Blockchain, a technology that is revolutionizing the HR function

The Blockchain arrives slowly with the digital advance. She seems to want to revolutionize the world of human resources. What is it really about? What impact does the Blockchain have on the HR function? We talk about it.

Contents            

  • What is Blockchain?
  • Why Blockchain Matters
  • Blockchain and NFT, how does it work?
  • The fundamental concepts of Blockchain
  • The bitcoin blockchain, what is it?
  • What is the Ethereum Blockchain?
  • What are the applications of blockchain?
  • Private blockchain versus public blockchain, what are the differences?
  • Consortium Blockchains
  • Benefits of Blockchain
  • Blockchain Security
  • How could the Blockchain influence the HR function?
  • The blockchain, a technology to be handled with care in HR

What is Blockchain?

The blockchain (whose translation in French is chain of blocks) is a technology that allows the storage and transmission of information in a transparent, secure manner and without a central control body. It looks like a large database that contains the history of all exchanges between its users since its creation. Blockchain can be used in three ways:

  • For the transfer of assets (currency, securities, shares, etc.)
  • For better traceability of assets and products
  • To automatically execute contracts (“ smart contracts ”).
Infographic from the white paper “Understanding Blockchain”. © U Change

The great particularity of the blockchain is its decentralized architecture, that is to say that it is not hosted by a single server, but by a part of the users. There is no intermediary, so that everyone can check the validity of the chain themselves. The information contained in the blocks (transactions, title deeds, contracts, etc.) is protected by cryptographic processes which prevent users from modifying them afterwards. 

Why Blockchain Matters: 

Business runs on information. The faster they are received, the more accurate they are and the better. Blockchain is ideal for the dissemination of this information because it provides immediate, shared and completely transparent information, stored in an immutable ledger that only authorized members of the network have access to. A blockchain network can track orders, payments, accounts, production, and more. Because members share a single view of the truth, you can see every detail of a transaction end-to-end, which builds trust and generates new efficiencies and opportunities.

Key elements of a blockchain

Blockchain and NFT, how does it work?

NFTs refer to non-fungible tokens in English, i.e. non-fungible tokens in French. They represent a unique object that is not interchangeable, like a work of art (photography, digital painting…). The NFT designates a digital file, associated with an unforgeable certificate of authenticity. It is designed using blockchain technology. The latter makes it possible to register proof of ownership of the asset in a digital register. Ethereum is the platform on which the majority of NFTs are distributed  .

In 2021, American artist “Beeple” (Mike Winkelmann) sold a digital photo named ” Everyday: the first five thousand days ” for over $69 million through Christie’s auction house in New York. This digital photo in NFT can however be consulted and downloaded by all Internet users who wish to do so. Popular on the art market, NFTs reassure collectors against the risk of counterfeiting. However, they raise concerns. NFT transactions from wallets linked to illegal transactions increased in 2021, reaching $1.4 million in the fourth quarter, according to Chainalysis . 

The fundamental concepts of Blockchain

You don’t need to be a computer expert to grasp the fundamental concepts. The new technology was inspired by five essential elements. The Blockchain is based on the precepts that support transparency and integrity within transactions between strangers.

1- distribution :

Everyone who participates in a blockchain must be linked together in a distributed network. There they control computers that run “nodes”. These nodes are actually programs run for commercial purposes. These nodes come with a memory feature that keeps track of transactions and updates to them in a ledger.

2- cryptography

Blockchain participants are usually strangers who therefore use nicknames. The blockchain stores this information to allow participants to maintain a certain autonomy and to protect themselves. Only the minimum information necessary for the transaction is shared.

3- Immutability

At the end of the process in the blockchain, the transactions are cryptographically targeted and listed in the digital HR register. Changes that may take place after this step are only possible with the full agreement of all participants.

4- tokenization

“Tokenization” or token development is a mechanism by which the blockchain represents and facilitates the exchange of a currency . These tokens are used during transactions, they can even represent money, identities or values.

The fifth principle: decentralization

This principle regulates the risk of rule imposition by a participant. It is not permitted for a participant to own a large plurality of nodes in the blockchain. Finally, it is also forbidden to force other participants to follow its rules. Decentralization avoids the need to bring in a central intermediary.

The bitcoin blockchain, what is it?

Bitcoin is the best-known use case of blockchain. It was created in 2008 by an unknown person whose pseudonym is Satoshi Nakamoto. It denotes both a secure and anonymous payment protocol and a cryptocurrencyAnyone can access this blockchain (it is public, therefore open to everyone) and therefore use bitcoins. To do this, simply create a virtual wallet, downloadable from the application stores. Cryptocurrency is used to buy goods and services and can be exchanged for other currencies.

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Some platforms offer the conversion of dollars, euros or yuan into bitcoins . This is the case of Paymium, a French company that allows you to exchange bitcoins for euros. Bitcoin has a very volatile price. It can increase or decrease by 20% in just two days. This volatility is linked to the strong speculation around this currency and the absence of a regulatory authority.  At the beginning of December 2017, the price of bitcoin exceeded $ 15,000  for the first time . It increased by more than 1000% over the year 2017. Faced with this surge, the Financial Markets Authority (AMF) and the Prudential Control and Resolution Authority (ACPR) warned investors about the risks associated when buying bitcoins.

“This valuation may as well collapse in the same way. Buying/selling and investing in bitcoin to date takes place outside of any regulated market. Investors are therefore exposed to the risk of loss. very high in the event of a downward correction and do not benefit from any guarantee or protection of the capital invested”, indicates the two regulators in a press release. The latter would be increasingly solicited by savers on this subject. In Japan,  bitcoin was recognized as a legal means of payment on April 1 , 2017. The capitalization of the first cryptocurrency reached 1 billion in November 2017.

What is the Ethereum Blockchain?

The Ethereum blockchain has become as popular as bitcoin. Created in 2014, Ethereum also uses its own cryptocurrency: ether. Its price is lower (around 2,300 euros in February 2022, compared to 33,000 euros for bitcoin).  Unlike bitcoin, which only allows simple transactions (mainly payments), Ethereum goes further. It makes it possible to run ” smart contracts “, autonomous programs that automatically execute actions previously validated by the stakeholders.

Ethereum and its smart contracts are of interest to banking and insurance players, but also to the legal professions. In the future, these players will be able to certify transfers of ownership more securely or even automatically pay compensation. Axa was the first insurer to release blockchain-based insurance. In September 2017, it launched  automated insurance for plane flight delays. Based on the Ethereum blockchain, this insurance is actually a “smart contract”, an intelligent contract that triggers automatic reimbursement once the delay has been noted. This offer called Fizzy was developed with the start-up Utocat, which publishes a platform to accelerate the design of blockchain prototypes. See also  What to expect from Blockchain in corporate finance?

On the banking side, many projects are underway. Other industries are experimenting with blockchain, such as Boeing. The American manufacturer has filed a patent application for a blockchain-based system that would strengthen aircraft GPS systems. The application published on December 14 by the United States Patent Office mentions a “backup and anti-spoofing (GPS location spoofing) on-board GPS system” that could be used in the event of a malfunction in the main system of an aircraft.  

What are the applications of blockchain?

Blockchain technology is still young. However, some applications are already operational. One of the most common is food traceability . Carrefour is one of the precursors with its QR code affixed to several types of food (chicken, tomato, egg, etc.) which allows you to know everything about the origin of the product (origin, name of producer, date of packaging, etc.). .). Automatically triggering compensation is an application of great interest to insurers. This is made possible via smart contracts, autonomous programs that run automatically following pre-defined conditions. 

Axa, for example, makes it possible to compensate passengers for a flight that is late. Finance has also made good progress in the field of the blockchain, particularly in the field of ” security tokens “, financial securities digitized and recorded on the blockchain. For the issuer of the token (or token), there are only advantages: fewer intermediaries, almost immediate execution and settlement and cheaper process. 

The video game world has found a use case in blockchain: digitizing features . Thanks to a system of tokens (or tokens), players actually own their objects (and no longer the publisher) and can therefore buy, sell and exchange them as they wish. There are many others such as securing commercial transactions in trade finance or even disintermediation in advertising . 

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Private blockchain versus public blockchain, what are the differences?

What differentiates the private blockchain from the public blockchain is its degree of openness . The public blockchain can be viewed and used by anyone. Anyone can send transactions to it and expect them to be recorded in the ledger (if they follow the rules of this blockchain). This is the case of the Bitcoin and Ethereum blockchains. In the private blockchain, an organization can change the protocol whenever they want. No one can participate without being authorized but everyone can consult it.See also  Discover everything about the history of the Blockchain [2022]

Private blockchains are used a lot by companies for internal experimentation. They can also make it possible to connect different information systems that do not speak well within the same organization. There is also the “permissioned” blockchain in which an entity has control authority over the network. This is the case, for example, of the Rippe blockchain because it is a start-up (of the same name) that determines who can validate transactions on the network.

Consortium Blockchains

The “consortium” blockchain brings together several actors who have rights and the decisions are made by the majority of the actors. For example, a dozen financial institutions could agree and organize a blockchain in which a block should be approved by at least 8 of them to be valid. So it is very different from the private blockchain and the public blockchain. Not only are participants in the approval process limited and selected, but majority rule is no longer required.

This hybrid blockchain is a real advantage for players in the financial sector, because they operate in regulated environments and are notably obliged to know the identity of the participants (which is not the case in the public blockchain). The best-known blockchain consortium is R3. It has around 100 financial institutions including BNP Paribas. In May 2017, he raised 107 million euros.

Benefits of Blockchain

What needs to change: Operations often waste time keeping duplicate records and performing third-party validations. Archiving systems can be vulnerable to fraud and cyberattacks. Limited transparency can slow down data verification. With the arrival of the IoT, transaction volumes have exploded. All of this slows down business, drains the bottom line and forces us to find an alternative. Enter the blockchain.

Increased confidence

With blockchain, as a member of a restricted network, you are sure to receive timely and accurate data, and that your confidential blockchain records will only be shared with network members to whom you have specifically granted permission. access.

Enhanced security

Consensus on data accuracy is required from all members of the network, and all validated transactions are unalterable, as they are permanently recorded. Nobody, not even a system administrator, can delete a transaction.

Greater efficiency

With a distributed ledger shared among members of a network, time-consuming data reconciliations are eliminated. And to speed up transactions, a set of rules, called a smart contract, can be stored on the blockchain and executed automatically.

Blockchain Security

Risk management systems for blockchain networks

When building an enterprise blockchain application, it is important to have a comprehensive security strategy that uses cybersecurity frameworks, assurance services, and best practices to reduce risk against attacks and corruption. fraud.

How could the Blockchain influence the HR function?

Can be used for many purposes, the blockchain has been titillating the world of human resources for some time. Several companies have begun to test this data platform which inspires trust and integrity for the HR function. The blockchain indeed promises better management of human resources through the principles that govern it. What areas could be revolutionized by blockchain?

Improve recruitment

One of the tasks of HR is to recruit staff, however the hiring process today takes a lot of time. Some companies then sometimes prefer to delegate to recruiters, even if it means paying more. This approach calls for a business additionally to spend.

Blockchain could put an end to this unnecessary expense . All the data concerning the potential candidates as well as their evolution can be consulted on the digital register. This first advantage relieves HR of a large part of energy-intensive activity. CVs will be sorted, data can also be checked and recruitment will be facilitated.

The blockchain optimizes the verification of HR data

Half of blockchain users use it for data verification related to digital identity. In blockchain, authorized institutes provide authentic data. HR could use this feature to ensure the veracity of company employee data .

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SEO quality

Hiring processes go through professional reference checks. These references are sometimes likely to have been falsified. But blockchain can put an end to this kind of problem. The files that are inserted there are authentic, and not modifiable. The result: reference checking is more transparent and secure. The HR manager will be able to benefit from the authentic talents that the company will need.

Smart contracts

Traditional payment and contracting procedures also require time, energy and thought. Today there are so-called “smart contracts” that are available through blockchain. It is up to the payer or the HR manager to establish smart contracts listing the conditions as well as the payment frequencies. The activation or deactivation of a contract is within the reach of the manager according to the data recorded in the blockchain. The employees will then be paid on the same date and automatically according to the respect of the conditions. This is to avoid late payment, falsification of results. A better organization of the employee payment system in general is therefore proposed.

Employee life cycle management

An employee lifecycle refers to the process of hiring, onboarding, and firing employees within a company. This process largely monopolizes the HR function and can be very cumbersome. It includes record checks, interviews, work history review as well as data verification. This workload is sometimes spread out over time, and yet this process is constantly repeated within a company.

Thanks to the blockchain, all this HR data is first authentically stored in a single ledger which also records chronological updates. Having access to all data in one platform greatly eases the experience of managing employee lifecycles.

Better transaction security

Most transactions in a blockchain are encrypted in such a way that they become tamper-proof. These transactions can take the form of exchanges of information, work data, stock history, financial movements, etc. In a blockchain, these transactions are secure and unchangeable. The HR function can optimize the security of employee transactions via blockchain. This will result in less risk of data falsifications and errors .

Blockchain enables employee attendance tracking in HR

Blockchain could also improve employee attendance tracking within a company’s HR function. It can store biometric data such as fingerprints, iris scan. These techniques can be used for legal purposes for companies that have the right to identify and record the data of their employees. The HR function is the first to benefit from this kind of functionality. For example, such an ability to track and record attendance and absence in an integrated way would solve many problems related to claims and payroll.

Compliance and Audit

Almost half of the companies that have tested the blockchain use it for compliance and auditing purposes. The ability to memorize transactions in the blockchain would indeed facilitate these actions which generally take a long time. In particular, they require the recruitment of subject matter experts. This can add cost and time. While thanks to the blockchain, data and transactions are stored authentically and chronologically. And this register is accessible to everyone, which ensures transparency. Thus, the role of HRDs would be lightened and they could focus on other parameters in order to optimize the achievement of the company’s objectives.

The blockchain, a technology to be handled with care in HR

Blockchain technology seems to promise a poignant revolution in the world of human resource management. It significantly reduces waste of time and energy for HR. The development of applications linked to the blockchain as well as the operating models are constantly evolving. Logically, it also promises in terms of global turnover.

Its value will be based on its ability to overturn traditional processes within companies. The transactions as well as the values ​​that are exchanged are at the heart of the blockchain . They circulate in transparency and integrity for all to see. The success of this digital registry lies in the trust and responsible use it promotes.

However, the blockchain must be handled with care in HR. It is still in its infancy and the issues that may arise have not all manifested themselves yet.

On the other hand, there are still few experts who know how to master its use. HR will therefore have to take time to fully understand the digital register and its functionalities. Other challenges also arise over time such as the near-present threat of cybercrime, the apprehension of universal data sharing and of course the requirement for compliance. The latter is linked to the data protection legislation of the European Union.

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