Blockchain: much more than bitcoin
Trustworthy, reliable and quick, blockchain technology could change the way banking and accountancy work.
You’ve probably read about blockchain technology. Like artificial intelligence, machine learning and the “Internet of Things”, experts say it’s one of technology’s “next big things”.
Bitcoin, an electronic currency and payment system, is the best-known use of blockchain technology. But experts say that blockchain (a digital record of a contract or transaction that can be held on hundreds or more ledgers rather than just one), is about far more than bitcoin.
They say it will change the way we do business and interact online in our leisure.
So what is blockchain and how will it change banking and accountancy?
Blockchain is a type of database. It’s an encrypted and time-stamped record, or ledger, of a contract or transaction that’s virtually tamper-proof.
Unlike conventional databases, a blockchain ledger isn’t stored in one place. It’s copied across several, hundreds or even thousands of computers, anywhere in the world.
This means the record of a contract/transaction cannot be compromised, says Ruth Bender, associate professor of corporate financial strategy, finance and accounting at Cranfield School of Management.
“It exists on all the participants’ computers, so changing the entries on just one computer has no impact on the others,” she says. “This means it is a trusted record, which itself means that the parties in a transaction don’t need to know or trust each other because they can trust the blockchain. It is reliable. It is also quick.”
Instructions (“smart contracts” in industry jargon) are written into the blockchain. The instructions are important because they enable a blockchain to enact a contract or transaction when certain conditions are met, and then keep a record of it.
There are two types of blockchain – “unpermissioned” and “permissioned”. Or, public and private blockchains. Unpermissioned is like the bitcoin blockchain. Anyone can access it. A permissioned blockchain is for authorised users only. The blockchain is shared only between the members of that network. This is likely to be the type of blockchain used most often in business.
Much more than bitcoin
Blockchain, or distributed ledger technology (DLT) as it’s also called, may be widely used in various industries and society, experts reckon.
By 2027, 10 per cent of global gross domestic product will be stored on blockchain technology, the World Economic Forum has predicted.
Experts reckon that blockchain may transform sectors as diverse as accounting (automating much audit and compliance), healthcare (access to medical records), public services (e.g. tax collection) and media/entertainment (defending artists’ copyright and collecting royalties).
A report by accounting firm Deloitte published in 2016 says that blockchain and other new technologies, including artificial intelligence, robotics and crowdsourcing, will probably “play a fundamental role in the future of commerce and society”.
This is an excerpt but you can read the full article in the June 2017 edition of CA Magazine.