Financial Times: Blockchain can make jobs disappear, but it can also create new jobs

Baozou Comment : The potential of blockchain technology has attracted widespread attention from financial institutions such as banks, clearing houses and exchanges, because blockchain can improve security, increase efficiency and reduce costs. The peer-to-peer transaction verification model of blockchain has an important impact on financial services work. Jobs affected by blockchain include those related to transaction processing and verification and document verification, which may no longer require human operation. However, blockchain will not decentralize the content on the ledger, so manual verification of the authenticity of the content is still required, which creates new jobs.

Translation: Nicole

Some people believe that the Internet is the biggest change in technology, while others claim that blockchain can surpass the Internet. But those who once supported the Internet are asking how the underlying blockchain technology of digital currencies (including Bitcoin) will affect jobs, especially in the financial field. Banks, clearing houses and exchanges are also already paying attention to the potential of blockchain.

Blockchain technology can continuously maintain and verify digital records in "blocks", which can be shared among all parties. This technology is also called "distributed ledger technology", which means that all ledger data information can be updated instantly, and the information on the blockchain can never be erased.

Amy Webb

Amy Webb, founder of the Future Today Institute, a US forecasting and strategy firm, said:

“In simple terms, blockchain is a public record of transactions, which may seem less secure than private records, but the transactions themselves are part of the ledger, and all data related to them is encrypted.”

Blockchain can handle most transactions controlled by humans. Webb said:

“If you’re going to buy a house, there’s a mountain of paperwork and verification that needs to be done manually.”

Blockchain can make the entire process simpler and more secure, without the need for real estate middlemen.

Most of the applications are in the experimental stage, said Leda Glyptis, director of Sapient Global Markets:

“Blockchain can solve anything we throw at it, but we have few applications for it outside of the lab.”

However, banks, insurance companies and other financial institutions are interested in blockchain because it can improve security, increase efficiency and reduce costs. Last month, the world's four largest banks, UBS, Deutsche Bank, Santander and Bank of New York Mellon, and the British ICAP Group formed a team to jointly develop industry standards for blockchain clearing and settlement of financial transactions.

In June, Allianz Risk Transfer, a unit of German insurer Allianz Group, and specialist investment manager Nephila Capital said they had piloted using blockchain to process trade settlements in bonds and financial swaps (financial instruments that transfer risk from insurers to investors or other insurers). Earlier in 2016, the Australian Stock Exchange said it would work with U.S.-based Digital Currency Holdings to create a blockchain-based clearing and settlement system for trades in the Australian stock market.

David Yermack

David Yermack, professor of finance and business reform at New York University’s School of Business, said:

“If your experimental application is successful, it can be used worldwide in one to two years.”

Blockchain’s peer-to-peer transaction verification model has important implications for financial services, he said:

“If you think about someone whose job is to track assets, I think their job could be compromised by blockchain technology.”

Jobs that could be affected by blockchain include those related to transaction processing and reconciliation and document verification. Ms Glyptis said blockchain could time-stamp transactions, close them and mathematically verify their validity.

“The first areas that will be impacted will be anything that has to do with reconciliation or post-reconciliation processes — you don’t have to do any of that reconciliation work.”

Others are more thoughtful about the potential changes to the workplace. Steve Wilson, chief analyst at Silicon Valley-based Constellation Research, said blockchain technology only decentralizes verification of the order of entries on a ledger, not its contents. Auditors and agents will still verify the underlying facts of the entries.

Vaughan Jenkins

However, the nature of this type of work will evolve. Vaughan Jenkins, a financial services expert at the British Boan Consulting Group, said:

“You may not believe it, but blockchain will not eliminate some infrastructure and jobs in the financial sector.”

The new skill required by blockchain is security: Ms Glyptis said that while the immutable record created by blockchain is tamper-proof, fraud can occur at any stage of the transaction process, but these fraudulent transactions will be recorded in the blockchain and can be easily identified. She predicted that this is where new job opportunities will emerge, saying:

“I can see a lot of job opportunities in the area of ​​encryption and identity protection.”

"Even though some jobs will disappear, we'll have jobs that were never in demand before and are more valuable than before."