HR Management & Blockchain

HR Management & Blockchain

HR Management & Blockchain

Beyond Bitcoin: What blockchain and distributed ledger technologies mean for firms

Alex Hughes a,*, Andrew Park b, Jan Kietzmann c, Chris Archer-Brown a

Abstract Blockchain technologies are benefiting from significant interest in both societal and business contexts. Cryptocurrencies like Bitcoin have grown rapidly in user adoption over the past 8 years. However, blockchain technologies, which fuel cryptocurrencies, have the potential to extend to other business applications even more profoundly.

Blockchain can be leveraged to drive innovation and increase efficiencies in new domains–—including digital arts management, supply chains, and healthcare–—but there remain technical, organizational, and regulatory head- winds that must be overcome before mass adoption can occur.

In this article, we provide a brief history of blockchain and identify some of the key features that have enabled its popular uptake in the world of cryptocurrencies. We discuss how blockchain technologies have evolved from traditional software and web technolo- gies and then examine their underlying strengths and evaluate new, noncryptocur- rency use cases. We conclude with a look at the limitations of blockchain and present several important factors for managers considering blockchain implementation within their organizations.

 

1. The webs frontier and blockchain

In 2003, Jeff Bezos took the stage at a TED event to compare and contrast the digital zeitgeist with

other periods in American history (Bezos, 2003). He spoke of the California Gold Rush–—the run on land and mines in California in 1848–—which created a social frenzy around the notion of gold prospecting, business, escaping the rat race, and simply having a go at entrepreneurship. Bezos also observed how the origin and implementation of electricity started with one clear, small goal: to provide light within homes and streets.

Remarkably, a number of cot- tage industries evolved into the consumer electron- ics industry, which currently contributes $2.9 trillion to the global GDP (Persistence Market Research, 2017). Bezos used these comparisons to highlight his thinking in the context of the nascent internet and Amazon. He believed that society had only scratched the surface of the web’s capabilities, and that the best was yet to come.

Bezos was clearly right.

In the 16 years since his presentation, Amazon has grown and innovated its offering to a near trillion-dollar market cap, pro- viding goods and services that have far exceeded the original scope of the Amazon vision to become “Earth’s biggest bookstore” (Cakebread, 2017). In other areas, too, technology has made dramatic strides toward integrating into social and organiza- tional lives, providing the kind of utility that we had only previously imagined within science fiction.

Artificial intelligence (Kietzmann, Paschen, & Treen, 2018), virtual reality (Farshid, Paschen, Eriksson, & Kietzmann, 2018), the Internet of Things (Robson, Pitt, & Kietzmann, 2016), and robotics (Wirtz et al., 2018), to name a few, are starting to become normative experiences, disrupting the ways in which we consider business challenges and retain our competitive advantage in the market. In the same way that Bezos saw the early development of electricity as the foundation for something with greater potential, we would like to append the same sentiment to the topic of blockchain and how it can provide exponential value to business operations.

The benefits and utility of cryptocurrency are relatively simple to explain and understand, as are their implications for the financial services industry.

However, with the promise of lowering costs, in- creasing process efficiency, and the changing importance of intermediaries, the underlying block- chain technology has significant potential to disrupt all sorts of business operations.

At this relatively early stage of blockchain applications, these changes and their organizational implications are far harder to analyze or predict and, as a result, blockchain technologies and their potential impact are difficult for managers to understand. This con- fusion has led to frustration within the business community over how and if firms should incorporate

blockchain developments in order to create or re- tain competitive advantages within their respective industries. In this article, we hope to dispel some of the confusion by first explaining blockchain princi- ples and then outlining its benefits and some of its organizational applications and realities for mass adoption. We then discuss technical and societal challenges and managerial implications before we consider what the future might bring for blockchain.

 

2. Blockchain principles

 

Between 2007 and 2008, the world was plunged into turmoil by the financial crisis–—a man-made chain reaction of financial collapses built on bad debt and even worse administration, the likes of which had not been seen since The Great Depression. During a period of emergency mergers and bailouts, the world witnessed the fragility and instability of a tightly interwoven, highly leveraged, global finan- cial system that appeared to be failing quickly.

In response to these events, in October 2008, an un- known person identifying himself as Satoshi Naka- moto published a white paper to a cypherpunk1 mailing list (Nakamoto, 2008), introducing the world to the topic of blockchains by outlining the benefits of an electronic cash system called Bitcoin. To date, Bitcoin and other cryptocurrencies are arguably the most commonly recognized use case of blockchain and, as such, are a suitable basis with which to explain the operating principles of the technology.

Blockchains have been described in various ways.

The most generally accepted definitions are that they are distributed public ledgers (Kim & Laskowski, 2018; Zhao, Fan, & Yan, 2016) or a metatechnology: technologies made up of several technologies (Mougayar, 2016). Blockchains are ex- actly what their name suggests: a ledger of trans- actions, or blocks, that form to make a systematic, linear chain of all transactions ever made.

While the blocks themselves are highly encrypted and anony- mized, the transaction headers are made public and not owned or mediated by any specific person or entity. The headers are publicly available to those who would like to scrutinize transactions, as long as they have the wallet information details, also known as the hash, available. Every time a new transaction takes place on a blockchain, a new

 

1 Activist advocating widespread use of strong cryptography and privacy-enhancing technologies as a route to social and political change.

 

Figure 1. Blockchain timestamps and immutability

 

Beyond Bitcoin: What blockchain and distributed ledger technologies mean for firms

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