Blockchain. It has become a buzzword in fintech. Blockchain first rose to prominence as the platform on which the digital money Bitcoin runs, but the essence of blockchain technology has now progressed to smart contracts, which has huge implications for the world of HR and employee benefits.
A blockchain is a digital ‘distributed’ ledger that does not need a third party to act as a verifier in, say, the way a bank would act when a person transfers money to a company in exchange for goods. The key part is ‘distributed’ because this means that a copy of the ledger is downloaded to and held on the computers of anyone who chooses to run the blockchain, known as ‘nodes’. They act as a democratic consensus that secures the records kept in the ledger and stops any one person or organisation from controlling that information.
Initially, its use was quite narrow until the Ethereum blockchain was developed in 2014. This allows developers to build apps that use the blockchain to disrupt a range of industries, from data security, online storage, banking, real estate, legal, payments, pensions, healthcare and much more. Therefore, it will have a major impact on the world of employee benefits.
Here are some of the areas in which blockchain developers have begun operating that will have a big impact on employers. Payments: one of blockchain’s original uses was revolutionising cross-border payments, which can greatly benefit multinationals. Smart contracts could be built to automate payments, from expenses to tax and payroll, and even enable them to create their own corporate currencies.
Recruitment: secure ID and employee records will likely be stored and authenticated on the blockchain one day; that will make it easier, quicker and more accurate to verify candidates’ background, experience and suitability.
Fraud: there are several organisations building a whole new level of data security and fraud prevention, including the ability to remove the need for passwords and many other IT complexities that will make the workplace more efficient.
However, it is important to remember that blockchain is roughly at the same stage of development as the internet in the early to mid-1990s. It is huge on potential but low on mass market usability right now. The Googles and Microsofts that opened up the web are being developed for the blockchain as we speak. Some of these developers want to use the blockchain to make the current systems slicker, faster, cheaper, while others want to replace global institutions with, effectively, peer-to-peer systems. Either way, it will change the world significantly in the next few years.
Matthew Morris is director at Carr Consulting and independent advisor