We had such a good response from our first interview with Doug Sleeter on the Blockchain, we got him back to take a deeper dive on this fascinating meta, and disruptive, technology.
Doug Sleeter (@dougsleeter) is a passionate leader of innovation and change in the small business accounting technology world. As a CPA firm veteran and former Apple Computer Evangelist, he has melded his two great passions (accounting and technology) to guide developers in the innovation of new products and to educate and lead accounting professionals who serve small businesses.
Doug has been named one of the “Top 25 Thought Leaders” by CPA Practice Advisor for several years, as well as one of Accounting Today’s “Top 100 Most Influential People in Accounting” from 2008 through 2015. He was recently awarded the Small Business Influencer Champion award. Doug is the founder of the Sleeter Group, an active member of the Accountex Leadership Council, author of numerous books, and writes regular columns for the Sleeter Report and CPA Practice Advisor. Doug and his family live in Pleasanton, CA.
- The Trust Protocol, or Trust Machine—trust the math, not the people
- “In Math We Trust”
- Blockchain holds institutions more accountable for their actions. Imagine if you could track each dollar you gave to the Red Cross from its starting point on your smart phone to the person it benefited
- What is a distributed autonomous enterprise (DAE)? Essentially it is a cooperative owned by its members.
- Blockchains automate away the center
- Puts Uber out of a job and lets the taxi drivers work with the customer directly
- https://slock.it has potential to disrupt lots of business models, including airbnb and uber
Is it all too complicated?
How many people know there are seven layers to the Internet?
Micah Winkelspecht, CEO of Gem, nation’s first blockchain solution providers said, “In the future, people won’t talk about blockchains any more than they now talk about the lower level architecture that makes the Internet work. We’ll just use them every day without thinking about it. Their presence will be ubiquitous.”
Philosopher Alfred North Whitehead said, “Civilization advances by extending the number of operations we can perform without thinking about them.”
What is Triple Entry Bookkeeping?
Today, companies record a debit and credit with each transaction—two entries, hence double-entry accounting.
They could easily add a third entry to the World Wide Ledger, instantly accessible to those who need to see it—the company’s shareholders, auditors, or regulators.
Blockchain can also deal with micropayments—those going beyond merely two decimal places. It would also mean no more “float.”
How disruptive to CPAs?
Auditing is a multibillion-dollar industry controlled by four massive audit firms.
According to the book, Blockchain Revolution: “Traditional accounting practices will not survive the velocity and complexity of modern finance. New accounting methods using blockchain’s distributed ledger will make audit and financial reporting transparent and occur in real time.”
“Accountants are like mushrooms—they’re kept in the dark and fed shit,” said Tom Mornini, CEO of Subledger, a start-up targeting the accounting industry.
If every transaction globally distributed ledger, who need public accountancies to translate for us?
Deloitte Touche now has 100 people in its cryptocurrency group, spread out in 12 countries.
Eric Piscini, who heads up the Deloitte cryptocurrency center, tells clients that the blockchain is “a big risk for your own business model because now the business of banking is to manage risk.
Overripe for disruption is the audit business, and audit is a third of Deloitte’s revenue. Piscini said, “That’s a disruption to our own business model, right? Today we spend a lot of time auditing companies, and we charge fees accordingly. Tomorrow, if that process is completely streamlined because there is a time stamp in the blockchain, that changes the way we audit companies.”
Or perhaps eliminates the audit firm altogether?
Deloitte has developed a solution called PermaRec (for Permanent Record) whereby “Deloitte would record those transactions into the blockchain and would then be able to audit one of the two partners, or both of them, very quickly, because that transaction is recorded.”
Will investors demand triple-entry accounting to meet corporate governance standards?
After all, he argues, “Who is going to invest in a company that shows you what’s going on quarterly, compared to one that shows you what’s going on all the time?”
Is the Blockchain the beginning of the end for auditors and bookkeepers?
Bill Gates once said: “We overestimate technology’s short-term impact, and under-estimate its long-term impact.” Are we doing the same with Blockchain?
Could we have several different blockchains, for different purposes? This is Doug’s biggest fear.
He envisions one, trusted, public blockchain. Many blockchains could fail due to incompatibility. There would also be more innovation due to the open source nature of the code, since there would be only one target to improve (like Wikipedia).
Check out https://github.com, for the open-source code for blockchain.
There are skeptics
Don and Alex Tapscott lay out ten showstoppers that could derail blockchain in their book, Blockchain Revolution:
- THE TECHNOLOGY IS NOT READY FOR PRIME TIME.
- THE ENERGY CONSUMED IS UNSUSTAINABLE.
- GOVERNMENTS WILL STIFLE OR TWIST IT.
- POWERFUL INCUMBENTS OF THE OLD PARADIGM WILL USURP IT.
- THE INCENTIVES ARE INADEQUATE FOR DISTRIBUTED MASS COLLABORATION.
- THE BLOCKCHAIN IS A JOB KILLER.
- GOVERNING THE PROTOCOLS IS LIKE HERDING CATS.
- DISTRIBUTED AUTONOMOUS AGENTS WILL FORM SKYNET.
- BIG BROTHER IS (STILL) WATCHING YOU.
- CRIMINALS WILL USE IT.
Doug discusses “Big Bad Data” and how blockchain can overcome this problem.
The Economist had a story that a doctor is attempting to use blockchain for clinical drug trials, making the data from them more accurate and less susceptible to manipulation.
What do we mean by trust? The Tapscott’s list four principles of integrity: honesty, consideration, accountability, and transparency.
There’s a Chinese Proverb that teaches: “When the wind of change blows, some people build walls, others build windmills.”
Should we be investing in Bitcoin and blockchain companies?
Venture capital is pouring into startups in this area, destined to be an enormous growth area in the coming years.
- The Business Blockchain: Promise, practice, and application of the next internet technology, William Mougayar, 2016
- Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World, by Don Tapscott, Alex Tapscott, 2016
- Magazine, yBitcoin + Blockchain, www.ybitcoin.com