Blockchain, why it is as important as ERP for the future of companies[Opinion]| coindesk JAPAN | Coindesk Japan

A great disconnect is underway.

If there’s a silver lining to the woes of the past few months, it might be the potential to steer the blockchain world away from financial engineering and toward more compelling business uses that create real value.

separate value from price

We said last year that crypto assets (virtual currencies) will provide banking services to non-bank users / crypto assets are a good hedge against inflation / financial engineering of DeFi (decentralized finance) will outperform any other asset I was able to say goodbye to the myth of generating a large investment return. People stopped asking me for crypto price predictions and started asking about use cases again. This is progress.

A decoupling is currently underway to separate the value of the Ethereum blockchain as a global computer and business infrastructure from the price of the cryptocurrency Ethereum (ETH) and other cryptocurrencies. One of the guiding principles we have established at EY (Ernst & Young) is “What Blockchain Brings to Business Ecosystems Matches What ERP Has to Enterprises‘ is the idea. This year is a great time to revisit this idea.

ERP stands for Enterprise Resource Planning, and even if you don’t know what it means, much of your life is shaped by ERP. Simply put, ERP is the software that runs your business. It’s software that connects empty store shelves with shipping signs in warehouses full of products. It supports companies to consistently provide products and services on a large scale around the world.

The slow adoption of enterprise blockchain transactions is due to the lack of an essential ingredient: privacy tools. As this issue is resolved, companies will be able to start looking at trading instruments. Hopefully, the story of 2023 will be one of useful applications that ensure privacy and connect businesses to each other on the public Ethereum ecosystem.

The journey of blockchain utilization in companies

In an enterprise-use environment, you need to develop more slowly and carefully than you did with DeFi. Corporate users are cautious, and there are already those who fear that the “stigma” of cryptocurrency Ponzi schemes is hurting the push for blockchain adoption within companies. Progress is slow, but it never stops.

The order of development is likely to be risk-averse. We will start with inventory management. Greater inventory visibility will improve supply chain operations, use privacy tools, and make it easier to manage assets across the network.

But if you match your physical inventory with your digital tokens, even if your tokens are hacked or stolen, you haven’t actually lost your inventory. This is data corruption rather than theft. Not a catastrophe to report to the board, just a small problem that can be dealt with.

The next step in asset tracking is adding shared business logic. Businesses are good at negotiating deals, but often bad at things like remembering how much you bought before a discount or rebate is applied. By covering the sales process with smart contracts, those parts can be automated.

Of course, in the end it will come back to the starting point. currency. Completing a smart contract in a business means paying for what was purchased. When all other business logic and rules are already applied to smart contracts, it is most efficient and useful to pay with stablecoins to complete the contract.

Businesses will also be able to do things like factoring invoices (accounts receivable) and using inventory assets to borrow money. However, such funding is future-proof and will likely be the last system implemented by risk-averse companies.

slow, real progress

And evolution can be extremely boring. One of the reasons for the explosive growth of crypto-assets has been the ability of consumers to make quick decisions. New technology will reach consumers in as little as 10 years.

On the other hand, the most important rule in enterprise IT is “if it ain’t broke, don’t spend money fixing it”. In other words, systems are replaced only when they break/need significant new features/repair is sufficiently high.

The cloud era is 20 years old and most new systems are cloud-based. But much of enterprise computing hasn’t moved to the cloud yet. Don’t expect speed in blockchain progress.

Finance has played a huge role in the growth of crypto assets over the last few years. Five years of triple-digit growth would not have been possible without consumer acceptance of crypto assets and NFTs. I am truly grateful for the growth and experience I gained from it.

Growth will continue. DeFi isn’t over yet. But in 2023, I think it’s good to step away from the financialization of everything and focus on doing real things with real assets and real businesses.

Mr. Paul Brody: The global blockchain leader of EY (Ernst & Young).

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Shutterstock
｜Original: Why Blockchains Are as Important as ERP for the Future of Companies