Why CFOs Need to Know About Blockchain
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In the American comedy film, Back to the Future II, the shrewd character Biff takes a sports almanac from the year and travels back in cfo blockchain login to where he cfo blockchain login his younger-self and presents cfo blockchain login almanac to him.
Through gambling on the insights of the sports almanac from the future, Biff becomes incredibly wealthy. In the same way, CFOs and Finance leaders may be wondering whether to begin rolling the dice and investing in the actual technology behind Bitcoin, popularly known as Blockchain.
What I set out to do in this article is to share with you a basic understanding of Blockchain technologies with cfo blockchain login jargon so that as Finance leaders in various industries, we can begin dialogues about whether this emerging technology, touted with superhero-esk capabilities, can help us achieve business objectives. What are the benefits, hurdles to cfo blockchain login, and risks? Is it worthy of a big bet? Blockchain is a way to perform, record, and validate transactions through a decentralized peer-to-peer computer network.
When another transaction is created, a new Cfo blockchain login of data is created and attached permanently cfo blockchain login the previous Block. As more cfo blockchain login occur, these connected Blocks form a secured chain thus the name Blockchain.
Collectively, the Blockchain is referred to as a "Ledger" my accounting colleagues should be nodding their heads at this point. One key differentiation of the Blockchain ledger is that copies of the ledger is distributed to all users involved and reconciled across cfo blockchain login copies to maintain consensus of what the truth cfo blockchain login at all times. That way, if recorded transactions and the underlying information is tampered with without those involved in the transactions to agree to it, it would be apparent to all who are part of the ledger and the underlying reconciliation cfo blockchain login would require corrections to restore the truth across the cfo blockchain login ledger.
This is a major design difference from ledger databases today which is typically siloed, centralized, and controlled by a single enterprise making it more susceptible to cyber attacks and hacks. Data privacy in the Blockchain is achieved through cfo blockchain login data keys string of unreadable characters for each user and transactions are cfo blockchain login by mathematical protocols used in digital cryptography.
Growing up, one of my cfo blockchain login Marvel superheroes was Wolverine. Cfo blockchain login, he had those cool claws, but he also had the ability to regenerate his physical health and condition when attacked and cfo blockchain login. In some ways, he was immutable. One of the key features of the Blockchain is that it is an immutable ledger because of its distributed nature.
There is not a single point of failure sitting on a handful of servers or a managed cloud, since copies of the ledger are shared by thousands or cfo blockchain login of users and if one ledger is hacked and altered, the continuous reconciliatory nature of the collective ledger will restore consensus and regenerate the integrity of the Blockchain.
Ten years ago, Blockchain was more of an untested concept cfo blockchain login network engineers just wrote cfo blockchain login about and tested in limited applications. While these cryptocurrencies may cfo blockchain login may not turn cfo blockchain login to be overvalued at this time in history, the underlying technology of Blockchain bring much promise to creating business improvements cfo blockchain login cost efficiencies to the way businesses do things today.
The cost of international remittances today is burdened with processes and intermediaries i. Companies which engage in a significant amount of cross-border trade payments in their supply chain can benefit from a Blockchain protocol where high transparency would increase trust and ultimately lower payment and title costs.
This along with other supply chain cfo blockchain login of Blockchain can ultimately make the flow of goods and pricing better for the customer. Settlement of High Volume Transactions: The siloed nature of data sources inherent in these processes and underlying systems make accurate and timely settlement in a dynamic environment challenging and complicated.
Great simplification can be gained under a Blockchain environment where the ledger of transactions is adequately transparent and openly accessible by all parties involved. The continuous reconciliation aspect of Blockchain would also help to identify process breakdowns and tampering of transaction information for more timely resolution.
For a company that has numerous global legal entities and 3rd parties that it works with including governmental agencies, it is possible to leverage all beneficial attributes of Blockchain and form a cfo blockchain login Blockchain within the enterprise. With such a network in place, accounting and subsequent auditing can be much more efficient and effective since transactions can be reconciled to all dependent entities which participate in the Blockchain in real time.
Cfo blockchain login it's statutory, management, or inter-company reporting, visions of a centralized real-time ledger would cure alot of pains that come from disparate systems and ledgers across borders and stakeholders.
Audits of accounting transactions can also leverage the inherent cryptography controls underlying the transactions in a Blockchain ledger system which lowers risks and makes the audit efforts more focused on strategic opportunities and less on transactional integrity. Imagine a Blockchain network which connects both private and public blockchains between tax paying and remitting companies and their corresponding tax authorities across government counties, states, nexus boundaries, countries, etc.
These connected blockchains would facilitate tax filing preparation and auditing across numerous tax transaction types income, capital, tariffs, value-add Yes, cfo blockchain login sounds like nirvana, but the principles and momentum of Blockchain suggest that this type of solution may be around the corner. Optimizing and unlocking Liquidity: There are many working capital, cash management, commercial financing, and investment financing solutions that exist today which may highly benefit from Blockchain protocols and capabilities.
Any advancement in the transparency of counter-party information and the accuracy and timeliness in the communication of such information would highly reduce the costs underlying these liquidity options and encourage more participation in such transactions.
This would benefit the enterprises and individuals involved on both ends of the transaction. Unlike centralized ledger systems today which use usernames, passwords, and other forms of authentication tactics, the Blockchain uses encryption technology to manage access and edit rights to information in the ledger. Because the Blockchain is a distributed system and not contained within a single point of failure, it is difficult for hackers to breach the ledgers in order to commit fraud.
Doing so would require computing power to override and manipulate the entire distributed network which is less likely. Cyber security companies are beginning to develop solutions that distribute the cfo blockchain login vulnerable system access points across multiple blockchain nodes in order to better defend against cyber attacks. That should bring hope to finance leaders who dread the possibility of cyber crimes against their own datacenters and the consequences that follow.
Although there is currently not a host of vendors lined up to provide these solutions in a turn-key manner today, I believe it'll just be a matter of time. The Blockchain application ideas discussed above are real possibilities that Finance cfo blockchain login should stay alert to while considering other possible applications of Blockchain technologies. Because of the distributed nature of Blockchain and related solutions, enterprises need to develop and coordinate solutions that users will participate in.
For those that chooses to participate in a Blockchain solution, they will likely have to invest in computing infrastructure and software development that enable their roles big or small within the Blockchain ecosystem. Until scale is reached for a given Blockchain ecosystem or solution, benefits will likely grow gradually until more participants engage to create the solution.
Similar to what we are seeing with cryptocurrencies, the more participants invest in the infrastructure and the underlying asset or service, the more value is created for the users.
As discussed above, enterprise sponsors or other entities will have to step up to build out the infrastructure for various Blockchain solutions. Who will do that and is there enough Blockchain experts in the marketplace to support it? One likely hindrance to large Blockchain infrastructure investments and participation is the lack of widely accepted technical standards and governing bodies for those standards.
Who will establish the standards for other commercial applications that the marketplace will trust and accept? The same can cfo blockchain login said about user regulations. There have already been cases of fraud identified with lesser known cryptocurrency exchanges. For example, recording the movement of a unit of cryptocurrency may be more straightforward than recording a real estate contract in Blockchain with various legal terms subject to interpretation.
Despite all of the uncertainties and dependencies discussed above, there are many development activities in play outside of the cryptocurrency segment. Some examples include Fintech companies developing platforms for identity management and the trading of agricultural commodities; Accenture and SAP building out Blockchain solutions for Supply Chain management; Energy companies are leveraging Blockchain solutions to manage carbon offset credits in their efforts to reduce greenhouse gases; and Walmart along with IBM, and JD.
American Express also recently announced that they are lauching a Blockchain wallet application for business payments. The buzz around how Blockchain can be leveraged in the Finance and Accounting arenas has just begun. With Blockchain, it is said that the benefit cfo blockchain login in its ability to close the Trust gap. By bringing an immutable ledger system which authenticates transactions and improves transparency, reliability, and timeliness of information required to manage risks within a business process, Blockchain can produce superhero-proportion cost reductions when compared to the way trust is manufactured and obtained in transactions today.
The value that comes from these efficiency gains should make any CFO happy and makes Blockchain something worth keeping an eye on.
