Embracing The New Internet

Does the advent of blockchain technology hold the key to Hong Kong’s economic future?

The world of business is about to witness a transformation on a scale comparable to the changes wrought by the dawn of the internet. Welcome to the topic du jour in boardrooms around the world: blockchain and distributed ledger technology.

Blockchain is a subject that most people equate with the mysterious digital currency bitcoin. They’re certainly closely linked, but the difference is critical. Bitcoin is a virtual currency – blockchain is the underlying technology that enables it to become a store of real-world value.

In fact, blockchain is as much a revolution in accounting as it is in information technology. When Italian merchant states adopted double-entry bookkeeping in the 13th century, a method that saw businesses keep track of what was gained and what was lost in every transaction, business owners began to see how they could flourish and work together. The method became the basis of good corporate governance, transparency and accountability. Blockchain, which is one form of distributed ledger technology, offers a similar leap forward but at an exponential level.

SETTING THE RECORD STRAIGHT

Blockchain allows for every participating computer to access a shared accounting ledger – my computer, your computer and every computer involved has access to everyone else’s ledgers for a purchase, service or financial product. If we do business, my computer records the expenditure and your computer records the gain, with absolute precision. This ‘bookkeeping’ by distributed ledgers with no centralised data storage is the reason that bitcoin and a host of other digital currencies can exist.