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Beyond Blockchain

Blockchain might be the trend du jour, but it is just one part of the distributed ledger  technology revolution.

I am going to be completely honest: I am not a blockchain expert. But I do have a strong interest in how blockchain technology is going to change our profession.
In 2017, I joined a MeetUp group – Blockchain for Finance – to learn more about blockchain. This group hosts regular networking events throughout the year with speakers from various companies using distributed ledger technology (DLT) to create solutions for the problems and inefficiencies facing businesses today.

As part of my research for this article, I spoke with two blockchain company founders to find out more about their respective companies and better understand DLT’s practical applications for businesses.

QPQ

QPQ is a company creating a 21st century digital financial network which, according to founder Greg Chew, promises to reduce transactional costs by automating and digitalising the transaction processes with proprietary smart legal contracts.
Greg, a barrister by profession, explained that for true automation of a transaction, one must be able to govern what it does and how it does it. The ability to govern a transaction is central to what QPQ aspires to create and the company has developed its own operating governing code engine (OGCE), which will enable it to create reg-tech smart legal contracts (SLC).

The OGCE will convert a contractual document into operating code (i.e. the SLC). It will also include any other items that impact on an entity’s dealings such as regulations, tax, logistics and customs, for example. Having these additional items embedded in the operating code ensures compliance throughout the transaction.
Greg outlined the following example to illustrate how logistics could work using QPQ’s financial network (logistics being only part of the contractual document informing the SLC).

Logistics example

Imagine your company orders 100 barrels of mango concentrate from India, to be shipped to the UK. While the ship is at sea, a storm destroys 20 barrels. Using Internet of Things (IoT) technology, a signal will be broadcast to QPQ’s OGCE to inform the SLC in real-time of the accident. Before the ship arrives in the UK, at which point the accident would ordinarily be discovered, the SLC will already have determined that the following actions be taken:

  • Contact the supplier to inform them of the accident and re-order 20 more barrels; and
  • Instruct the shipping company to return the 20 destroyed barrels before entering the UK, thereby avoiding paying unnecessary customs duty.

In this example, the additional transactional administration was removed and unnecessary costs were avoided.

QPQ is conducting extensive research with accountants to ensure that its development process considers the specific requirements of different industries, sectors, geographies and regulations. To read more, visit
www.qpq.io

Piprate

Piprate is an Irish insurtech start-up using blockchain to solve the insurance industry’s fundamental data-sharing problems. I met with Stanislav Nazarenko, co-founder and CEO, to find out more about Piprate’s plans to revolutionise the insurance industry.
Stanislav, who worked in the insurance industry for several years, explained that the industry has a lack of trust between parties due to the manner in which data is shared. As a result, a significant number of processes are inefficient. For example, roughly half of a loss adjuster’s time is spent confirming the facts of an insurance claim.

Piprate uses DLT to create a platform for the insurance industry, which allows all parties involved to share data in a more efficient, transparent and trustworthy way. Stanislav added that creating such a platform comes with many challenges, which DLT helps them overcome. Data will be spread around a single network (in data wallets), so no one party will have access to the entire system. In fact, parties will only have access to the data they need to perform their function (your home insurance broker doesn’t need to know if you have penalty points, for example).By having one definitive and reliable source of truth, Stanislav explained, you will enable efficiencies and as a result, insurance could become value-add for businesses and individuals alike. Consider the following examples:

  • Insurance renewal: instead of businesses filling in various renewal forms, which are labour intensive and inefficient, Piprate’s platform will share data with multiple parties simultaneously to provide a quote much
    quicker; and
  • Preventative measures: if you have a cybersecurity insurance policy and install various software programmes to mitigate the threat, this data could be shared to reduce your premium.

I asked Stanislav if Piprate’s platform could lead to cheaper insurance premiums in the future. He informed me that the platform will create efficiencies and reduce operating costs – whether these savings will be passed on to customers remains to be seen.

Conclusion

Blockchain, or DLT, promises to make Chartered Accountants more efficient by removing the significant amount of time currently spent verifying the information provided to us. As a result, we will be able to reinvest this time to work on value-add activities for the clients and organisations we serve.


Five things you need to know about blockchain

It is not a cryptocurrency, it is a type of DLT

The common misconception is that blockchain is a cryptocurrency. Blockchain is distributed ledger technology – the underlying technology that enables cryptocurrency to exist. There are various types of distributed ledger technology and blockchain is just one example.

It gives you control of your data and has enhanced security

The average consumer isn’t aware that GDPR has made them the owner of their personal data. DLT will give consumers even more control of their information and allow them to manage who has access to it. Your data will be more secure as information is stored across a network of computers instead of on one single server, making it very difficult for hackers to compromise the transaction data. In any industry where protecting sensitive data is crucial, DLT can change how critical information is shared by helping to prevent fraud and unauthorised activity.

It increases efficiency and reduces costs

DLT data is more reliable because the record-keeping is completed using a single digital ledger that is shared among participants. You don’t have to reconcile multiple ledgers, which enables transactions to be completed faster and more efficiently.

It is more transparent and trustworthy

DLT provides a verifiable and auditable history of all information stored on a dataset. All network participants share the same documentation as opposed to individual copies. That shared version can only be updated through consensus. In addition, DLT removes the need to trust third parties because now, you can trust the data.

Accounting for crypto-assets

Blockchain and DLT have enabled the creation of new crypto-assets (such as cryptocurrency, tokens, coins and so on), which is a constantly evolving and fast-growing area. As such, there are no specific accounting standards in place to deal with crypto-assets. This will provide a challenge for anyone preparing accounts for entities that hold crypto-assets.

Michael J Walls is the Founder and CEO of Dappr and the 2018 Young Chartered Star.

This article was originally published in the April 2019 issue of Accountancy Ireland.