There is a pattern emerging where new technologies are treated with a certain degree of skepticism. After the initial wave of excitement and expectation, many of the game-changing advances are suddenly approached with a flash-in-the-pan dismissal.
Blockchain is a high-profile victim of this phenomenon: As a distributed ledger technology that promises faster, more secure payments, many industries are exploring its possibilities. And while blockchain technology may have limited application in some professions, in finance it will live up to the hype.
Let’s go through some of the common reasons skeptics think blockchain is not all it promises to be for finance:
“While a blockchain itself is safe, an application using it remains hackable.” This is also true of your bank software, or Apple Pay or pretty much any software we are currently using for payments. It should not stop us using it or leveraging its deep transformational effects in how businesses operate.
“It can be too transparent.” Technically true, but in reality the references to user wallets are encrypted key strings which, whilst easy to relate to the originating source and other related transactions, is not as easy to relate to an actual physical person. In much the same way as a credit card number isn’t easy to relate to a person without extra information.
“It’s not the most elegant solution.” Here’s where we strongly disagree. The elegance is in the simplicity. Banks have been trying to come up with distributed ledger technology since the 1970s but they were hindered because they refused to be outside the transaction. By using TLS-style encryption and cutting out the transaction verification at financial institution level, the whole transaction becomes significantly simpler.
“You can still lose things!” Of course you can. You can lose your wallet too.
Blockchain will render invoices obsolete
Trust is the cornerstone of every business relationship. In this age of phishing, malware, and general cyber security attacks, this seemingly simple principle becomes complicated. Login details are stolen and turned to criminal ends; high-level executives are being impersonated by hackers, who then persuade other parties to release vital funds; the sheer scale and variety of cybercrime is growing.
Blockchain provides a means of automating trust. By using permanently retained historical data to authenticate everyone involved in a deal, each side can be assured of the other parties’ trustworthiness: The seller and buyer alike are always who they say they are, and the product is the right product. And because prices cannot be modified, invoices will effectively be rendered obsolete.
Blockchain technology stores every detail of every transaction at every level. This will facilitate increased fraud control, and it will also offer transparency into issues of legality such as money laundering. And though it’s a digital technology, blockchain will also assist with the tracking and recording of physical items. As they are transported across local and international borders, they can be identified at each location—creating a strong and fully documented audit trail. This allows you to manage and optimize these supply routes with maximum efficiency—ensuring that no space is wasted and no customer disappointed.
It’s clear blockchain will have a significant influence on procurement and finance. The advantages of being able to streamline business processes, secure payments, and automate workloads shouldn’t be understated.Simona Pop is head of brand and growth for InstaSupply, a UK-based information technology company.