The Impact of Blockchain on US Accounting Practices: What You Need to Know

Introduction to Blockchain

Blockchain is a decentralized Technology (DLT) that stores information in blocks that are linked in a chain. These are blocks are connected using unique identifiers called Cryptographic hashes. Every time a new transaction happens in that chain, a new cryptographic hashes is formed. And each block contains data indicating who, how, when and how much. These chains are immutable, meaning it can’t be changed until the majority if the network approves the change. Moreover, if at all someone changes any information, the hashes gets changed, and entire network will know that data has been compromised.

History of Blockchain and further evolution.

Blockchain was first proposed by a cryptographer, David Chaum, in 1982. Further, the chain was then secured in 1991 by Stuart Haber and W. Scott Stornetta. They wanted to implement a system where the timestamps cannot be tampered and after various improvement in the system, their works were classified in the New York Times every week since 1995.

Further in 2008, first decentralized blockchain was conceptualized by a person (or group of people) known as Satoshi Nakamoto. Nakamoto further improved the system using Hashcash, where it does not require anyone else to authenticate the transaction. In coming future, the same system was adopted for Cryptocurrency Bitcoin, where it serves as the public ledger for all transaction that happened on that network.

Scope of Blockchain Technology

Blockchain has nature of decentralized network, making it impossible and very costly and time-consuming task to tamper with the data. It becomes very user-friendly and highly promising in its adoption into various industries, especially where each transaction in the network are permanent and needs an Audits.?

It is widely adopted in Industries like the Banking and Finance Industry, Supply chain Management, Healthcare and Pharma, Manufacturing Industry, and Industry?

Industry using Block chain

On a blockchain, every transaction are distributed and? Cryptographically sealed, making it virtually impossible for someone to forge, manipulate or destroy the data. Having this nature, the technology is highly adopted with these industries.

Healthcare and Pharma: The efficiency in the medical sector improves as the data of any Patient is stored and shared with the necessary persons on the network like Pharmacist, Nurses and Doctors, Further, it also help the patient get right treatment, making them avoid any future illness.

It also has the scope where a system can be built where a Patent can have their health information on a blockchain network where he/she has the key where that data shall be used and everytime he visits for any Medical services, it gets stored in that blockchain that acts as a History of Medical Record.

Blockchain in Real Estate:?

Whenever any transaction happens in Real estate, their is the involvement of Numerous Third parties, and as a result, the cost of making the transaction rises.

Blockchain can make it faster, authentic and reliable using NFTs, which can be used to search, verify, and further trade on the blockchain. Further Smart contracts can help in making contracts between Buyer and seller to secure the price, ownership and transparency.

Lastly, Blockchain can used to make smart keys and smart contracts in leasing, where the smart key will stop working the moment the smart contracts end.

Blockchain in Insurance

major challenge in this industry is that the chances of fraud and misleads are more often, especially when there is reinsurance. Blockchain being encrypted with cryptography makes it more authentic, immutable and secure, but also more transparent to all stakeholders in insurance industry.

Blockchain in cross-order Payments and transactions:

Being a decentralized-based platform, the Blockchain does not recognize international borders As a result, making transaction seems like it have been made within a room, which makes them cheaper and less complex.

Blockchain in Digital Voting:

Whenever the elections are organized, the department organizing the election massively conducts this on a Blockchain network. Here, whenever a vote is made, it becomes undisputed and can’t be challenged about the potential fraud. As it makes it more secure, transparent and immutable. Due to the nature of blockchain mechanism called Cryptography.

What is Blockchain Accounting?

Blockchain accounting is a digital method of accounting or bookkeeping using Blockchain Technology. It records the transaction on a decentralized ledger, helping stakeholders, especially auditors and officials, to verify the accounts further, making it easy for auditors to concentrate on more complex task as the transparency of the transaction is immutable, making them less effort for verifying the transaction with third party.

Traditional System of Accounting

traditional method of accounting had served us for many years but they did have certain limitations. Slow processes and pronity to errors and forgery were making it very lengthy for an auditors to complete an audit. Blockchain is cushioning in the way transaction are made and recorded, making valuations and mergers more informed, authentic and fast.?

Process of Blockchain in Accounting.

The traditional method of accounting all these were done using Double-entry systems, but when it comes to blockchain, it is done on a triple-entry-based system where third party is authenticating party called a blockchain-decentralized network of computer nodes, which authenticates that a transaction between the two accounts has been made. These transaction are linked together in a chain.

Benefits of Blockchain in Accounting

• Abridged Reconciliation: Due to reduced chances of alteration in financial transaction. It makes the important process of reconciliation much faster and more accurate. Thus reducing effort by 70%.
• Smart Contracts : Smart contracts are a kind of automated process where all the conditions are met and then the further actions are made automatically by blockchain, thus eliminating need of middle intermediaries. Smart Contract is expected to reach 10 billion US dollars by 2030.

• Fraud Prevention : Blockchain DLT and security features can detect any fraudulent activities. This can help any organization to at least reduce their chances of fraud by 5%.
• Improved Financial Reporting: Blockchain is a Decentralized ledger where a stakeholder can access the report with complete accuracy and completeness, thus helping in reducing errors by 60%.

Types of blockchain in accounting

• Public Blockchain: Open to everyone. And are highly transparent.
• Private Blockchain: Restricted Access. Majorly used in organization
• Consortium Blockchain: These are Shared and made for group of trusted organisations.

How Blockchain Technology Impacts Accounting Industry

• Proficient Process: Blockchain makes the transaction much faster and more accurate. Certain study predict it can help a financial institution save billions.

• Career Opportunities: Accountants that are Blockchain savvy have leaping demand in Industry. As per LinkedIn report, there is surge in demand in Blockchain accounting by 550%.

• Regulatory Amendments: Blockchain in accounting is getting huge surge in demand as a result, regulatory authority are making necessary amendments in regulatory framework to ensure higher safety and responsibility among the users worldwide. These are worldwide adopted by the governments of respective Countries.

Future of accounting in Blockchain

Even though the Blockchain in accounting is in embryonic stage and normal tests and applications are happening. But it can’t be denied regarding its adoptability in near future. So, Embracing these modernization in accounting will be crucial in having a competitive edge in industry. As it will be a principle asset for financial institution.

As a finance professional, we need to adopt the upcoming transition in the industry. Blockchain is offering us exciting future opportunities because it will enhance transparency, authenticity, security and efficiency in accounting practices. Blockchain technology merits its adaptability on a Global scale, as the finance sector is ever-evolving. So it is safe say that Blockchain is the future in financial transaction. Making basic tasks less complex, thus devoting time to more crucial tasks.

Blockchain in accounting takeaways

accounting industry will continue to evolve so consider embracing the upcoming technology as a valuable skill set. It can happen by understanding its basic usability.

In order to stay ahead of the curve, its better to hold hand with institution which is focused on industry, adapts it and also has Industry-expert as their professor.