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Blockchain in HR remains in beta, outlook uncertain

Blockchain in HR verification is getting interest from universities, vendors and startups. There are powerful forces driving its adoption but also forces that may work against it.

Last summer, MIT launched a blockchain-enabled verification pilot program. It issued a "verifiable, tamper-proof" digital diploma to 111 recent graduates. This blockchain in HR program enables students to share digital academic credentials without an intermediary to verify them.

But MIT has not heard of a case where a student's digital diploma was either consumed or accepted by an employer. Many certificates were verified, but they don't know by whom.

MIT's pilot illustrates the state of blockchain in HR. It is in a beta, proof-of-concept, experimental phase. Blockchain verification is currently not a practical option for employers and recruiters. When -- and if -- that becomes more practical is unknown.

Blockchain's success is uncertain

Despite blockchain verification's adoption uncertainties, blockchain is gaining momentum. There are startups creating HR blockchain platforms and HR vendors seeking to invest in startups. The technological infrastructure for verification is emerging. There are open standards, such as Blockcerts, which was codeveloped by MIT and Learning Machine in New York, for issuing and verifying blockchain-based educational records.

There is motive by all parties, not just employers, to look at blockchain in HR verification. Job applicants have a reason to jump on blockchain. Faster verification by employers may speed up job offers. Organizations and governments that issue academic and occupational licenses, certifications and other credentials can automate verifications and fees for these records.

HR may stand to gain the most from blockchain with its ability to create a reliable and secure record of credentials.

"They [a hiring organization] could extract everything they need to know [about] who I am -- to prove who I am, to prove my education, to prove my work history, my salary history," said Michael Fauscette, chief research officer at G2 Crowd.

Blockchain's immutable, tamper-proof decentralized database can work as a credential clearinghouse. A university, for instance, issues credentials -- proof of courses and degrees -- to a student. It sits in a virtual wallet. Only the cryptographic hash, or fingerprint, is on the blockchain. The student controls who sees the information, such as a potential employer.

stages of blockchain implementation
Four stages of blockchain implementation

Blockchain is creating opportunities

Blockchain technology is creating opportunities for people such as Gary McKay, cofounder and managing director of APPII. The London-based firm, launched in 2016, created an HR online verification and recruitment platform. It is still in beta but has 60 participating organizations, including The Open University, the U.K.'s largest university.

A user of the APPII platform creates a profile not unlike something he might create on LinkedIn. The user biometrically verifies his identity, such as with a government-issued ID, along with a photo. The user then seeks verification for each of his "assertions" -- work history, education, etc. -- and that prompts the party he is seeking verification from to either accept or reject the claim.

Within five years, I think, we will see wholesale adoption of the tech and the use of verified [CVs].
Gary McKayCo-founder and managing director, APPII

Nothing is written to the blockchain until it has been verified, McKay said.

In the U.K., it can take 60 days to hire someone, McKay said. He estimated blockchain verification can significantly reduce the time it takes to complete a hire.

"Within five years, I think, we will see wholesale adoption of the tech and the use of verified [CVs]," McKay said.

But there's no guarantee that blockchain will succeed, said Alan Cohn, an expert in blockchain and cybersecurity in the RANE Network and an attorney at Steptoe & Johnson LLP.

Blockchain faces deployment threats

Competitive threats loom. Universities, for instance, may see blockchain as an enrollment threat, Cohn said.

Blockchain could be used by a student to assemble verified credentials from a variety of massive open online courses (MOOCs). A student could put together his own academic program, class by class, course by course, that an employer might accept. "Why would you need a four-year degree program at all? Why couldn't someone put together their own program?" Cohn said.

Blockchain adoption in HR may not happen if it takes too long to gain traction. If the lag time is too great, companies "will need to move on and look at other technologies," Cohn said.

When it comes to blockchain's future, "I think that normal competitive forces are the greatest threat," Cohn said.

But content creators -- the originators of credentialing information, such as an electrician's license -- may see financial incentives. Blockchain technology in HR may also include a digital payment system. These providers could be paid automatically using digital tokens, which have a value, Cohn said.

A methodical arrival

Blockchain's potential to be disruptive for HR is difficult to know. Third-party services, for instance, will continue to screen potential candidates for their criminal backgrounds, finances, legal issues and other checks, as well as run an analysis for customers.

"It's not just content creators that can add value to verifications on blockchain, but also entities that can provide data augmentation and insights on top of the root content," said Dan Koellhofer, chief innovation officer at First Advantage, a major background screening company.

For now, blockchain in HR verification appears to be arriving methodically. A number of universities are exploring it and even some governments, such as the Illinois Blockchain Initiative, a consortium of local governments exploring blockchain's use. More participants are likely. Google and Facebook, both of which have recruiting platforms, may well decide to enter the blockchain credentials verification market.

The major HR system vendors are already moving ahead.

Last summer, SAP Innovation Center Network, for instance, announced TrueRec, a blockchain technology for credential verification. SAP is "in early stages" of evaluating it for its SAP SuccessFactors human capital management suite, a spokesperson said. The system is being used, however, on openSAP, its MOOC training platform.

This interest and investment are certain to rise. In February, for instance, Workday announced a $250 million venture capital fund aimed at early growth stage companies working on advanced technologies, including blockchain in HR. "Blockchain is certainly an area that we're exploring and researching," said Sherry Bourzac, a Workday spokeswoman.

Mary Callahan, senior associate dean and registrar at MIT, expects the use of blockchain verification to expand.

"This [is] still new technology in the higher education sphere, [and it] will take a little time for employers to realize its potential," Callahan said. "There is certainly much discussion among my colleagues about this topic, and many of them are actively considering issuing digital credentials."

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