The next big thing: Blockchain
Spotlight on Business
Blockchain is arguably the “new geek on the block” that has at once left many curious, excited and perplexed.
Essentially, blockchain is a distributed decentralized database technology that maintains a growing list of transactions, validates their legitimacy and ensures their permanence. It is a digital ledger of transactions shared among a distributed network of computers. It can be public or private based on who has permission to write to the ledger and verify transactions. Time-stamped and validated individual transactions are compiled into blocks, which are linked together into a chain.
Many people are familiar with the peer-to-peer virtual currency, Bitcoin, where blockchain is best known as its underpinning technology. However the potential of blockchains goes far beyond monetary transactions. People are actively looking at its potential across entire industry supply chains.
With massive potential comes risks
Blockchain has the potential to revolutionize transactions across industries. This is especially true of transactions that require multiple authentications and verifications, contracts, and any type of record verification. Its greatest value lies in its ability to streamline the transfer of any value (data, assets, currency and information) in a secure, real time and cost-efficient way, and administers transactions globally without centralized oversight.
For example, blockchain technologies can improve operational efficiency via better asset management and transform supply chain management and delivery. Companies can use blockchain to track the movement of assets throughout their supply chains, coordinate their back-end operations or electronically initiate and enforce contracts.
Blockchain technologies are also moving quickly to applications in the Internet of Things (IoT) — and there are, potentially, powerful spins off from there. The distributed nature of IoT and the blockchain could lead to a myriad of applications. In the same way that blockchain could become a “registry of anything”, it could also serve to decentralize any number of business processes.
Yet, the huge potential of blockchain also magnifies the risks and challenges of the technology, including infrastructure concerns, capacity constraints, computing resources required to change records, performance risk, questions around privacy and information disclosure, regulatory hurdles and potential cyber security threats — of which many businesses and regulators may yet be addressing fully.
Don’t dismiss it
These emerging opportunities and risks of blockchain are compelling C-suite executives to move out of their comfort zones in many ways.
As a start, C-suite executives can consider some of these potential implications of the technology.
For the CFO, blockchain could change the role of the finance function in areas such as corporate reporting, where it could transform the speed of reporting and help to provide greater transparency and trust in a company’s financial accounts.
For the CEO, ask yourself: how will your company look to compete in a market where all transactions are transparent, secure and validated; industrial assets are shared among market participants; customers have even more information than they do today; and regulatory compliance and tax collection could occur in real time as and when transactions occur?
These are all intriguing questions that are not yet all clearly answered. What is certain is that the impact of blockchain will pull in different industries at different times, and understanding the nature of that pivot, and the tax, legal, security and compliance questions that will arise, is of growing importance.
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