Until now, the technology industry has made its money based on a series of advances that have made data easier to copy. The world wide web, electronic books, video games, movies, and television have all seen considerable growth into new markets because networks have reduced the cost of transmitting and copying data from one place to the next to practically zero.
Now, as the business-to-business world catches up to the more consumer-driven worlds of entertainment, news and social media, some new requirements are being folded into the basic foundational technology of computers and data storage. Now, new growth is likely to be based on data that can’t be copied.
One might ask what is the benefit of data that can’t be copied? Simple. Data that can’t be copied can’t be altered. One need only consult the nearest attorney, accountant or securities dealer to see if that technological advance has value.
What was needed was a flexible way to create a chronological stream of uncopyable data, much like a series of tweets. All the stream had to do was store data, make it permanent and make it shareable. Enter the blockchain.
Accounting has always been one of the most powerful ways computers help businesses. From consumers to small business owners to enormous corporations, accounting software has driven billions of dollars in business practices from the invention of the PC. But what if more than one company needs to collaborate on financials?
For example, if two companies are merging and need to produce a set of shared financials for investors, how can those financials be verified? How can they be written to satisfy regulatory requirements, tax laws, and the prospectus? After all, laws now require corporate officers to sign off on their various financial statements. Wouldn’t it be nice if those numbers were irrevocably tied to a long list of other verified financials and couldn’t be fudged?
How much would scientific certainty that these results match those results save the average corporation in due diligence costs alone? How much would it save the government? How much more confident would investors be?
Developers like Mark Polelle will tell you one key element of the blockchain that doesn’t get quite as much press as the others are the fact every link in the chain can be time stamped. In the above example, two companies securely share a set of data. What if there are ten companies? When does this happen? Simple. How about an international character license?
The blockchain’s primary strength is in the fact it is a distributed ledger. This means all ten companies would have copies of the same data. Every time a new entry is “posted” to the chain, it propagates to all ten companies in much the same way RSS feeds propagate to subscribers.
Because of the nature of blockchain technology, these updates can all be chronologically verified, which means the order in which they occur is just as unalterable as the actual data each record contains. So if there is a date by which a character license becomes active, it would be possible for all ten cooperating companies to verify that all the appropriate transactions in the chain took place after that date and further, that none of those records could ever be altered.
Such a record could then become the basis for all the financial and legal record-keeping with regard to contracts, financial results, investment statements and so on. Again, the cost savings associated with avoiding compliance issues, verifying financial results and scope of intellectual property agreements would be staggering, even for agreements with modest terms.
Suppose your company has a contract with your bank that includes covenants your revenues won’t drop below a certain amount. If that company hired an expert like Mark Polelle, they would have a way to tie that contract to the company’s financials. Did revenues trip those covenants? If those agreements are associated in a blockchain shared by both the corporation and the bank, there will never be any question, which means there can never be a dispute over the facts.
Everyone in business has heard stories of enormous corporate bankruptcies. The amounts billed by attorneys in some of those cases run into the many thousands or even hundreds of thousands a day.
What if there were a way to standardize a bankruptcy filing? Consider that the average small business might have 50 creditors and 100 investors. If they all had access to the bankruptcy blockchain, they could “file” their application for relief right alongside everyone else with a stake in the company. With the right software, that blockchain could be processed in minutes and produce a report that could be dropped on a judge’s desk for a signature.
There wouldn’t be any need for discovery or litigation. There are tens of thousands of bankruptcies filed every year.
Blockchain technologies are resilient because they are shared. They are strong because they rely on serialized encryption that makes it virtually impossible to “unwind” the chain in a manner that would allow data to be altered. When these two capabilities are combined, they produce a type of data that can be of immense value to the business if it is properly utilized.