It's not surprising that technologies like blockchain excite accountants like me. My world is one of ledgers and transactions and internal controls -- and blockchain is exactly that.
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Originally created as an underlying ledger for digital currencies like Bitcoin and Ethereum, blockchain's popularity has quickly grown in the corporate world as more executives have begun to realize the enormous benefits it brings for handling transactions transparently and securely.
The blockchain concept isn't as difficult to understand as some may think. It's essentially a database, except it's not in one place or stored on a single server like we’re accustomed. Instead the database is spread among multiple places – sometimes millions -- at the same time.
Imagine you have a spreadsheet that you're sharing with a dozen others. That spreadsheet isn't stored just in one place in the cloud. It's stored on everyone's computer or server. The spreadsheets contain a bunch of information about a transaction - who's buying, who's selling, price, date, quantity, etc. etc. However, the spreadsheets are linked together using an encrypted key and so that no one can change any of the information without it being approved by everyone else and once changes are approved the information is instantaneously changed on every spreadsheet. That’s a blockchain.
This is why the data storing technology has become so popular with digital currencies and has been attracting an enormous amount of attention by corporations worldwide. Its uses are widespread. Banks and financial service companies in particular are testing blockchain for securely recording transactions and enabling quicker person-to-person payments. Initial Coin Offerings using blockchain technology are enabling companies to more easily raise capital. Start-ups and big companies alike are exploring ways to make file sharing and intellectual property exchanges more secure and easier to transact.
Now FedEx -- the shipping giant -- has recently announced its intention to deploy the technology to track its shipments, too.
"We move easily 12 million shipments a day and that more than doubles during the peak seasons," Robert Carter, FedEx's CIO and executive vice president of information service recently said at a conference. "The application of these custody chains ... is so critical to the information aspect. It makes sense for us to do this in our freight world." For what is a shipping company without a reliable ledger, right?
Shipping is complicated. There are always multiple parties and lots of data involved – and that’s just if a package is being shipped domestically. Duties, taxes, authorizations and other information required for international shipments adds even more complications. There's also a great deal of trust involved – particularly among agents in multiple countries - and any breakdown in communications can quickly throw off schedules and commitments.
This is the very core of FedEx’s business: “absolutely, positively overnight,” remember? It’s not an easy promise to keep considering all the potential problems that can happen. But FedEx executives believe that blockchain will help minimize these problems. Their “database” will provide a single record of a shipment that is secure and transparent and will allow all parties to see whatever details they need about the cargo so that they're all on the same page whenever a change or approval is made.
Using blockchain, FedEx hopes to minimize disputes about payments or postage or when and where a package was received. It will help the company be compliant under the EU's new General Data Protection Regulations. It should enable their customers to receive information faster and more accurately and their customer service people to solve problems in a more rapid manner. Company executives also believe that blockchain will help them operate more efficiently and position the organization to handle growth, particularly as the economies in the U.S. and other countries continue to expand. All of this affects you and me, the prices we pay and the companies we choose to ship our products.
“We’re quite confident that it has big, big implications in supply chain, transportation and logistics,” Chief Executive Officer Fred Smith said in this Bloomberg report. “It’s the next frontier that’s going to completely change worldwide supply chains.”
Of course, blockchain is not without its issues. Its transparency may reveal more information about a transaction than a company cares for all parties to see. It relies on the mass duplication of information across many computers – which means that as compared to one shared database in the cloud it's pretty inefficient. Downloading the data relies on bandwidth and acceptance at a local level and any blips, security issues or hardware fails could significantly delay a transaction from being approved and processed.
But FedEx is bullish on the blockchain technology and Smith’s comments about it not only underlies this commitment, but is also a friendly reminder to any business looking to grow. He believes that technologies like these threaten companies that aren't prepared to be innovative. "If you are not willing to embrace new technologies like internet of things and blockchain to face those new threats, you are, maybe subtly, at some point ... going to extinction," he warned.