The Year of the Blockchain

This week we wanted to share both a podcast and a fascinating report on the blockchain.

What is a blockchain?

A block chain or blockchain is a permissionless distributed database based on the bitcoin protocol that maintains a continuously growing list of data records hardened against tampering and revision, even by its operators.

The initial and most widely known application of block chain technology is the public ledger of transactions for bitcoin.

The Australian Broadcasting Corporation’s Radio National recently aired a thought provoking podcast on the topic:

http://www.abc.net.au/radionational/programs/themoney/blockchain/7136126

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Listening to this podcast reminded me of the mid 1990s when I was a much younger (and considerably more hirsute!) auditor. 

The internet as a generally available phenomenon was then just a year or so old.

Where I worked had a dedicated, not connected to any network, meeting room where you had to write down every webpage that you had visited.

It was in that context – and my lack of understanding of something that would change all our lives – that I was asked to do an audit of a (then) strange concept called e-commerce.

My overriding memory of the review – other than I probably added no value because I didn’t know what I was doing – was this dreaded sense that I had somehow missed out on the birth of the internet.

How had I missed something so important and what else was I missing?

I vowed then that I would always try and understand new and emerging technologies – knowing full well that some, if not most, would suffer premature declines. 

I hated the feeling of not knowing what was on the horizon.

If this podcast is even half accurate then blockchain may just be that next technology that will change everything.

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If you remain a tad sceptical (don’t forget we sung the praises in these pages many years ago about Second Life!) have a read of the attached paper on the implications of blockchain for corporate governance from the NYU Stern School of Business.

The abstract to the paper neatly summarises a (very near and possible) future:

Blockchains represent a novel application of cryptography and information technology to age- old problems of financial record-keeping, and they may lead to far-reaching changes in corporate governance.

During 2015 many major players in the financial industry began to invest in this new technology, and stock exchanges have proposed using blockchains as a new method for trading corporate equities and tracking their ownership. This essay evaluates the potential implications of these changes for managers, institutional investors, small shareholders, auditors, and other parties involved in corporate governance.

The lower cost, greater liquidity, more accurate record-keeping, and transparency of ownership offered by blockchains may significantly upend the balance of power among these cohorts.

2016 could be the year when the blockchain arrived.  Are you ready for it?

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