Blockchain: How does Blockchain Technology work?
Blockchain is considered a technology changer designed to transform accounting, auditing, and banking. But how does Blockchain Technology basically work?
A blockchain is a single ledger that records transactions between organizations. Anyone who has the right to participate can see the same information in real-time.
Blockchain is said to reduce fraud and accounting errors. Australian government research institutions, the Australian Stock Exchange (ASX), and CSIRO are considering its use.
This instructional video introduces technology, answers some questions about security, and the potential impact of blockchain on financial and global trade.
Blockchain can have a major impact on supply chain management and transaction accounting, and can also provide opportunities for accountants who can work with clients and colleagues to gain the technical advantage.
Working of Blockchain Technology?
Create an audit trail when adding data to a linked “block” and build a chain of blocks when adding more information.
Anyone who has a license to join the blockchain can see the same information in real-time.
You can see who added each block and when. Blocks cannot be deleted or changed.
All users, not just the controller, have a blockchain, and the user is responsible for maintaining the blockchain.
In a private blockchain, users determine who can join the ledger and their access level. Some information can be encrypted to protect business confidentiality.
Companies can build blockchains with customers, suppliers, banks, tax authorities.
How safe/secure is Blockchain Technology?
Blockchain can reduce fraud and accounting errors.
After adding a data block to the chain, it must be verified in the rest of the network.
If you run your business through a store chain, all computers on the network will identify you and check if you have trading permission.
So, if you pay $ 120 and accidentally send only $ 100, the other blocks will fetch an error.
What does Blockchain Technology do for accountants?
By creating a single ledger on a computer network, companies, customers, banks, and tax authorities can record and share information.
If any of them add information, the ledger automatically validates and adjusts the data.
Accountants do not have to perform all transaction processing and reconciliation because each party does not need to maintain its own private ledger.
Blockchain Technology could disrupt the audit profession
If the blockchain is widely adopted, the auditor does not play a role in validating transactions in the blockchain because the chain itself creates an automatic audit trail in real-time.
Cybersecurity is strong with blockchain
Hackers need to enter the entire computer network almost simultaneously to cause damage.
If you compromise only one computer, other users can view and respond.
It is not only audit and accounting that face disruption
Blockchain Technology is a peer-to-peer network that can eliminate intermediaries such as banks.
The Australian Stock Exchange is investigating how blockchain will replace existing stock clearing and settlement systems.
Blockchain can accelerate the speed of international payments and land transfers, making it easier to verify the identity of individuals or businesses.
As a result, CSIRO, an Australian government research institute, is studying how blockchain works between the government and the private sector.
This commitment is why the world invested more than $ 1.4 billion in blockchain technology in the three years to 2016.
These are still in the early stages of the blockchain, but if you can meet your promises, accounting and auditing functions will change dramatically.
Accountants and auditors need to rethink their way of working and may provide clients with more valuable work, including strategic insights and thoughts.
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