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Blockchain Beyond Bitcoin

McCombs School of Business professor Cesare Fracassi explains how the technology created for virtual currency will change the way we do business. 

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Blockchain is a technology that was created as a database for the virtual currency Bitcoin.

Now, it is having its own moment in the spotlight.

Companies, entrepreneurs and governments are looking into how blockchain could be used to solve some of the biggest problems facing business and society.

To understand why, we spoke with McCombs School of Business professor Cesare Fracassi, an organizer of the first McCombs Blockchain Conference.

What exactly is blockchain in simple terms?

CF: Since the beginning of humanity, people have used what’s known as centralized ledgers. A ledger is a place where events such as land sale deeds, marriages, births, or transactions are recorded. In the past, there was a single central authority like a government or bank deciding what goes on the ledger. Blockchain is a distributed ledger — now, new technology allows for multiple participants in a network to collectively decide what goes on a ledger.

“We want to bring more clarity on what is real and what is hype.” — Cesare Fracassi

So, is blockchain something we’re all going to start using soon?

CF: While there has been a lot of hype on the topic, the technology has potential to change how many businesses operate. That is why we are hosting the McCombs Blockchain Conference. We want to bring more clarity on what is real and what is hype. The goal is to bring together academics, industry experts, students and policymakers to discuss the opportunities and the challenges of adopting blockchain technology.

More information about the McCombs Blockchain Conference is available here.

Are there particular industries this technology is most suited for?

CF: Blockchain is particularly well suited for industries that require collaboration. For example, banks need to trust and rely on each other for payments, remittances, loans and trading. That is why cryptocurrencies are using blockchain. It can be a more efficient and transparent system to connect financial institutions.

Beyond finance, why are other types of companies such as grocery stores interested in blockchain?

CF: One of the applications of blockchain is in supply chain, where it could improve consumer trust by providing transparency. For example, a consumer could track back where a mango was grown, when it was picked from the plant, what treatment it received and when it was shipped to the store.

How else can blockchain benefit consumers?

CF: Blockchain could bring the power back to the consumers over how their personal data is used and shared by companies, by making consumers the ultimate decision makers about who can access their data and for how long.

“Blockchain could bring the power back to the consumers over how their personal data is used and shared by companies.” — Cesare Fracassi

What are the big challenges for industries interested in adopting blockchain? 

CF: Blockchain technology is still at the proof-of-concept stage. Like most new technologies, the adoption of blockchain is uncertain, and many challenges lie ahead:

  1. Coordination: Most blockchain applications require a common standard, and all users have to agree to the standards.
  2. Privacy: Transparency might conflict with the need and rights of businesses and individuals to privacy.
  3. Scaling: Distributed systems are slower and more redundant than centralized ones. When the technology is adopted in large scale, system slowdowns might cause big problems.
  4. Regulation: Government agencies are currently ramping up actions to regulate some applications of blockchain, like cryptocurrencies, to eliminate abuses and fraud.
  5. Over-exuberance and hype: Lately the (untested) technology has been featured in several mass-media outlets. Like in the dot-com bubble, many ventures will fail.

Cesare Fracassi

Cesare Fracassi is an associate professor of finance in the McCombs School of Business at the University of Texas at Austin. He joined the school in 2009 after completing his doctorate in finance from UCLA Anderson. His primary research interest is corporate finance, including work on fintech, corporate governance, executive compensation, credit rating agencies, small business financing and the effects of social networks and cultural preferences on financial policies. His articles have been published in top finance journals, including the Journal of Finance, the Journal of Financial Economics, the Journal of Financial and Quantitative Analysis and Management Science. He teaches fintech, corporate finance and valuation to MBA and MSBA students, and empirical corporate  finance to Ph.D. Students.

Fracassi holds a bachelor’s degree in electrical engineering from the Politecnico di Milano in Italy, and an MBA and Ph.D. In finance from UCLA Anderson. He was a visiting professor at the Wharton School in2012-2013. Before beginning his doctorate, he worked as a strategic management consultant at Booz Allen and Roland Berger in Italy, and as a summer intern at the United Nations in New York.

The McCombs School of Business at the University of Texas at Austin is excited to host the first McCombs Blockchain Conference on April 13th at the state-of-the-art new Rowling Hall building for Graduate Business Programs.

You can find the full schedule and other information about the McCombs Blockchain Conference here.