5 Ways Blockchain Technology Will Change the Way We Do Business
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Most of the media headlines on blockchain technology revolve around the outsized investment performance and extreme volatility of cryptocurrency. This trajectory closely resembled a roller coaster as Bitcoin gained 1,390 percent in 2017 (up as much as 1,935 percent when it hit a record high of $19,666 in mid-December) -- and then plummeted to a low of $5,950 in January 2018. By mid-February, it had settled around $8,400.
The growing consensus among business leaders and entrepreneurs: The future of blockchain technology will be about a lot more than Bitcoin. Blockchain tech will impact every major area of business from accounting to operations, and there's evidence the revolution has begun.
What is it, and why is it so crucial to the future of business? A blockchain is an electronically distributed ledger or list of entries -- much like a stock ledger -- that various participants maintain via a network of computers. Blockchains use cryptography to process and verify transactions on the ledger. Encryption and coding improve transparency, efficiency and trust in information-sharing.
All of this has innovative companies rethinking their strategies for the digital age. Here are five ways blockchain technology is disrupting the way we do business, with sometimes sweeping changes.
Accounting is the textbook case study for a business field that stands to benefit from blockchain technology. The tax code is overwhelmingly complex, the challenges of managing business operations in far-flung locations are many, and the need for precision and accuracy is paramount. Blockchain tech can more effectively manage all of the above.
"Blockchain’s transparency gives visibility to all transactions for approved users, and this may decrease auditors’ work with sampling and validating transactions," Ken Tysiac wrote in a recent edition of the Journal of Accountancy. "But this allows auditors more time to focus on controls and investigating anomalies. Meanwhile, opportunities are emerging for CPAs to use blockchain technology as they expand their assurance services to areas such as cybersecurity and sustainability.”
While the Winklevoss twins and other entrepreneurs are striking it rich with cryptocurrency, a large inheritance or winning lottery ticket remains the best chance for the rest of us to become millionaires. Here, too, blockchain technology will have a role. (Never mind the chances of winning the Powerball jackpot are about one in 175.2 million.)
Blockchain technology has the potential to disrupt the $260 billion annual global lottery market by providing anonymity and confidentiality for participants and providers alike -- while reducing the potential for fraud and manipulation. Prime Ball, managed by Ethereum smart contracts, will be among the first fully decentralized and transparent lottery platforms using blockchain. All winning results will be publicly recorded and distributed on the Ethereum blockchain without any third-party involvement. This new model is a major shift in an industry where scratch-off tickets and pencil-filled play slips remain commonplace.
2. Advertising and marketing.
Juniper Research anticipates advertisers will lose an estimated $19 billion to fraudulent activities next year -- the equivalent of $51 million per day. This figure, which represents advertising on online and mobile devices, is projected to reach $44 billion by 2022. The technology underlying bitcoin and other cryptocurrency can help dramatically reduce “click fraud," ensuring that marketing and advertising executives reach their target markets.
“We’re seeing that the principles of blockchain, which were historically developed to prevent fraud in banking, can be applied to programmatic media buying,” explains Amir Jan Malik, Digital Marketing Expert at Accenture Interactive. “By using the system to monitor and govern budget spend, advertisers can track investment from the initial transfer of the media budget to the final publication of creative with the media owner, reducing the risk of overcharging and underperformance.”
3. Human Resources.
Human resources professionals plan, direct and coordinate the recruiting, interviewing and hiring of new staff. They consult with top executives on strategic planning and often handle employee-relations duties as well as those tied to compensation, benefits and training. Don’t let the “human” in Human Resources fool you: There's a great deal of technology behind hiring, retaining, evaluating, compensating and even terminating employees.
According to the Society for Human Resource Management, blockchain technology soon will modernize hiring -- allowing HR professionals to quickly verify credentials of job candidates and existing employees. The association predicts that blockchain systems can "reduce the chances of third-party companies providing inaccurate historical data about a candidate or existing employee, since those individuals would have greater input and control over data that's already been verified by multiple parties.”
Blockchain tech also will affect payroll, with the greatest impacts in multinational corporations or businesses with foreign employees. The technology easily can handle the back-end work to simplify and standardize payments in multiple currencies.
“Not only is blockchain technology changing how companies are compensating employees, it is also changing how employees save for retirement, diversify their investment portfolio from a dependency on U.S.-dollar linked financial products and exert a greater degree of control over their personal assets,” says Travis Parker, COO of IRA Bitcoin LLC. The company helps investors purchase and hold cryptocurrencies such as Bitcoin, Litecoin, Ethereum and Ripple in Individual Retirement Accounts or 401k plans.
4. Information technology and cybersecurity.
Highly publicized data breaches at Yahoo, Equifax and Target disclosed and disseminated hundreds of millions of names, addresses, birth dates and other information. Today, companies of all sizes are increasingly focused on protecting networks, computers, programs and data from attacks, damages and unauthorized access.
David Schatsky, Managing Director at Deloitte U.S., sees the potential for blockchain technology to help revolutionize the $122 billion global cybersecurity market. He notes “the technology provides a way of recording transactions or any digital interaction in a way that is secure, transparent, highly resistant to outages, auditable, and efficient.” These features form the bedrock of an effective cybersecurity system, and those capabilities are attracting interest from Lockheed Martin and even the U.S. Department of Defense. Both organizations are studying the advantages that blockchain can offer in terms of protecting critical intellectual property -- information that could be a matter of national security.
5. Management and operations.
Founded 129 years ago, Eastman Kodak has struggled to compete with being largely supplanted by the digital age's smartphones. The legacy company is finding a way to reinvent itself with its new blockchain venture. The KODAKOne management platform will create an encrypted, digital ledger of rights ownership. Photographers can register both new and archived work, and then license it within the platform. The system allows professionals to take part in a new economy for photography, secure payment for licensing their work immediately when sold and offer their work on a secure blockchain platform.
Blockchain technology is changing how companies do business in other staid industries, too. The tech is creating operational efficiencies and new opportunities even in developing markets whose hyperinflation, political instability and corruption long have frightened away entrepreneurs.
NagriTech is a global organic agricultural company that aims to improve crop yields in developing markets. It's launching a cryptocurrency token to facilitate financial transactions in nations whose high inflation indexes and currency devaluations make it particularly difficult for farmers and producers to secure credit. The principal markets for Nagritech -- Brazil, India, Mexico and Peru among them -- all struggle with inflation's effects. In these countries, farmers bear the adverse impacts of depending on the U.S. dollar or the euro. Regulations and limits imposed by central banks or their intermediaries make foreign exchange difficult and, in some cases, impossible.
For blockchain technology’s early adopters and evangelists, it feels a lot like Silicon Valley in the early 1990s: a potent combination of great ideas, the intermingling of smart money and dumb money, iconoclastic personalities mixing brains and braggadocio -- and a strong sense that the internet could change everything.
Blockchain technology has the same potential. Its practical applications are limited only by the imagination and effort of the entrepreneurs and visionaries who will use blockchain technology to transform their companies. Leaders who make strategic moves will profit mightily from the upheaval and disruption of traditional business models.