Nine major banks are working together to experiment with using the technology behind cryptocurrencies such as Bitcoin. The idea is more about making financial transaction records more efficient and reliable than creating or using a new currency.

The project, which follows consultations of more than a year, is exploring the blockchain technology which underpins cryptocurrencies. In very simple terms, a blockchain is a frequently updated record of a complete history of a specific type of transaction.

Each batch of added records is known as a new block. Rather than having a centralized control of the record, computer users around the world are incentivized to race to verify transactions, complete a full block and add it to the chain. The set-up is designed to mean that there’s a single record of all transactions, accessible by anyone but difficult if not impossible to alter fraudulently.

Barclays, BBVA, Commonwealth Bank of Australia, Credit Suisse, Goldman Sachs, JP Morgan, Royal Bank of Scotland, State Street and UBS will explore the technology with New York financial tech company R3.

The initial idea is not to use the technology to actually complete the transactions, but merely as a way of recording them in a cheaper, more secure manner than is currently used for electronic finance. Those involved suggest the first use might be for recording commercial paper deals, a type of short-term unsecured borrowing made by banks and corporations.

It’s not the first suggestion of how blockchains could be adopted. Another idea is that a blockchain could be used to reduce or eliminate tampering with electronic voting. The difficulty is coming up with a system that proves who has voted, proves how many votes were cast for each candidate, but doesn’t show a specific person’s choice of candidate.

(Image credit: Toptal)