There is a push on to find new and better ways to use blockchain technology over and above trading cryptocurrencies. Payroll experts are now looking into blockchain as a way to better process payroll data, keep it secure, and afford everyone involved access to the information. There may be a future for blockchain in payroll, but it is clear that the technology is not yet ready for payroll prime time.
Blockchain is the technology that was originally built around processing the Bitcoin cryptocurrency. Its inventor needed a way to keep track of cryptocurrency transactions using a distributed ledger that would be available worldwide but not modified once created. To discover more about how blockchain and cryptocurrency are connected, visit this website:
What he came up with is a system that collects data in blocks that are then attached in an unending stream. Once new data is verified by numerous nodes within the network, a new block is added to the chain for record-keeping purposes. Furthermore, the chain is inherently resistant to modification. This is accomplished by requiring all modifications to be retroactive across the entire chain, thereby forcing a revalidation of blocks in order to make the changes permanent.
With the introduction out of the way, here are just a few reasons explaining why blockchain is not ready for payroll prime time:
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1. Customizing Data Is Difficult
The open ledger format of blockchain is such that anyone who wants access to the data has access to all of it. That doesn’t play well in the super secure world of payroll processing. It would be possible to utilize blockchain technology by creating a separate chain for each individual employer but giving access to employees who want to see and maintain their own personal information would mean opening up all the data to everyone. Not good.
When it comes to online payroll service companies like BenefitMall, they would have to create brand-new chains every time they took on a new client. Those chains would have to be unique to each client as well. That would mean operating and maintaining hundreds of blockchains at any given time.
2. Validation Is too Slow
One of the inherent weaknesses of blockchain technology is that data verification is rather slow. In order to accomplish proper validation and verification, transactions have to be processed through nodes. A block of data cannot be finalized until all nodes have completed the task. This takes time.
This is not to say that speeds will not be increased. They will be, and, in fact, they have already been improved. Some of the biggest financial service companies are now beginning to implement blockchain APIs for programmers with the understanding that eventually the speed problem will be solved. When it actually happens is anyone’s guess.
3. Validation Takes Power
The third weakness of blockchain technology is that data validation requires a lot of raw computing power. You don’t need much power to start, but power requirements increase commensurate with the length of the blockchain. The longer the blockchain goes, the more processing power is needed to maintain the same transaction speed.
For an individual company doing payroll in-house, processing power would not be an issue. That is not true for payroll processors like BenefitMall. The combination of multiple blockchains and regular payroll processing across each of them would require more and more processing power as time went on. BenefitMall would have to invest in a significant amount of computer equipment keep up.
The day for blockchain in payroll is coming, there is little doubt of that. But the day is not here yet. Blockchain needs further improvement before it is ready for prime time.