15 Oct 2018
Blockchain definitely is one of the most talked about technologies across industries. According to Gartner, Blockchain could fuel a platform revolution where business completely rewires systems to function in an ecosystem-driven model.
Could blockchain also be instrumental in making HR processes more effective?
Or even more, could blockchain alter the very bedrock of HR function?
That’s what we wanted to find out! So we dug in, meticulously picked 3 articles on blockchain and HR and summarized them in this week’s Connect with Content.
Want to learn more on blockchain, then we have great news for you!
Koen Vingerhoets will entertain the HRbuilders HR freelance community on this topic during the monthly workshop November 12th. Koen is Project Coördinator Blockchain & Digital Transformation at Belfius where ‘he got blockchain going’ and we met him about 6 years ago. “Givers advance the world, takers advance themselves”. That’s his credo and that’s why he will entertain the HRbuilders HR freelance community on cryptocurrencies, bitcoin, blockchain and distributed Ledger Technologies.
Want to be able to take part in the conversation? Start reading :-)
You may have heard the term ‘blockchain’ already and dismissed it as a fad. So let’s start by explaining what blockchain is first. Blockchain is essentially a digital public database (distributed ledger) that stores information securely and distributes it across a network of users. Each ‘block’ is a record of data, or a change to data or a transaction, that is securely encrypted and verified by authorized users. It allows every single data change made on its network to be documented in a continuous record that is hard (impossible?) to falsify. No single block can be altered unless all the computers (or “nodes”) are in agreement, thus creating a highly secure and (theoretically) tamper-proof medium.
Blockchain is the technology that enables the cryptocurrency Bitcoin that runs on blockchain, however its potential applications are much broader than finance: using the same concept, other data can be put on a blockchain and verified and encrypted in the same way, for example sensitive employee data. Blockchain data can be public and everyone on the network can add data, or they can be public but only authorised people can add data or they can be only open to certain individuals or organisations, and only authorised people can add data.
The essence of this technology and the huge value that it brings, simply put, is trust.
Blockchain ideology, at its core, is a kind of truth machine that is not owned by one entity but available to all its users.
In other words: blockchain is a decentralized database, a matrix of computers talking to each other, and any transaction has to be approved by each node before it’s executed. And every transaction is stored in a series of indelible ledgers or ‘blocks’ so it’s easy to recall who sent what to whom and when. The potential for transparency and democratization is clearly immense. Blockchain’s biggest draw is that it effectively cuts out the middleman.
Want to dive into the basics of blockchain, read this article (it’s a A Complete Beginner's Guide To Blockchain)
What this means for HR, then, is that the future is transparent,
collaborative, and peer-to-peer.
So, is Blockchain really altering the very bedrock of HR functions?
Well, the blockchain technology can be a major differentiator in HR processes as we found out by reading this first article. The author unravels how this ‘uber-hyped piece of technology’ could alter the very bedrock of these 3 HR processes:
Blockchain-based HR tech can make payroll and compensation seamless, more efficient.
Blockchain tech can equip HR with more accurate, better-verified resumes.
Blockchain can enable smart contracts, changing how HR agreements are made.
(1) When it comes to Blockchain, bitcoin was where it all really began. From a valuation of USD 1 in 2011, it continues to be the cosmetic face of Blockchain technology. There are also several other currencies that use peer 2 peer tech to operate and all those cryptocurrencies, including Ethereum, function on similar principles and could be viable alternatives for bitcoin. Why resort to cryptocurrencies for wages? Well perhaps your local currency is volatile and therefor blockchain could be a viable alternative for offshore employees. Or perhaps emerging compliance norms are demanding more transparancy?
(2) Bitcoin can also be used to validate if the candidate has the skills, certifications, and experiences required for the job. It takes time and manpower to uncover lies on candidates’ resumes and it can lead to severe consequences. As career ladders are becoming career webs and with the event of globalization and ease of travel, these days a lot of those previous experiences are in foreign countries and in foreign languages, meaning it requires official documents to be translated. Imagine if every degree, certification, and employer reference in on a CV could be automatically, securely verified. Well, that’s what this tech makes possible.
(3) HR is heavy on contracts and paperwork: think insurance policies, benefits schemes, and reward plans. A ‘cryptocontract’ is an application that directly handles how digital assets are exchanged between parties, under certain conditions, and the underlying agreement is then stored on a Blockchain. It’s easy to imagine how Blockchain might disrupt the HR landscape. With emerging trends like the gig economy, remote workforces, and third-party consultants, a solution that makes contracts unified, universal, and foolproof could become the ‘new normal’.
In this second article we want to share with you, the author is convinced that blockchain can revolutionize the field of recruiting: startup companies are either building or have introduced new blockchain-based HR products and services. ChronoBank, for example, an Australia-based cryptocurrency firm, uses blockchain technology to help clients find freelance workers and pay them in Bitcoin-based “Labor Hour” tokens. Blockchain can definitely be advantageous to jobseekers and consumers in making sure their data is secure. An end-to-end blockchain-based recruitment platform could solve many of the recruitment problems that plague employers and jobseekers alike.
Not mainstream yet…
One potential sticking point for blockchain, particularly for companies that recruit in the European Union, is the EU’s new General Data Protection Regulation, that went into effect on May 25. The GDPR mandates the so-called “right to be forgotten,” under which individuals can legally compel organizations to delete their personal data in certain circumstances. This could pose a problem for recruiters who rely on blockchain, which means that data entered onto a blockchain can never be erased. Maybe that’s why this technology has not been widely adopted in the mainstream yet.
Another big impediment to wider adoption is the current severe shortage of blockchain experts available to build new tools. Having data validated and decentralizing it across many individuals also carries a real cost in electricity. These individuals also need to be incentivized to take an active role in this process of checking and writing information to the blockchain. Incentive structures are very difficult to design but they sit at the heart of these systems. An example is ‘mining’ for bitcoin, which rewards ‘miners’ for recording the confirming transactions took place and recording them on the blockchain.
Many of the existing ledger platforms are not efficient or economical enough to be used in all applications as they stand today. For example, it has been estimated that if you were to try and use Bitcoin to process the number of transactions Visa typically processes each minute (if it were possible) it would use as much energy as the entire world put together.
That being said, technologies are being dreamed up and improved each day that will help more efficient platforms come into existence.
The future of blockchain - Why is blockchain important?
The last article we want to share with you is atually a great wrap-up of this technology and why it is so important.
We are all used to sharing information through a decentralized online platform: the internet.
But when it comes to transferring value – money – we fall back on old school solutions.
Even online payment methods which have sprung into existence since the birth of the internet – PayPal being the most obvious example – generally require integration with a bank account or credit card to be useful. Blockchain technology offers the possibility of eliminating this “middle man” by filling three important roles: (1) recording transactions, (2) establishing identity and (3) establishing contracts that are traditionally carried out by the financial services sector.
This has huge implications because, worldwide, the financial services market is the largest sector of industry by market capitalization. Replacing even a fraction of this with a blockchain system would result in a huge disruption of the financial services industry, but also a massive increase in efficiencies.
But it is the third role, establishing contracts,
that extends its usefulness outside the financial services sector.
Apart from a unit of value (like a bitcoin),blockchain can be used to store any kind of digital information, including computer code. That snippet of code could be programmed to execute whenever certain parties enter their keys, thereby agreeing to a contract. The same code could read from external data feeds — stock prices, weather reports, news headlines, or anything that can be parsed by a computer, really — to create contracts that are automatically filed when certain conditions are met. These are known as “smart contracts,” and the possibilities for their use are practically endless.
Blockchain technology in its current state is still being improved, but the core idea of a single source of truth is what is generating so much excitement. Some of the smartest minds on the planet are working on these solutions and we will continue watching with fascination at this rapidly evolving space.
Talk to you next week!
PS: If you’re a freelancer in HR and you’re living in Belgium, don’t forget to sign up for the HRbuilders workshop on this topic November 12th (register here)