3 key industries you didn't know blockchain technology and cryptocurrency is set to disrupt
When people think about cryptocurrency and blockchain technology they invariably think Bitcoin, however the space is so much broader and far reaching than one cryptocurrency. Although the technology is still relatively new when compared to the internet as a whole, it has already proved it’s ready for wider usage. In this article I will introduce you to 3 industries you probably didn't know are set to be disrupted by blockchain technology and the cryptocurrency revolution.
What is blockchain technology?
Ok, before we explore the 3 industries that I have selected let's take a quick look at what blockchain actually is. Well, simply put it is a chain of blocks. The chain is a effectively a large public database and the blocks are buckets of digital information.
Let's dig a little deeper. In a similar way that you may use a regular database the blocks in the chain are used to store transactional data, such as date, time, and the currency denominated amount of sales. Instead of using an identifier like 'purchaser names', each block is given a unique digital code, called a “hash.” When a purchase is made for example, a network of computers verifies the details of the transaction and stores the information in a block. Once it is verified and given a hash, the block is then added to a chain.
What makes blockchain technology different from traditional databases is that copies of the blockchain are spread across a vast array of computers networks, which makes it extremely secure. Furthermore the code and data can’t be altered or deleted.
Blockchains have evolved to not only store large amounts of transactional data but they also utilise smart contracts, which are also referred to as self-executing contracts.
Just like any contract, a smart contract establishes the terms of an agreement. But unlike a traditional contract, a smart contract’s terms are executed as code running on a blockchain. Smart contracts allow developers to build apps that take advantage of the blockchain security, reliability, and accessibility while offering sophisticated peer-to-peer functionality which is why they are so powerful and will find their way into a wide range of different industries.
Industry #1 - The legal profession
Let’s consider how the legal profession will be disrupted and lawyers may find themselves using blockchain technology within their own law firms in the very near future.
Legal contacts today are still very much as they have always been – written in hard copy with physical signatures from all required parties to create a legally binding agreement. With piles of accompanying administrative work and paper this makes the process of creating a contract a very time-consuming and costly process.
Blockchain offers the potential to completely digitise and disrupt this process with the use of smart contracts. Certain obligations can be triggered and performed in an entirely automated manner. Contracts can be made and auto-executed directly between the relevant parties, with minimal intervention from legal third parties.
Payment disputes could become a thing of the past as smart contracts automatically trigger payments of funds agreed at the outset when certain terms are met; or apply penalties or cease services should this not happen.
Lawyers will have far less work to do to enforce agreements, and the streamlined nature of smart contracts makes it likely that fewer cases will end up in court.
On the face of it, blockchain could be a scary prospect for lawyers and in fact in time they may actually find themselves needing to understand the technology to create and agree terms and conditions in the contracts they write.
The advent of digitisation has created huge problems associated with intellectual property (IP), particularly when it comes to protecting the rights of the individual concerned. Users of the internet often believe that everything on it should be freely available. This causes many legal issues.
Blockchain provides a solution, offering a publicly visible record of copyright ownership. It can also track who has viewed or downloaded the material in question.
By adopting blockchain any confusion as to who actually owns the digital property could become a thing of the past, meaning piracy will become more difficult and also lawyers will be able to quickly verify proof of ownership.
Proof of service
Blockchain technology may also solve the problem of serving documents on an individual by allowing for the input of a digital tag that tracks all physical and online movement. Blockchain can also be used to log delivery attempts and provide immutable evidence of service delivery.
As blockchain starts to impact different industries it is likely they will need to seek out law firms for counsel, which in itself presents new opportunities to specialise and assist within an emerging area of law. Lawyers who are progressive in their thinking will have the potential to build successful and highly sought after niche law practices.
Industry #2 - Supply chain management and logistics
In the past year or so it's likely that you have experienced frustrating shipping delays and perhaps even dramatically increased shipping costs, especially when the product you have ordered has needed to be shipped from the Asia-Pacific region. In fact, compared to this time last year, shipping prices are five to six times higher.
There are a myriad of reasons why these issues exist. Many companies are suffering from the ramifications of supply chain problems due to the effects of the pandemic and now new COVID-19 restrictions. Natural disasters such as typhoons, floods, and wildfires have also played a part in disrupting the freight market, which have slowed down supply chains and reduced capacity.
Companies are also facing increased consumer demand for imported goods, a shortage of labour, the lack of empty containers, congested ports and terminals, and lagging inventory levels. Supply chains have slowed and prices have increased as a result.
Logistics is a complex business so when you have even one element of the chain affected the knock on effect can be dramatic. Blockchain however is emerging as a possible solution for these challenges.
There is a growing acceptance within the industry that the potential of the technology is vast, especially when applied across logistics functions. Admittedly blockchain can't solve every real-world problem by itself, however the underlying technology if applied correctly could help this industry in several different ways.
Enhance transparency and traceability
Provide end-to-end transparency: Blockchain provides a single source of truth by integrating data from all the participants in the supply chain
Monitor and performance: Blockchain-based monitoring of performance history of carriers and suppliers provides 'trustworthy' information of past performance
Confirm provenance: Blockchain provides proof-of-origin along with assurance of compliance and safety standards throughout the entire supply chain.
Increase real-time visibility: Blockchain-based transparency provides real-time information and data of all aspects of the chain.
Ensure security, immutability and authenticity
Authenticate data and documents: Due to its immutable characteristics blockchain provides a secure and encrypted platform to exchange data and documents.
Detect fraud: Every transaction is visible to all participants and nothing can be removed without it being detected. This eliminates areas where fraud could occur. Shippers can confirm authenticity by tracking when each document or transaction was modified (time stamping).
Prevent theft: Blockchain can contain detailed information and rules, such as photo ID requirements for pick-up or delivery, which improves security
Reduce process complexity
Eliminate intermediaries: Blockchain replaces the roles of intermediaries by bringing trust in the ecosystem and enabling peer-to-peer models
Improve quality assurance: All participants can assess and validate data, which can reduce disputes
Increased automation: Processes such as payments, transfers of ownership, settlement of tariffs, etc., can be automated by using 'smart contracts'
Improve operational efficiencies
Improve compliance: Blockchain can be combined with electronic logging devices which provide data about driving behaviour to a blockchain platform in real time.
Reduce transaction cost: Through consensus validation Blockchain helps avoid repetition of transactions as well as process errors by verifying each transaction.
Reduce human error: As smart contracts foster the automation of processes, blockchain additionally reduces the potential for human error.
Industry #3 - Accounting and audit
Blockchain and accounting would appear to be an ideal match. Blockchain is able to offer a new, reliable way to store, share, and record all sorts of data and by utilising this technology in the accounting and audit sector allows for a sophisticated system of bookkeeping that implements distributed ledger systems.
The use of digital technology has influenced accounting for some considerable time, but this has primarily involved replacing analog tools with a digital variant. However, blockchain will change the way in which accounting is done on a more fundamental level.
A Direct Connection
At the core of blockchain technology is a distributed ledger coupled with cryptography, this not only ensures the confidence of everyone involved, but when implemented properly, the blockchain offers effectively unbreakable protection. For accountants, the benefits of this technology should be quite apparent even if the underlying technology is a bit baffling:
• The ability to automate transactions with less errors in the data.
• Trustless transactions resulting in less fraud
• An increase in transactional security and a reduction in bad data.
Effects On Audits
Accountants are relied upon for their skills in being able to keep records, ensure that standards are met, and be able to deal with the ever growing and complex regulations and rules. Because blockchain technology works in a trustless manner, it is starting to impact how auditing is done.
Blockchain technology has the potential to impact all recordkeeping processes, including the way transactions are initiated, processed, authorised, recorded, and reported.
Changes in business models and business processes may impact back-office activities such as financial reporting and tax preparation.
Both the role and skill sets of CPA auditors may change as new blockchain-based techniques and procedures emerge. For example, methods for obtaining sufficient appropriate audit evidence will need to consider both traditional stand-alone general ledgers as well as blockchain ledgers. Additionally, there is potential for greater standardization and transparency in reporting and accounting, which could enable more efficient data extraction and analysis.
Real-Time Data Accessing
At present, account reconciliations, trial balances, and other supporting documents are provided in electronic and manual formats to auditors, which is undoubtedly a time-consuming and labour-intensive activity for planning an audit. With blockchain, auditors could access information in real-time via read-only nodes on blockchains, and audit firms will be able to perform instant online assessments throughout the period under audit.
Blockchain to Speed-up Auditing Process
Blockchain can reduce the lag between the transaction and verification dates, thus speeding up the audit preparation tasks. This, in turn, is likely to increase the performance and effectiveness of financial reporting and auditing processes. Blockchain-enabled digitisation allows auditors to focus on complex tasks while conducting routine auditing on a near real-time basis. Furthermore, auditors could deploy more automation and analytics almost instantaneously.
As you can see when implemented correctly, the blockchain has the capability of providing a high degree of trust, it can improve process efficiencies, aspects of the job can become automated and costs can be reduced. As such professionals in a variety of different industries should start to realise that this has the potential to impact their field and in some instances reduce demand for certain 'traditional' work performed.
Forward thinking professionals should also be aware of opportunities to leverage either their clients' adoption of blockchain technology or its introduction into their respective field of expertise.
Professionals must embrace and "lean in" to the opportunities and challenges from widespread blockchain adoption. One should be encouraged to monitor developments in blockchain technology because they have an opportunity to evolve, learn, and capitalise on their already proven ability to adapt to the needs of a rapidly changing business world.
However, professionals need to take note: The blockchain is here, and they need to keep up to stay on top of their field.