As a CFO or controller of a DeFi business, you know the importance of having a reliable and efficient enterprise resource planning (ERP) system to support your operations. An ERP can help you manage and streamline your core processes, such as accounting, human resources, and customer relationship management, as well as provide valuable insights through data analysis and reporting.
As you look to grow and scale your DeFi business, it's essential to choose an ERP that is tailored to the unique needs of the decentralized finance (DeFi) industry and can handle the complexity and fast-paced nature of DeFi. In this blog post, we'll explore the different types of DeFi ERP and the benefits and challenges of implementing an ERP in the DeFi space.
What is blockchain?
There are four types of blockchain; public, private, hybrid and consortium. Its distinctive feature is a decentralized ledger that records transactions across many "blocks" or "links" that form a chain. These records are stored across many computers, and are only accessed by permitted network members. The transactions or blocks are fixed in time, and as such altering one would alter the entire sequence, making it a highly secure and visible system.
The choice of blockchain technology depends on the specific business requirements, industry regulations, and data sensitivity. Public blockchains offer maximum transparency and decentralization, while private blockchains provide more control and scalability. Permissioned blockchains offer a balance between the two extremes, catering to diverse business needs.
Beyond just Cryptocurrency...
Typically, blockchain has been associated with cryptocurrencies. Cryptocurrency is a type of digital currency that utilizes cryptography to secure transactions. It is decentralized, meaning that it is not controlled by any government or other central authority. The most well-known cryptocurrency is Bitcoin, which was introduced in 2009. Other cryptocurrencies, known as "altcoins," also exist and may serve specific purposes or have different underlying systems.
However, blockchain has further benefits than just facilitating the transfer of cryptocurrency. Blockchain can be integrated into systems to improve things like inventory and supply chain management. As products for manufacturing organisations often have so many touch points, from producer, to processor, to transporter, to seller, it can be hard to track where things have gone wrong. Blockchain reduces this ambiguity and helps certain frictions that often occur during the procurement process.
The benefits of integrating blockchain into ERP
Blockchain technology, initially developed for digital currency, has found a broader application in various business sectors. It has the potential to significantly influence the evolution of supply chains and enterprise business software systems, such as ERP.
ERP systems are business software applications that bring together and organize data from across an organization into a single, comprehensive solution that serves the needs of the entire enterprise. By implementing an ERP system, data from all departments can be consolidated into a single system, optimizing business processes throughout the organization.
The benefits of integrating blockchain into ERP systems include:
- Greater transparency- ERP systems are the central system for tracking business related activities. Blockchain allows an extra level of traceability, due to the fact that it is extremely easy to see where a transaction has been changed or altered. This means swift action or business decisions can be made, reducing any negative impact on the organisation.
- Enhanced security- Blockchain uses public key cryptography which encrypts supply chain data. Blockchain also only allows permitted members to view and edit transactions, ensuring all data in the ERP system is extremely secure.
- Improved efficiency- Blockchain allows greater visibility into the supply chain, and allows organisations to see where changes have happened, speeding up the problem solving process.
- Greater sustainability- The high visibility of supply chains allows organisations to see where they are being wasteful, improving their carbon footprint.
Challenges of integrating blockchain into ERP
While integrating cryptocurrency and blockchain technology into ERP systems may provide certain benefits, it may also pose some challenges.
- Compliance- as blockchain is still a fairly new thing, ensuring you are compliant with international regulations can be a daunting and confusing thing
- Information gap- Not many people fully understand the complexities of blockchain, so it may be harder to implement into your ERP system. It would require hiring an expert to ensure they can fix things if they go wrong.
- Energy- it can take a lot of processing power to keep a system running on blockchain, so this will increase electricity costs and carbon footprint
ERP systems and blockchain technology can be a powerful combination for businesses. Blockchain's encrypted blocks of transactions provide enhanced security and the ability to track and verify each transaction in real-time. This transparency and visibility can be especially beneficial in the financial services industry.
Additionally, blockchain-based transactions tend to be faster and more efficient than traditional methods. As decentralized finance (DeFi) becomes more popular, some people are looking to cryptocurrency and blockchain as a way to disrupt the traditional banking system and take control of their own financial transactions. By integrating blockchain and ERP, companies can take advantage of these benefits and be well-positioned for the future of DeFi.
However, there are also concerns about the use of cryptocurrencies, particularly in illegal or nefarious activities on the dark web. In addition, the value of cryptocurrencies can be volatile, with significant fluctuations in price over short periods of time. This can make it difficult for businesses to predict the value of their cryptocurrency holdings and make long-term plans. While some early adopters saw cryptocurrency as a potential replacement for traditional currencies and a catalyst for radical change in the financial system, its use has more often been focused on speculation and trading.
Despite these challenges, there is still potential for cryptocurrency and blockchain technology to improve and streamline business processes through the use of ERP systems. Many investors see cryptocurrency as a long-term investment and believe that it has the potential to make a positive impact on the financial markets and businesses.
How Threadgold Consulting Can Help
If you're a financial service organization in the DeFi space looking to implement DeFi ERP, Threadgold Consulting can help. As a partner of NetSuite ERP, we have the expertise and experience to deploy ERP solutions that are tailored to the unique needs of the DeFi industry. Our team will work closely with you to understand your business goals and design a solution that meets your requirements and is ready for the future of DeFi. Check out our pricing guide to understand the costs associated with licensing and implementing NetSuite.