Economists around the world watched as Bitcoin, the unregulated cryptocurrency, grew and grew in value, at one stage hitting a valuation just shy of $20,000 in 2017.
Economists knew this wouldn’t last forever; and it didn’t. Bitcoin, along with thousands of other cryptocurrencies, plummeted in value in the early months of 2018, as owners sold off their stock. In June 2020, it sits just above $10,000.
But what emerged from the crypto-rubble was a powerful technology that made its existence and value all possible—blockchain.
The application of blockchain technology goes far beyond cryptocurrency, and has the potential in the coming years and decades to transform a number of industries. It’s a technology that MBAs won’t be able to ignore.
Here’s what MBAs need to know about blockchain.
How does blockchain work?
For a complex technology, blockchain’s name describes it fairly simply.
The system is a chain of blocks which store information about transactions between different parties. Each block contains information about the transaction, as well as who was involved.
First, a transaction takes place. Information is stored about who is making that transaction, and how much it is worth. This is all verified by a system of computers.
Once the transaction is verified, it is given the green light, and stored in the blockchain of the seller.
All of this information is encrypted in blocks along with hundreds or even thousands of other transaction records, each distinguished with a specific ‘hash’ that makes it instantly identifiable.
Why MBAs should be interested in blockchain
Blockchain’s application is simple, but powerful.
“Blockchain allows the transfer of value over the internet,” explains Alfred Taudes (pictured right), lecturer at the Professional MBA Digital Transformation & Data Science at WU Executive Academy, and head of WU Vienna's Research Institute for Cryptoeconomics.
On the professional MBA, students get a rigorous introduction to blockchain, with insight into the diverse possibilities and applications of the technology.
What makes blockchain particularly interesting for different sectors is how it has changed the game when it comes to security of transactions. ”These can be done peer-to-peer, securely, without an intermediary,” Alfred adds.
This overcomes a huge barrier that has restricted online financial services, particularly over the internet, for many years. Igor Pejic, a WU Executive Academy graduate and author of the book ‘Blockchain Babel’ instantly recognized how blockchain had the potential to change the way people transacted.
“The blockchain was a trust machine that could create trust among participants who had never met in their life. And it was able to achieve this so much cheaper and faster than the methods still used today,” Igor says.
Financial transactions, Igor says, “still rely on a paper-logic”, which is costly and inefficient. “Blockchain can bring banking into the digital world, which will radically transform the economy.”
Other possible applications of blockchain
It’s crucial to understand that blockchain is not restricted to the financial profession. The professional MBA at WU Executive Academy aims to help those who are looking to see how it might transform their own job. “The goal of the program is to enable graduates to assess the potential of blockchain technology for your business.”
Alfred believes that blockchain could give rise to the concept of self-sovereign identity, the idea that individuals should have control over their own online identity (as opposed to through mediators). “This will enable new privacy-aware government applications and novel ways to track items in global supply chains efficiently and reliably.”
Supply chain management in general could see serious benefits from blockchain. Supply chains tend to be globalized, which adds a great degree of complexity when it comes to transactions and interactions between buyers and sellers. There is also a growing desire for transparency when it comes to where products come from, whether or not they are ethically or sustainably sourced.
“The ability to provide identity to persons and things that are independent of servers operated by institutions will give rise to new ways of coordinating supply chains,” Alfred says.
Blockchain could propel the use of smart contracts—automated programs that can execute or control legal documents. Igor believes these could be easily applied to the insurance profession, as well as internet of things (IOT) technology.
Many have warned of a blockchain bubble; but many, Alfred points out, warned of a dotcom bubble. It happened, and now the internet has changed almost every aspect of business.
“Blockchain has the potential to be as disruptive as the internet. We will see new types of business models, new ways of organizing firms, new job profiles, and MBA students should be the leaders of this change process.”