From Bitcoin to Facebook’s proposed cryptocurrency, Libra, the term “blockchain” has been popping up in the news frequently. But what is it, and why is it important?
What is Blockchain?
Put simply, blockchain is a distributed ledger, which means that multiple parties share access to a single ledger, and therefore share a single source of truth. Blockchain is often associated with cryptocurrencies like Bitcoin because of its origin; however, blockchain enthusiasts and big business are identifying potential blockchain use cases at an exponential rate.
Why is Blockchain Important?
Blockchain has the potential to remove the need for trusted third-party intermediaries. “It reduces the need for costly and time-consuming reconciliation procedures and allows vested parties to work off the same version of the truth,” says Shane Husar, Eide Bailly Partner and blockchain thought leader.
While blockchain has quietly been around for a little over ten years, it is only within the last few years that businesses have begun to view blockchains as a potentially disruptive technology. Large companies such as Walmart, JP Morgan, HSBC, healthcare entities and other organizations have begun to utilize this technology, and many more are spending money on research to identify potential use cases.
Blockchain’s Application in Supply Chain Management
An emerging trend in the blockchain space is its use in supply chain management. “Blockchain can have a significant impact on organizational process,” says Vince LoRusso of TrueUp, a company that specializes in the gamification of accounting and finance skills. “It can create incredible process efficiencies for businesses.”
LoRusso says that while blockchain has often been seen within the world of cryptocurrency, the future of blockchain may lie in these broader organizational process applications. “As the technology matures, we are seeing a great deal of application of blockchain to the business world.”
Blockchain Case Study
Blockchain can be used to automate and complete processes much faster than humans can. A key example is Walmart’s use of blockchain. Walmart utilized blockchain technology to track the supply chain of mangoes from farm to stores across the United States. Their proof of concept simulated the process needed to discover the origin of problematic product in the event of a foodborne illness outbreak. While it generally took managers seven days to trace the origin of the product using traditional methods, the same information was obtained using blockchain technology in only 2.2 seconds! The ability to examine supply chains quickly and thoroughly could drastically decrease the spread of foodborne illnesses and reduce food waste. Walmart is now using this technology to track other produce, as well as meat and poultry, dairy, and multi-ingredient products like pre-packaged salad and baby food.
The Future of Blockchain for Business
While blockchain has been around for a while, it’s slowly gaining traction for business usage. According to LoRusso, the biggest items that need to occur for better blockchain usage are:
Eide Bailly’s Blockchain Expertise
Blockchain is no doubt having a significant impact on the way organizations do business. It’s also impacting organizations’ finances. “There are many accounting implications related to blockchain usage, and the industry is very broad,” says Husar. “The impacts extend beyond accounting and into the heart of business operations and streamlining processes.”
To stay on top of this new technology, Eide Bailly has joined the Wall Street Blockchain Alliance and the Accounting Blockchain Coalition. The goals of these organizations include the promotion and comprehensive adoption of blockchain technology. We understand that this technology is changing the way that our clients do business, and we have been researching the potential tax implications, cash flow management issues, record keeping potential and a variety of other areas.
Learn more about blockchain and its implications.
If you’d like to learn more about blockchain technology or how it may be beneficial to your organization, contact Gary Smith for more information.
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