Blockchain is a topic that is the most popular among the crowd at the moment. It's a topic that is disruptive, accelerating and that may be your elevator pitch. Let's have a bird-eye view on this.
Imagine yourself as a bird flying high in the
sky, and down you observes that the world is divided into blocks, blocks of
massive information. But how can this information work for good if there is no
common link between them? Here is the point when the word "Chain"
comes into the picture.
Blockchain is the most talked-about form of distributed ledger technology. It works on decentralized & distributed ledger technology that stores transactional records in blocks, and it is accessed by the participants globally over the network. Every time a transaction takes place, a block is formed, which further develops a chain. It creates an irrevocable record of transactions that could not be undone. Blockchain organizes a peer-to-peer network that provides participants with a platform to communicate among themselves over the web & increases confidence, security, transparency, and the traceability of data shared over a network and delivers cost savings with new efficiencies.
Blockchain will gain you an edge as it is an
open-source ledger; every transaction made is public, which leaves no room for
fraud. The integrity is monitored by minors who have their eyes on all the
transactions; hence it is more secure. It is responsible for keeping a record
of all the transactions that cannot be revoked or manipulated. The user public
can view transactions data at any point. This makes online transactions even
more secure. Blockchain solutions can offer a speed of 100 to 10,000
transactions per second, hence saving your time.
But to implement this technology, you need to
take care of a few critical things, such as the application must be updated on
both ends of the P2P network. If any end doesn't accept the amendments,
technology will fail. If you plan to have business applications, then they must
have some business logic behind them.
This logic specifies how applications will perform within the sphere of
business needs. By nature, blockchain uses more stringent logic that won't
allow you to redesign without leading to the need for logical business changes
to be acceptable to the blockchain solution. Now, blockchain is a complex set
of protocols that require a big brain to solve Hyperledger, multichain, Corda,
quorum theorems which one can't manage at the sole level; hence enrising the
need to involve some third party help to add new features and expand the
application without redeployment of the network.
Types of Blockchains: Deciding which one is
better for your business.
The most basic function of this technology is
to carry out transactions or exchange of information through a secure network.
But the way people use blockchain varies from case to case. For instance, if we
talk about Stock Market/Crypto, the reason blockchain got hyped into the
scenario. Shares are digital holding certificates that get traded through
blockchain technology. It is a type of blockchain in the nature of a public
network giving the right to people from all over the world to become a node,
verify other nodes and trade shares.
On the other hand, let us take an example of a
bank using a private blockchain network. It is a restricted network where only
concerned persons/employees of the bank can access confidential information.
Thus, anyone out of this closed network can not gain access to the bank
database. A private network is more bound to have only authorized nodes that a
network admin must initially monitor. The information transmission through a
private blockchain remains within the network. Any new node that wishes to
become a part of a private network needs permission from the network admin. The
bank decides the scale of their private blockchain for all their branches in a
country.
Another famous type of blockchain that exists
is Hybrid Blockchain. Some information can be circulated in a private blockchain
network, and some parts can be mutually agreed to flow in a public blockchain
network. The hybrid blockchain is so flexible that users can quickly join a
private blockchain with multiple public blockchains. A transaction in a private
part of a hybrid blockchain is usually authenticated within that network. But
users can also shoot it in the public blockchain to get verified. The public
blockchains increase the hashing and involve more nodes for verification, which
enhances the security and transparency of the blockchain network.
Worry not with Blockchain Technology
- Each block holds a unique hash number and a key link that connects it to the previous & next block in a blockchain. The blocks cannot be altered. If there is any replacement, the hash sum would be altered, and the block would longer be valid, which further will lead to invalidation of the whole chain as each block is interconnected with the previous & the next one.
- Your all transactions are secured by cryptography. Each block contains a unique and private key that can be verified with a public key. If there is any change in transaction data, the block's unique key becomes invalid. As a result, the block is dismantled from the chain, again remembering each block of the chain is interconnected.
- The security of blockchain also depends on its decentralized and distributed nature. Failure is never at any single point as every block is interlinked, making it much harder to corrupt, thus making it invulnerable. Hacking into any one part of the system cannot affect other parts. However, in the case of a private blockchain, this advantage is partially lost as they have a single point of control and a limited number of nodes. This restricts users from making changes to the ledger. Organizations operate these kinds of blockchains for their internal use, allowing the company to control its processes.
- There is no principal body to authenticate and verify the transactions, yet every transaction in the blockchain is presumed to be completely secured and verified. It is because of the presence of the consensus protocol on which blockchain works.
- A consensus algorithm is a process through which all the peers in the blockchain reach a mutually predecided agreement about the present state of the distributed ledger. In this way, consensus achieves reliability in the Blockchain network and establish trust between peers in a distributed network. Most importantly, the consensus protocol verifies whether the new block that is added to the blockchain is the sole version of the truth agreed upon by all the nodes in the blockchain.
While the benefits are in front, there are
many risks that may be imposed by this nascent technology. Understanding of
blockchain technology and its associated risks may evolve as this technology
endures to mature. It’s therefore imperative for all organizations to
continuously monitor for the scope of development in this technology and its
application to various cases.
Blockchain technology contains the potential
to reengineer business models from a human-oriented model to an algorithm
oriented model, which might expose businesses to risks that they have not
encountered before. In order to react to such risks, businesses should consider
establishing a robust risk management strategy, governance, and controls
framework.
Future
Of Blockchain
Blockchain is
already picking up the pace, here are examples of successful blockchain
projects:
Helium is a decentralized
wireless infrastructure. The network allows everyone worldwide to connect to
the infrastructure wirelessly without having any expensive data plan. By using
their plug-and-play hotspots, anyone from anywhere can join the Helium network.
Forward
Protocol is
a decentralized knowledge protocol that emancipates education by rewarding the
users with the “earn well, learn well” model. It incentives students for
completing a course and provide royalties to teachers when their students
finish a project. The protocol aims to link job seekers with the vacancies such
as Monster, Upwork, and Fiverr.
Theta
TV is
a decentralized video streaming network that allows us to watch content, earn
virtual currency and give total administration to the content maker. Many
YouTubers are also publishing videos on Theta since they can get 100% of the
profit generated.
Future
of Blockchain in Accounting
In
the long run, Blockchain proves to be a disruptive technology for accounting
like digital photography disrupted the conventional film photography, pagers
& land-line phones were utterly disrupted by mobile phones.
Blockchain
is a multi-faced technology that also plays the role of accounting technology,
which helps with the transfer of ownership of assets and maintaining a ledger
with accurate financial figures. Implementation of blockchain assists in
increasing the potential of the accounting profession by reducing the cost of
maintaining and reconciling ledgers. This strength may be a threat to
accountants as automation in reconciliations cut the work of accountants. But,
Blockchain empowers the accountants that assets exist with proven authenticity.
We
have always come across double-entry bookkeeping when talking about accounting,
but Blockchain works on triple entry bookkeeping. Now it will be, with
Blockchain, each transaction will be recorded by the third party/all blocks,
and the third party/block verifies each transaction (Cryptographically), and a
receipt will be issued. What will be the outcome of the same? Every transaction
will be simultaneously recorded in the books of a third party to be verified by
the Blockchain. As the transactions are entered in three places, and hence
called as Triple entry system.
How
will it change the attitude of Accountants towards the work? Well, Blockchain
proves to be disruptive, but when coming to betterment, it has its gain over in
the following manner:
Accountants
are experts in recording, bookkeeping,application of taxation and related
rules, with theBlockchain Technology; they get opportunities to
becomeBlockchain advisors and can join the blockchain network.
Accountants
can spend less time on identifying errorsand mistakes and reconciliation work;
instead, they canconcentrate on areas like technical knowhow, advisory and
related
activities.
To
conclude, while the landscape for Blockchain technology is still in its
infancy, its potential is transformational. Blockchain protocol offers the
greatest opportunities for change in various accounting mechanisms and creates a
new platform to reshapethe world of business and transform the accounting and
auditing profession. Its potential disruption in theaccounting industry cannot
be overlooked. Various past developments, such as the emergence of computers,
ERPsystems, and cloud computing, have just changed theauditors’ work instead of
making them irrelevant. Auditorswill need to develop a more data-centric
approach anduse it with a forward rather than historical perspective.In this
way, the auditors will be able to provide a veryhigher-valued service. Firms
adopting new technologies pretty earlythat account for these potential
disruptions will be better off in the long run.
Authored
by Himanshu Sharma & assisted by Simar DS
For any queries or suggestions, reach at info@manishanilgupta.com
Source: https://www.manishanilgupta.com/blog-details/blockchain-beyond-cryptocurrency
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