Blockchain technology is at the forefront of innovation, changing all industries alike.
More specifically, it offers a fundamentally different way to manage our finances in an effort to prevent fraud, increase trust and transparency, and save time and money by eliminating intermediaries. While some remain skeptical of its real-world applicability, others argue that blockchain technology has the potential to disrupt business the same way the internet disrupted offline commerce.
To better understand blockchain technology and whether it’s here to stay, a few members from our Systematic Community, the largest community for business systems professionals, hosted a session to discuss it in depth. You can read on to learn what they shared!
What is Blockchain?
According to our presenters, “blockchain is a consensus-based, secure, decentralized/distributed public database (also called a ledger) which stores information immutably over peer-to-peer networks.”
Blockchain is the underlying technology of Bitcoin (a digital currency “mined” by people on computers all around the world who use software to solve mathematical puzzles). This means that blockchain goes back as far as 2009, when Bitcoin was launched by an anonymous person or group going by the name of Satoshi Nakamoto.
How Blockchain Helps Finance Teams
The presenters explained that blockchain technology will impact finance more than any other field, and that its impact should be mostly positive. Here are some of the specific benefits it can provide:
1. Adoption of smart contracts: These are self-executing agreements between buyers and sellers that are inscribed in computer-coded language before being decentralized and distributed across a blockchain network. This can help you create, monitor, and comply with financial agreements made between the two parties.
2. Better financial transparency: Blockchain ensures transparency between the parties involved as all data is stored on one accessible system. This helps eliminate errors or disputes with each transaction because it allows for the retracing of inaccurate data entries as an incorrect entry to a block.
3. Improved data accuracy: Manual data entry is perhaps the area that blockchain can help the most, since it’s where the chances of human error are highest. Blockchain can significantly reduce human error by making most accounting functions automatic, and it can also help ensure that financial reports are more accurate and secure by using encryption and time stamps on its transactions.
4. Fraud Reduction: Due to its immutable nature, it’s challenging to commit fraud with blockchain. Modifying a record on a blockchain is almost impossible as the person would have to make the same changes on all the copies of the distributed ledger simultaneously.
5. Efficient audits: Auditing can be fast and easy thanks to the inherent traceability of everything that’s recorded on the blockchain.
6. Lower costs: When making the switch from conventional accounting systems to blockchain, you can expect to realize cost savings, as it reduces errors and increases efficiency.
7. Easy regulatory compliance: Blockchain can help satisfy regulatory demands thanks to the enhanced security it offers. It may even become mandatory in some financial sectors as more regulatory authorities embrace the role of blockchain.
Blockchain technology can be applied to other areas that use multi-step transactions and that require visibility and traceability. For example, you can use it as part of the supply chain process to manage and sign contracts and to audit product provenance.
Do you have more questions about blockchain? Join our community to get your questions answered, and to access the full recording of this session!