BLOCKCHAIN: 'Fraud' or Fortune? What directors need to know about the technology behind Bitcoin.

Author:Tahmincioglu, Eve
Position:ON THE TABLE FOR 2018

Whether it's JP Morgan's CEO Jamie Dimon publicly eating his words about blockchain, or Kodak attempting to resurrect its photo dominance with the technology, the promise of what is essentially a more secure, shared online database is getting hard to ignore.

Blockchain--the technology behind cryptocurrencies such as Bitcoin--has been hailed as the next big disruptive business force, already being tested in everything from tracking Chinese pork to making insurance underwriting more efficient.

"2017 was the year of enthusiasm," says Christian Catalini, assistant professor of Technological Innovation, Entrepreneurship, and Strategic Management at the MIT Sloan School of Management, about blockchain. "2018 is the year of more mature deployments and the slow adoption in real-world uses."

But he warns, "Markets are overreacting and people are flocking to anything with 'blockchain' on it. It's important to cut through the hype."

It behooves directors everywhere, he adds, to understand the technology and figure out what it means for their organizations.

So why all the blockchain-mania? For business operations, much of the interest focuses on its potential to provide heightened levels of efficiency, transparency and security for a host of business transactions without the need for an intermediary.

There are endless articles trying to explain what blockchain is, but the consensus describes it as an open, online ledger/database dispersed among a network of computers.

It's different than a typical database that's housed on one computer, server or the cloud and accessed by individual computers, smartphones, etc. In the blockchain, there's essentially a carbon copy of the ledger/database on all the devices looking to use/access it and it can't be changed without sign-off from all parties in the network.

Zealots in the blockchain universe like to say the technology is immutable, unable to be changed, because of its unique structure, and is thus unhackable. Many tech experts, however, are dubious of claims it can't be compromised but do see it as more secure than many existing systems.

"Blockchain's going to be a game changer," says Patricia Oelrich, an independent board member with the Federal Home Loan Banks Office of Finance and a board member of the Association of Audit Committee Members, Inc. "But I think boards in general are struggling with 'what it means to me.'"

There is a lot of confusion out there about blockchain, partly brought on by the mad...

To continue reading