5 Ways CFOs Can Maximize Blockchain Technology

As the next generation of the World Wide Web unfolds, new economic and technological infrastructure is on the horizon. With this new generation, known as Web3, concepts including decentralization, digital currencies, token-based economics and non-fungible tokens (NFTs) are entering the mainstream economy. As the new technology brings terms and tools alien to even the most highly academically credentialed individuals, this new trading arena has created a level playing field for companies of all sizes to exploit.

Experts from across the current financial infrastructure of Web3 and beyond shared their thoughts CFO about exactly how CFOs can use the latest and trendiest phenomenon in finance to improve their business.

Recognizing the potential of decentralized finance (DeFi)

Lars Seier Christensen, co-founder of Saxo Bank and founder of Seier Capital, spoke with CFO about how finance without an intermediary can be done. Christensen believes unbiased ledgers powered by blockchain technology can provide unprecedentedly secure transactions at instant speeds.

Lars Seier Christensen

“[In DeFi], the data is completely secure and cannot be manipulated or rolled back, Christensen said. “Many infrastructures will in the future be built on blockchain. Staying up-to-date with a rapidly evolving industry is highly advisable. With a growing younger generation taking a growing interest in crypto, accepting these as a means of payment and transaction could open up significant new business opportunities.”

By removing intermediaries from financial transactions, fees and waiting times for large capital transfers can be eliminated. As moving large amounts of money from one account to another involves both time and fees for sender and receiver in the current financial infrastructure, blockchain technology could disrupt how banking transactions are completed. By removing things like Venmo, Visa, Mastercard and PayPal from transactions, Web3 can make moving money easier and cheaper.

NFTs are not just images, but tools with tools

NFTs offer tools for companies involved in the tracking and distribution of large amounts of secure data. Both NFTs and non-transferable tokens (NTTs) allow data’s location and use to be monitored. “An NFT can be enriched with a set of data that you can trace through a company, its suppliers and customers,” Christensen said, increasing financial transparency and improving logistical processes.

NTTs, or a one-way NFT, can act as a virtual identity card or identification document for organizations in the business of giving individuals access to valuable information. Through NTTs, this type of identification can be given, tracked and taken away in an instant. “NTTs are by nature linked to an individual and can be an effective way to link certain information to an employee or business area, such as credential recording, access control and personal achievements,” Christensen said.

Other executives believe NFTs have the potential to earn the business of a repeat client and can have real value for organizations invested in repeat business.

Christos Makridis

“There are many ways NFTs can be useful, but especially for rewarding employees or customers,” said Christos Makridis, Chief Technology Officer, COO and co-founder of Living Opera, a Web3-based tech startup. As a professor of Web3-related topics at both Columbia Business School and the University of Nicosia, Makridis’ thoughts on blockchain’s potential to disrupt corporate finance are extensive.

Evaluating the use of NFTs – and blockchain technology as a whole – the Web3 Professor instructs managers to measure how these types of tools can be useful in their own companies. He says a question must be asked: “What does the organization want to do that cannot be done now?”

Makridis explained that the value of these types of tokens lies not only in their use case, but also the ability to talk about their value is crucial for any manager who wants to offer Web3-induced bonuses. Developing a method to compensate and reward employees with internal tokens is certainly a use case, but managers need to explain why it is more valuable than other non-salary benefits – or simply higher pay.

For business-to-consumer (B2C) companies, especially those that rely on repeat business, Makridis believes NFTs can be a way to strengthen brand loyalty in a customer base. “Organizations, especially those that target consumers, can also think about how they can use NFTs to reward their customers and learn more about them,” Makridis said. “An organization can buy NFTs that are valued by the market and use them as gifts or appreciation.”

NFTs are created to provide their holders with certain benefits. For example, social media phenom Gary Vaynerchuck’s line of NFTs offers membership benefits like access to certain restaurants, and even meet and greets with him. Even the gaming industry has taken advantage of NFTs and blockchain technology, offering tokens as playable characters that can be traded between players.

Modernization of accounting principles, especially in fraud detection

With the vast amount of data transferred, reviewed and passed around in accounting tasks, the idea of ​​decentralized information transfer via an objective ledger has the potential to transform how numbers are accounted for and tracked.

“Because data and accounting entries are time-bound, immutable, with a clear record of the source of the entry, I believe a blockchain ledger implemented across a company can be very effective both in terms of managing accounts, auditing them and preventing fraudulent activity,” said Christensen, when asked about blockchain’s potential in accounting and bookkeeping.

Permitted blockchains can greatly help with internal accounting and the development of a credible audit trail. — Christos Makridis, CTO, COO and co-founder of Living Opera

Makridis agrees with Christensen, especially when it comes to the potential for detecting fraud. “Permissional blockchains can greatly help with internal accounting and develop a credible audit trail,” Makridis said. Since the value chain of activity is recorded, the use of a permissioned blockchain can not only detect fraudulent activity more easily, but also deter it more often.

ENS domains are Web3’s Dot-com

Ethereum Naming Service, better known as ENS, is a naming system that allows users conducting transactions on the Ethereum blockchain the ability to have a unique name for a digital wallet or Web3-based website. Rather than being known as a 64-character code that must be used when sending tokens to a specific wallet or website, an ENS domain allows a wallet holder, business, or individual to have a name on the wallet. With ENS, companies can have a name like CFO.eth instead of randomly generated characters.

“The current Internet-based domain name system is not very secure,” Christensen said when asked about the value of ENS domain names in Web3. While a blockchain is a safer and more independent way to store important brand names and corporate identity, there are many of them – so many, in fact, that companies could not hope to secure all their brands across all platforms. Christensen said it’s better to choose some of the key platforms where you expect to interact with your customers, and not worry too much about the irrelevant services.

“ENS is a good use case around distributed ownership,” Makridis said. He believes businesses already operating in Web3 must have their own ENS domains to maximize the value of their investment in blockchain-based technologies and campaigns.

In particular, customer-facing organizations involve, “[they] will be able to reach consumers directly in a privacy-preserving way by air-dropping NFTs or fungible tokens,” Makridis said. “The bigger issue that corporate finance should be concerned with is the movement toward decentralization, and ENS is just one example of how individuals own the domain names and the data surrounding it.”

A future hedge against infinite inflation

Elena Garadis, CFO of Defy Trends, an algorithmic data-driven crypto intelligence and education platform, provided CFO her thoughts on why investing in cryptocurrencies can be a viable long-term hedge against inflation in the future. Garadis noted how inherent qualities of blockchain-based currency could help preserve the overall value of capital sometime in the future.

In the long term, crypto, especially Bitcoin, is very likely to serve as an inflation hedge due to its pre-programmed supply and demand characteristics, namely its fixed supply. — Elena Garadis, CFO of Defy Trends

“In the long term, crypto, especially Bitcoin, is very likely to serve as an inflation hedge due to its pre-programmed supply and demand properties – namely its fixed supply,” Garadis said. “At its core, inflation is about supply and demand dynamics. Right now, the US economy, and many global economies, are experiencing inflation due to both rising commodity costs due to supply chain disruptions in COVID and the Russian-Ukrainian war.”

Garadis said the devaluation of fiat currencies is also driving the idea of ​​cryptocurrencies as a hedge against inflation. “High levels of money in circulation means people are accepting and paying higher prices due to higher available disposable income, fueled by the COVID stimulus and a decade of suppressed interest rates.”

Elena Garadis

While talking about short-term protection against inflation via cryptocurrencies, Garadis cautioned against allocating wholeheartedly to cryptocurrencies for short-term hedges against financial turmoil. “I would be cautious about allocating cash reserves to cryptocurrencies to preserve value, especially for short [and] medium-term operational cash reserves,” she said. “The market is still too immature and volatile to protect working capital.”

The blockchain-based CFO noted that demand for things like Bitcoin must continue to increase with further adoption of blockchain technology in mainstream business and corporate finance processes to be a viable long-term security.

“What’s missing from Bitcoin’s ability to act as an inflation hedge is the demand side,” Garadis said. “[Bitcoin] must either remain stable or increase over time. For this to happen, we need to see mass adoption and utility that will steadily build trust and perceived value for crypto.”

“Crypto is not only a store of value, but also a rich ecosystem that can transform entire industries,” Garadis said. “This includes solving issues of privacy, mining and interoperability. I believe this will also lead to institutional investors delinking crypto from traditional risk assets in their investment strategies. In the long term, there is a strong likelihood that crypto, especially Bitcoin, can serve as a inflation protection due to its pre-programmed supply and demand characteristics, namely its fixed supply.”