Blockchain: Business Processes of the Future
Companies currently operate entire departments such as payroll or invoicing through Enterprise Resource Planning (ERP) systems. When two companies or departments interact and transact with each other, they each may have separate ERP systems that need to communicate with each other.
Smart Contracts: A New Paradigm
The latest accounting revolution revolves around smart contracts. A smart contract is a unit of business logic that is executed via consensus on a blockchain. This new way of executing business logic will improve and replace some functionality of legacy ERP systems. Smart contracts can act as a shared source of truth and veridical execution environment for automating interactions which formerly required multiple parties to trust each other.
Essentially, smart contracts can require two or more parties to each agree to a set of parameters — for example, standardizing a process of haggling on a price for a good, its shipping terms, and payment method. These parameters become recorded as smart contract code. Once triggered, the smart contract executes based on the rules set by both parties. All can trust that the process will unfold based on the parameters of the smart contracts.
Streamlining Accounting Processes
When two or more parties agree to automate their business processes using smart contracts, they are in a great position to streamline further accounting operations. Smart contracts are vehicles for standards. All of the transfers executed by a smart contract will be recorded on the blockchain in a structure which is easily understood by other business systems. In addition, the smart contract may have supplemental information about the transfers that happen as part of the “shared business process” — providing multi-stakeholder visibility into transfers and their supplemental data on the blockchain as a result.
Companies or individuals who use a blockchain to automate the various processes involved with the sale of a good, for example, will store the associated transfers and supplemental data about each transfer in a uniformly structured smart contract (or, in some cases, in near-chain storage referencing the smart contract). Since the data is standardized, it can be referenced to automatically classify each of those transfers. Usually a bookkeeper would analyze each of the transactions and classify them in order to represent them in financial reports such as a balance sheet. However, since the blockchain has aggregated the transfers and included (or linked to) data reflecting their purpose, the bookkeeper role can become streamlined and automated. The result is a shared trusted process between multiple transacting parties that also enables each party to create self-generating financial reports — if they’re using a second layer technology such as Balanc3.
Crypto Dependent
For this interaction to take place seamlessly, companies must transact in digital assets. If Company ABC wants to buy a good from Vendor XYZ through the “shared business process” they created, Company ABC must pay with a digital asset, and Vendor XYZ must accept a digital asset and send an asset-backed token.
Currently, there are many blockchain businesses that have raised a digital asset in a token sale and want to pay for goods and expenses with their own or other digital assets. If they are paying employees and the employee wants to accept the digital asset as payment for services, then the shared business process works. However, if the blockchain business wants to purchase a good from Vendor XYZ, then Vendor XYZ must accept a digital asset and their goods must be in the form of a digital asset. The acceptance of digital assets as a form of payment is being adopted to an increasing degree — recently all major browsers implemented a payment request API that allows the payment of Bitcoin, Ether, and other traditional payments. Many goods are also being tokenized into digital assets by blockchain businesses such as LAToken, Coin Circle, etc. With the adoption of digital assets more opportunities open to execute business processes in a shared data environment.
Prepare for a Data-Shared and Streamlined World
The development of business activity smart contracts and their resulting streamlined accounting processes are on Balanc3’s road map. As more token sales, digital asset acceptance, and digital asset creation take place the world is being prepared for improved interactions between businesses. There are situations in which operating businesses can already perform some of their functions through shared business processes and continue to grow.
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