Cryptocurrency, NFTs, and blockchain technology — these terms arrived with predictions to uproot the financial system and its operations. The technology drew large crowds at events with the biggest names, while also creating interest within the finance and banking community.
Web3 had its fair share of IPOs (something the AI industry has yet to experience), and even resulted in consumer offerings at major businesses from retailers, banks, and fast food chains worldwide. Now, after FTX’s debacle and the emergence of ChatGPT, the companies that previously developed and supported blockchain technology have gone quiet.
Despite a noticeable absence in recent fintech events, along with some of the underwhelming reviews of Bitcoin 2023 from earlier this month, experts still believe the principles of blockchain technology will have impact. Although Bored Apes’ and DogeCoin’s future value is in question, those observations may overlook how blockchain technology provides some of its best utility within corporate finance.
According to leaders building Web3-based products now, blockchain technology can assist in many tasks that CFOs are responsible for. According to Lucas Hamrick, former U.S. Army special projects officer and CEO of blockchain technology integration platform ORE System, the tech still has potential impact.
“Blockchain technology creates audit-worthy, immutable records that can be referenced in accounting, custodial record keeping, payments, and settlements, document verification, and trade finance, and increases transparency across any industry,” said Hamrick.
“The ability to leverage blockchain reduces risk exposure and allows organizations to refine how they manage assets like real estate, commodities, and other fractional investment opportunities through ‘tokenization’ of the assets.”
Blockchain technology makes information secure, accessible, and transparent while reducing the need for hands-on labor. As technology is used both as a way to improve workflows and as a tool for recruitment, blockchain-inspired processes offermultiple points of value for growth.
“The automation of routine functions within the operational processes is reducing the workload across all lines of effort,” Hamrick said. “Smart contracts take a recurring function and program the ability to complete the process from start to finish without users controlling the execution of the task. These contracts follow a defined set of rules that are programmed to take the task through completion. This frees up team members to focus on tasks that require user inputs to complete the tasks.”
“The crypto market should see greater regulatory controls in the coming months and years. This will address consumer protections and Know Your Customer/Automated Machine Learning (KYC/AML) requirements, addressing the lion’s share of the friction,” Hamrick continued. “Additionally, [blockchain technology] focuses on security and scalability that will result in a more widely adopted use of the technology.”
When finance leaders are tasked to cut costs, blockchain typically doesn’t make the list of priorities. However, according to Aaron Rafferty, CEO of StandardDAO, a community-owned, decentralized treasury, this type of technology should be of interest to CFOs who want to cut costs. In addition, the tech can provide financial access to the historically underbanked, something that Rafferty, who is co-founder of a blockchain-powered scholarship provider BattlePACs, seeks to address.
“Think about money transfers and payments — blockchain is allowing us to send money across borders swiftly and with significantly fewer costs,” said Rafferty. “It cuts out intermediaries, democratizes financial access, and enables peer-to-peer micropayments that are transforming economies.”
Environmental, social, and governance (ESG) efforts, which finance leaders must pay attention to, may be achieved by using blockchain technology with suppliers or vendors in emerging markets. According to the Standard DAO CEO, the benefits for both organizations and those who lack access to the financial system provided by blockchain technology are nearly unmatched.
“A good example of this is the case of remittances in developing countries in the Middle East and Africa, where blockchain is empowering people by reducing transfer fees and time significantly while also banking unbanked persons,” Rafferty said. “We are also seeing more use cases for decentralized alternatives to finance, as well as tokenization of assets that enable whole industries to benefit through enhanced security, automation, transparency, and fee reduction.”
Non-fungible tokens (NFTs), a blockchain subset that gained notoriety when they served as representations of artwork that were exchanged for incredible amounts of cash, still has some use cases.
“NFTs are currently in a state of reorganization,” said Hamrick. “With the economy in its current state, the ability to provide a return on your investment has created a demand for NFTs to provide utility to the owner. Companies and brands are using NFTs in their ticketing to events, limited access to content, and even credentials for login to private social media platform applications. The ability to leverage the technical applications of the various NFT standards should provide new business opportunities for years to come.”
According to Rafferty, NFTs still have value when it comes to intellectual property protection, an idea that the emergence of AI in music and entertainment has significantly disrupted. “NFT technology holds much value, however, it has had some ups and downs since launch,” he said. “A compelling use case is the tokenization of intellectual property. Artists, for example, can mint NFTs of their art, retain ownership, earn royalties on secondary sales, and interact directly with their audience.”
Rafferty also believes blockchain technology can be used to balance the disruption potential of AI. The problems surrounding AI technology are exactly why blockchain technology was developed, according to Rafferty.
“The integration of AI large language models like ChatGPT could present the killer use case for blockchain,” Rafferty said. “By leveraging blockchain for data storage and user sovereignty, AI models could potentially train on data owned and controlled by users themselves, thereby keeping privacy intact and rewarding users for their data. This synergy could unlock a new era of trust, privacy, and user-centric internet.”