A company given $21 million by leading Silicon Valley investors aims to extend Bitcoins functionality so it can power much more than just payments.

LinkedIn founder Reid Hoffman announced an unusual new investment late last month. He and other Silicon Valley luminaries, including Sun Microsystems founder Vinod Khosla, sunk $21 million into a company that may never have to make a profit to be successful.

That company is called Blockstream. Hoffman and others backed it in an effort to give a technological shot in the arm to Bitcoin, a digital currency built upon software that uses cryptographic transactions to prevent counterfeiting without the need for any central authority (see What Bitcoin Is and Why it Matters).

Blockstream is working on technology that will use the code that underpins Bitcoin to secure other kinds of assets, such as contracts or ownership of stock. The companys technology could also provide workarounds to shortcomings in the design of Bitcoin.

Bitcoin has come a long way since its obscure debut in 2009, and the 13.5 million bitcoins in circulation are worth $4.7 billion. But the currency has yet to become widely used, and Blockstreams founders and investors say significant technical improvements are needed for that to happen.

Blockstream will play a huge role in helping it maintain its momentum, Hoffman wrote in a blog post on his investment. He said that the company will operate in a similar way to Mozilla Corporation, which produces the Firefox Web browser and related technology but is owned by a nonprofit foundation. However, if Blockstream is successful in helping Bitcoin catch on, other Bitcoin companies that Hoffman and his fellow investors have backed stand to benefit.

Bitcoin startups have received hundreds of millions from investors in the past few years (see Bitcoin Hits the Big Time). But few resources have trickled down to support work on the core technology that makes Bitcoin work. Startups have focused on building products on top of Bitcoin, such as online payments services. It has fallen mostly to a band of unpaid coders to maintain the core technology that underpins how Bitcoin operates (see The Man Who Really Built Bitcoin).

That community has been unable to work on improvements to Bitcoins design, says Adam Back, a cryptographer and cofounder of Blockstream. Core development has been quite conservative and focused on security and stability, he says.

Blockstream wont be helping out with the core Bitcoin code, though. Instead it is building on top of it using what are known as sidechains.

At the heart of Bitcoins design is what is known as the blockchain, a digital file maintained by computers around the world that records every Bitcoin transaction. Bitcoins most novel feature is that everyone can trust the blockchains record, even if they dont trust every individual contributing to its upkeep or using Bitcoin.

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