Members unify with the need to address blockchain.
Several of the presenters at our recent ACT Working Capital Conference referred to or were presenting software solutions which used blockchain. The ACT have written on blockchain in The Treasurer last year, and until recently our Wiki definition was drawn from a 2017 article. Member questions revealed a need to get back to basics on the subject: both to redefine blockchain (asked 11 times in one session) and to understand why treasurers may want to know how it works (10 times in the same session).
Blockchain was presented as a means of enabling software solutions to financial services problems, including solutions which could be used by treasurers to manage their business internal processes as well as their interaction with financial services providers.
The BBC eruditely defined blockchain:
At its heart, blockchain is a relatively straightforward concept. It is a ledger of blocks of information, such as transactions or agreements, that are stored across a network of computers.
This information is stored chronologically, can be viewed by a community of users, and is not usually managed by a central authority such as a bank or a government. Once published, the information in a certain block can’t be changed.
If people try to tamper with that information, it becomes obvious.
Often confused by association with its initial fellow traveler Bitcoin, a means of value storage and transfer which uses blockchain, the software concept is one being used to develop new financial solutions. To be clear: Bitcoin requires blockchain; using blockchain does not require Bitcoin.
As of 2018, blockchain’s development success has been limited to software, based around now traditional tools such as databases and file transfer. The August 2018 edition of The Economist noted that “Most attempts to use blockchain remain tentative”.
Should treasurers be Concerned?
The potential for open access, (more realistically access limited to defined user groups which could include treasurers), and apparent tight security could prove appropriate to systems through which treasurers transfer value, the ownership of securities such as bonds and Certificates of Deposit, and information about payments. They could also be used to gather information throughout a supply chain which is where their relevance to working capital was promoted.
But should treasurers be concerned about the form of software being used, or are they software agnostic? Our concern is whether value and information move promptly, remain valid, remain secure, and is delivered in a usable format, and whether their systems are reliable and easy to maintain and develop. Whether the latest update to bank’s on-line cash management portal uses twenty year old relational database technology or blockchain technology is not important. Whether it is secure, reliable, does the job, is simple to use, can manage changes in our markets, and is cost efficient is our concern.