Why Blockchains Are as Important as ERP for the Future of Companies

Why Blockchains Are as Important as ERP for the Future of Companies

The remarkable dissociation If the experiences of the last few months have any silver lining, it could be moving the blockchain world away from financial engineering and towards more compelling business applications that create value. Over the past year, we’ve successfully busted the myth that cryptocurrencies are bankless, that cryptocurrencies are a good hedge against inflation, and that the financial engineering of decentralized finance (DeFi) can deliver a better return on investment than any other form of wealth. People are no longer asking me for my digital asset price predictions and are again asking me about use cases. And that’s progress.

The decoupling happening now is where we separate the value of Ethereum as a global computing and trading infrastructure from the price of Ethereum (ETH) and all these other digital assets. One of the guiding principles we’ve built here at EY is the idea that blockchains will do what ERP has done for business ecosystems within the enterprise. This new year is the perfect time to review this idea. ERP stands for Enterprise Resource Planning, and even if you don’t know what it is, its existence has profoundly impacted your life. Simply put, it is the software that allows businesses to function.

The software connects an empty store shelf to a pull signal that brings in more products. In this way, companies manage to provide consistent products, services, and prices on a large scale worldwide. Business transactions took place slowly due to the need for more privacy tools that are essential. When this problem is solved (see my discussion above), we can start thinking about how companies can interact with each other. The story of 2023 will be about how practical applications emerge to connect businesses privately and publicly in the Ethereum ecosystem.

We need to build slower and more cautiously in this environment than with DeFi. Enterprise users are a more cautious bunch, and we’re already seeing shy users concerned that the “damage” of crypto Ponzi schemes will affect their ability to sell vision within the enterprise. Things will move more slowly as a result but continue. A path that avoids risk will most likely be the direction of development. Businesses will start with things like inventory management. Greater visibility improves supply chain operations, and privacy tools make it easier to manage your assets across an extended network. However, if you compare a physical asset to a digital token, for example, and that token is hacked or stolen, you haven’t lost anything of value. It’s less theft and more data corruption.

It’s a manageable little thing, not a catastrophe that you need to call the board about. The next step after tracking the assets is to add common business logic. Purchased before any discount or refund is applied. With smart contracts covering the sales process, this can become automatic.

Over time, we will return to where we started: money. Closing the loop in an intelligent enterprise contract means paying for things bought. When all the other rules and business logic have already been applied, it’s more efficient and valuable to complete the contract by paying with a stable currency. Businesses will also be able to do things like factor invoices and take out loans against the value of their inventory. But these financialization components will likely come later and will be the last components of the system to be implemented by risk-averse companies, not the first.

Be prepared, though, because this revolution can be just as exciting as watching paint dry. Part of the explosive growth of cryptocurrencies has been fueled by consumers who can make decisions quickly. New technologies can conquer the consumer world in a decade. If there’s a rule above most in enterprise IT, it’s this: “If it ain’t broke, we don’t spend money fixing it.” This means that systems are replaced when they fail or if a larger new set of systems is required.

Capacities are required, or the return of the solution is large enough. We entered the cloud computing era two decades ago, and while almost all new systems are cloud-based, most enterprise computing is still not in the cloud. Don’t expect blockchain to be faster.

Finance has played a very important role in “paying the bills” for cryptocurrencies in recent years. Five years of triple-digit growth would not have been possible without consumer acceptance of cryptocurrencies and non-fungible tokens (NFTs), and I am truly grateful for the growth and experience we have gained from this job. I think there is more to come; DeFi is far from over. But this year, 2023, I think it would be nice to take a break from the financialization of everything and focus on doing real things with real assets and real companies.

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