the deal, bitcoin's verification system is distributed across all the computers in its network. What's more, each transaction is logged publicly for everyone to see. This makes it almost impossible for any fraudster to try to game the system and spend a bitcoin twice.
The technology behind this process is called the blockchain. In theory, the blockchain allows the level of trust among everyone using or trading bitcoin to rise. And in practice, experts say, it could mean both faster transactions (no more waiting days for certain transactions to clear!) and more secure transactions. You could even exchange the title of a house or draw up contracts that are backed by the blockchain.
The distinction between bitcoin and the blockchain is as important as the difference between the U.S. dollar and the system of cash, credit and other financial instruments we use to exchange it.
But despite all the talk about blockchain-based applications and how it could transform the economy, what we've gotten instead is simply a bunch of people looking to trade actual bitcoin as a way of earning U.S. dollars. This has led to the rise of bitcoin exchange-traded funds and bitcoin futures contracts that essentially let you gain exposure to bitcoin as an asset, just like you would with real estate or stocks or bonds.
Where bitcoin goes from here is anybody's guess. But for the moment, all the excitement around Wall Street finally adopting bitcoin as an investment vehicle has businesses like Long Island Iced Tea leaping before they look.