For months, I have been researching how the blockchain works. Now I am getting seemingly random emails about blockchains. It’s like when I bought a new pair of running shoes and a stream of popups asked me if I wanted to buy socks. It’s kind of creepy and cool at the same time. Is this an “unwelcome” intrusion of technology or simply data analytics at work?
My research on the blockchain is driven by both excitement and fear. The term is so new that my spell checker underlines it, but it is a real word and an emerging reality. That reality will slowly infiltrate our lives, and like the boiled frog metaphor, we will hardly notice the change. What is blockchain and why does it matter?
Blockchain is a term widely used to represent an entirely new suite of technologies. “At a high level, blockchain technology allows a network of computers to agree at regular intervals on the true state of a distributed ledger,” says MIT Sloan Assistant Professor Christian Catalini, an expert in blockchain technologies and cryptocurrency. “The ledger is distributed across many participants in the network—it doesn’t exist in one place. Instead, copies exist and are simultaneously updated with every fully participating node in the ecosystem. A block could represent transactions and data of many types—currency, digital rights, intellectual property, identity, or property titles, to name a few.”
For HR professionals the blockchain represents a disruption to business as usual. When something has this kind of potential our business acumen antenna needs to be picking up the signal that a change is coming. What changes? For starters, Bitcoin, with a market cap of more than $40 billion, is the largest implementation of blockchain technology to date. But there are other “apps” that are not as flashy but could save business leaders money. In his recent paper, “Some Simple Economics of the Blockchain,” Catalini identifies two key costs affected by the technology: 1) the cost of verification; and 2) the cost of networking. The first cost relates to the ability to cheaply verify the attributes of a transaction. The second relates to the ability to bootstrap and operate a marketplace without the need for a traditional intermediary.
Industries can be fundamentally altered by the blockchain. Take finance, for example. The busiest area of application so far, blockchain is being used by companies seeking to offer low-cost, secure, verifiable international payments and settlement. Changes in other areas will be equally dramatic:
Money transfer: blockchain remains attractive because of the lower costs it could offer parties in global, peer-to-peer transactions.
Identity and privacy: Google’s DeepMind is attempting to use blockchain to layer privacy and security in electronic health care records.
Internet of things, robotics, and artificial intelligence: Your appliances are already talking to each other—think smart-home technologies like Nest thermostats and security systems. Many of these areas are at the outer edge of application, but not outside the realm of possibility, Catalini says.
This is pretty “out there” stuff, but think about where technology was 10 years ago. How and when this technology will affect you and your organization is hard to predict. Staying current, however, is something you can control. The MIT blog on blockchains is a resource worth marking as a favorite in your browser. Happy reading!