Blockchain is one of those tricky concepts known by many but understood by few. Despite this, it has been heralded as a true game changer with the ability to revolutionise traditional transactions and processes. Some even compare its potential to that of the internet. But what does blockchain technology do, and how is it impacting the world of work?
What is a blockchain?
A blockchain is a distributed digital ledger where transactions are recorded and stored in chronological order. When a transaction takes place, a new block is added. Each new block contains information about the transaction and a unique hash – much like an encrypted ‘digital fingerprint’ – for both the new block and the previous block. So, each new block is cryptographically linked to the previous block, creating a chain of blocks all the way back to the original ‘genesis’ block.
Instead of being managed by a central entity, the blockchain is distributed openly across a peer-to-peer network comprising thousands of ‘nodes.’ When a new block is added to the chain, these nodes collaborate in the verification process.
This combination of cryptographic techniques and a decentralised and collaborative approach to verification makes it virtually impossible for anyone to tamper with the blockchain.
Blockchain is best known as the technology behind the cryptocurrency Bitcoin. Unlike standard currencies that are backed by a country’s government, Bitcoin has no central authority. Blockchain technology ensures that every transaction made using Bitcoin is recorded and verified automatically.
Why is this revolutionary?
Blockchain has been described as the only incorruptible ledger. Traditional records and accounts can be manipulated, altered, or even lost – there have been plenty of high-profile accounting scandals over the years. With blockchain, this is impossible. Once a record is added, it is virtually impossible for it to be removed or changed, ensuring a new level of transparency and accountability.
As a result, the transactions recorded in a blockchain do not need to be authenticated or overseen by a legal professional or government body.
How is blockchain impacting the world of work?
Cryptocurrencies are just one of many applications for this technology. Blockchains can potentially be used not only for financial transactions, but virtually any process that involves the recording, verifying and tracking of data.
Here are just a few ways blockchain technology is impacting the world of work.
The facts on a traditional CV are notoriously difficult to verify. Beyond the references from recent positions, how do we know that the information there is true? To gain competitive advantage, candidates often bend the truth or even tell outright lies – according to HireRight’s 2017 Employment Screening Benchmark Report, 85% of employers caught applicants fibbing on their résumés or applications. This makes the challenge of recruitment even more difficult for employers.
What if trust issues could be removed altogether? Instead of an individual CV, candidates can use a blockchain-based verification platform, such as APPII, to create profiles containing information on their identity, education, qualifications and work experience, which have been verified and permanently logged. This saves time during the recruitment processes, as employers don’t need to check a candidate’s credentials – information in the blockchain only needs to be verified once and cannot be subsequently altered or removed.
This ensures a new level of truth and transparency during the recruitment process. Employers also have quick and easy access to a wealth of employee data, all of which has been verified as true. From the employee side, this removes the unfair advantage given to those that cheat the system.
This system does raise some concerns around privacy and human rights, however. There are some parts of our career history that we would like to forget – perhaps we acted unprofessionally in a previous position ten years ago or were even sacked for misconduct. These facts could be stored forever in a blockchain, meaning we could forever pay the price for past mistakes. How would we ever prove that we had changed?
Contracts and agreements
Blockchain technology is also behind the rise of so-called smart contracts, pioneered by blockchain platform Ethereum. These are essentially computer programs that use sets of rules and actions to enforce terms and conditions automatically. Rather than being a written document, these terms are set out in code and stored in a blockchain.
Unlike traditional contracts, which often need an army of legal professionals to draught and enforce, smart contracts essentially automate the performance of contractual obligations. Like any computer program, they execute tasks exactly according to their programming; for example, if condition A is met, action B must happen.
Smart contracts increase transparency between parties, while eliminating the potential for ambiguity or dispute. They run on software code, meaning they can perform transactions rapidly, with no need for administration or manual updating of terms.
The algorithmic nature of smart contracts makes them ideally suited to governing agreements that have clearly defined rules and actions, such as those found in the real estate, insurance, banking and healthcare industries.
Cutting out the middleman
Any traditional transaction or legal agreement requires an intermediary – someone qualified, certified, and usually highly paid who ensures that records are kept, contracts are enforced, and transactions are completed. This can make such processes time-consuming and costly for the parties involved, and often acts as a bottleneck to progress. Traditionally, these middlemen were an essential part of the process – there were no transactions without banks, no contracts without lawyers, no accounts without accountants.
Blockchain could revolutionise these processes by eliminating the need for intermediaries. The immutable nature of the information stored in blockchains means that issues around trust, accuracy, authentication and enforcement are removed. This will transform the way businesses deal with each other, employees and freelance workers, while reducing the time and cost dramatically.
This is just the beginning
This is a technology still in its infancy. For many, blockchain is associated with Bitcoin and nothing else, and the uncertainty around cryptocurrencies is perhaps holding us back from using blockchain to its full potential.
Blockchain technology is notoriously difficult to grasp, and as a result, it is yet to catch the imagination of the wider population. But this abstract process with a clumsy name could yet change the world. Like the nascent internet of the early 1990s, it is impossible to predict the true impact it could have on our lives and the way we work.
Written by Mark Williams.
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