How blockchain will transform tax, accounting and more

The highly secure technology creates “trust-free” transactions that sidestep the need for intermediaries such as banks and governments.

Blockchain technology today is regarded by the mainstream public with the same skepticism as the internet in the early 1990s. The difference? It took a decade or more for the internet to become ubiquitous, but it may only take a few years before we see widespread adoption of this next era in technology.

In hindsight, corporate investment in the internet should have been a no-brainer in the 1990s. But the value of the internet was not well-known at the time and the use cases not well-defined. Corporate early adopters who had the foresight to prepare their organizations for the internet were rewarded with a sustainable competitive advantage, while laggards were forced to compete from behind or shut down. Blockchain is at a similar crossroads as it moves from the lab to the production line.

Many organizations use databases for recording transactions. What makes blockchain revolutionary is its strong cryptography. Blockchain replicates and authenticates transactions across many computers in a participating network. This ensures that transactions can be initiated only by certified parties, changes are validated by participants collectively and the outputs of the system are immediate, accurate and irrevocable. This unprecedented level of security creates a “trust-free” system that eliminates the need for transaction intermediaries such as banks, governments and other businesses to act as the sole authenticator of any transaction.

Like the internet, blockchain technology allows for an almost endless variety of applications to be built on top of it, going far beyond cryptocurrencies (e.g., bitcoin), the most well-known today. Similarly, like the internet, blockchain has the potential to fundamentally change the global economy by eliminating the need, across many industries, for the role of the intermediary. Imagine a world in which the role of the “broker” doesn’t exist, and two parties can execute a transaction (of many sorts) with complete trust and transparency.

Increasing transparency, accuracy and speed

At one level, blockchain has the potential to revolutionize accounting practices and the way we calculate and collect tax. It can also be transformational from the standpoint of increased efficiency. Processing speed will be much faster; data and transaction reconciliation will no longer need to exist; and data reporting will eventually be more reliable and real-time.

More broadly, blockchain also modernizes global business by providing traceability and transparency within every step of the supply chain. Blockchain is ideally suited for supply chains because it streamlines paper-based processes while also introducing greater security and transparency.

Global supply chains tend to feature an array of complex agreements, contractual obligations and documentation that collectively require huge amounts of time and money to manage. These efforts can be greatly reduced using blockchain, which introduces order, simplicity, trust, visibility and automation.

Pharmaceuticals giant Bayer, for example, has completed a proof-of-concept that accelerated its ability to locate products within three days, greatly enhancing efficiency and security. Multinational retailer Carrefour, meanwhile, is using blockchain to enable consumers to trace the journey of a select line of products from farm to supermarket.

Prepare for the potential

There are two things to understand about blockchain. First, blockchain technology is here to stay. There are many potential use cases and, while there are barriers to widespread adoption at present, the technology is evolving rapidly.

Second, no industry will be immune. Some industries will be disrupted faster than others. Now is the time for you to learn about blockchain technology and how it could affect your markets.

Formulate a plan to prepare for blockchain’s potential benefits and disruptive forces, including developing blockchain-related competencies. Assess whether you have a ready supply of talent available to act on these technologies or a pipeline you can tap for support. Arming yourself with this knowledge and making timely plans will help to position your company in the vanguard when blockchain becomes mainstream.