Is Your Board on the Block?

 
If governance, risk management, auditability, traceability, and transparency are within your board’s oversight, understanding of blockchain technology and its implications should be added to your board agenda for 2019.

 
If you haven’t heard of blockchain, you’ve missed the hype and super hype that surrounds it. But is it all hype? Are there any real applications of this technology? And if so, is there a practical role for blockchain in Australia?

 
This article aims to provide a basic explanation and some working examples and poses some questions to quickly assess if blockchain is for you and your NFP.

 

Blockchain demystified

A basic explanation of blockchain is that it is a digital ledger that chronologically and securely records data transactions. What does that mean in practical terms?  A transaction can be anything you need to record, e.g. a supplier engaged, goods delivered, a service provided, a payment received or made, or an asset stored or deployed. The data related to the transaction is recorded and stamped with the time it occurred so it is in chronological sequence (this time-stamped data is called a ‘block’), then this block is added to the chain of data relating to that activity (creating the ‘blockchain’). In the linking of the blockchain, a specific algorithm connects the new block to the previous block in a secure way to ensure the integrity of the new transaction and all prior transactions leading up to it.

 
What makes a blockchain ledger different from other technologies is that it is both decentralised and distributed, meaning the process is shared across multiple computers in different locations rather than having the data in one single location; it is not copied or duplicated databases, it is a shared unified record. Because it is shared, blockchain applications are almost tamper-proof: any one single point/person cannot change the record without it being obvious that it is inaccurate. Blockchain technology thus represents a true chronological order of what happened, when and how, with the added benefit of the possibility of tampering being almost eliminated.

 

Real-world examples of blockchain

The global use case examples below are to help visualise blockchain in action, and to show there are some strong cases around the world where blockchain has been successfully deployed.

 
If identity management (securing and validating areas such as birth certifications, education, address, references and medical history) is an issue in your sector, as it is in the aged and community care sectors, imagine what a major issue it is for refugees who may have little in the way of possessions or identification. Blockchain solutions in refugee camps in Jordan allow Syrian refugees to receive funds from the World Food Program directly into their individual digital wallets, which they can use to purchase supplies at shops using facial recognition technology to confirm their identity.

 
Can it be scaled? It already has been. The country of Estonia also runs on blockchain. Since December 2014 people have been able to become a digital citizen, or e-resident, of Estonia. It takes as little as two minutes to set up a new citizen. Users receive a government issued smart ID card, which enables them to digitally sign documents, access secure services and make secure transactions, even if they don’t live in Estonia. It is part of Estonia’s desire to create a country without borders, where people from developed and developing countries can do business anywhere in the world.

 
Blockchain is already a key tool for verifying financial transactions. This is particularly useful in the world of donor funds and tracing their receipt and distribution, eliminating middle players and the possibility of fraud: because the transactions related to the funds are clearly visible and unable to be tampered with.

 
In addition to those two cases, during 2018, a wide variety of blockchain platforms were developed to address areas such as land and asset registrations, agriculture, supply chains, green energy, financial donors, financial inclusion and micro credit. As a result, hundreds of use cases are now in progress.

 

Blockchain for boards

Blockchain is also becoming increasingly applied for execution of smart contracts. A smart contract is one where all stages of a contract are digitally captured and applied in a transparent, trackable and irreversible way. This is especially useful in management of the supplier chain, as it allows for automatic communications and confirmation between each stage without manual intervention or complex reconciliation of separate records. Both parties would automatically have the same record.

 
Another area of value to boards is in validation and compliance, e.g. when a third party (such as an auditor or regulator) can, via the blockchain records, easily track and confirm a business process and how it has addressed specific requirements.

 
Issues such as identity, supply chains and donor finance are some of the many challenges facing Australian non-profits  can be addressed with blockchain solutions. More generally, some current challenges are due to systematic asymmetries and inefficiencies in information access. The open and transparent exchange of information represented by blockchain may help solve some of these challenges within your industry or sector.

 

Is blockchain for you?

You should have a compelling reason for moving to blockchain before doing it. There is no value in simply moving an existing database to blockchain technology because it exists: it’s not a replacement for databases or enterprise resource planning (ERP) systems. Assessing whether blockchain is applicable for you should be more about addressing questions such as:

 

  1. What’s the issue you are trying to solve?
  2. What’s the associated risks with that issue?
  3. What’s the potential for fraud with that issue?

If you have a strong response to all three of these questions, that then begins to address the ‘why’ and indicates that it is time to consider the ‘how’ and ‘when’.

 

Summary

There certainly has been a lot of hype surrounding blockchain, but like all technologies, it’s now settling into a less hyped cycle. There are real applications for blockchain with real world use cases and more in progress, blockchain won’t go away anytime soon, and board members do need to pay attention, as blockchain promises improvements in governance, risk management, auditability, traceability and transparency.

Sonja Bernhardt OAM About Sonja Bernhardt OAM

Sonja Bernhardt OAM earned her Medal of the Order of Australia, in 2011, for services to the Australian Information Technology Industry. She is an emerging technology commentator on ABC Radio and on cruise ships, throughout the world. She is a globally published author, with a new book Blockchain Technology for Global Social Change due in mid 2019.
In her real job she is a director and CEO of ThoughtWare, the software development company behind the ionMy Governance, Risk, Compliance software platform (ionmy.com.au).

ThoughtWare has started developing blockchain solutions as part of the overall governance capabilities of the ionMy platform.

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