Blockchain accounting is a new and revolutionary method of communicating financial information that was inspired by the financial crisis of 2008. The main features that differentiate blockchain technology from traditional accounting methods are the decentralized ledger, transparent and public record keeping and virtually incorruptible nature of the system. The future of accounting will likely be impacted by the blockchain technology, but experts are conflicted on how this new technology will be incorporated into society.
The Birth of Bitcoin
The notion behind blockchain technology was first recorded back in 1991 when researchers Stuart Haber and W. Scott Stornetta described a system secured by a chain of blocks, but the idea didn’t gain much attention until the financial crisis of 2008. An individual online under the pseudonym Satoshi Nakamoto utilized these ideas to publish a paper called Bitcoin: A Peer to Peer Electronic Cash System. His report argued for creating a digital currency that would be distributed through a decentralized database. This notion would enable two distant parties to directly have a transaction without a trusted third party between them. The ideas embodied in Nakamoto’s paper became the foundation for both blockchain technology and the cryptocurrency Bitcoin. Since 2008, many researchers have attempted to determine the real-life identity of the online user Satoshi Nakamoto, but they haven’t been able to determine whose ingenious mind is behind this revolutionary technology.
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Decentralized, Transparent and Incorruptible
The blockchain database isn’t stored in a singular location. The blockchain’s ledger is duplicated and updated millions of times across millions of computers, so all information regarding transactions is continuously being shared between all parties. Every transaction is both public and verifiable. The blockchain cannot be controlled by any singular entity, and hackers cannot corrupt data because it is available to anyone on the web. Information lives in a state of consensus, so it is a self-auditing and self-sustaining system. Together, these factors make the blockchain virtually incorruptible.
The Future of Accounting
The blockchain’s use of the internet also makes the entire system a global one. Citizens in different countries can exchange currencies across the globe within seconds. These transactions don’t require a middle-man banker, and they are entirely digital. The incredible potential of the blockchain system has led many experts to the conclusion that this system could bring a one world currency. Forbes explains “for centralized incumbents – the US dollar as the world’s reserve currency, the financial system, predominately governed by western financial institutions – their leverage is poised to decrease.” This radical new technology has the potential to disrupt financial, economic and social systems across the board. Block Geeks calculated Bitcoin transactions to be valued at over $200,000 dollars a day in 2016, and this number is expected to grow exponentially in the future.
Some claim the cryptocurrency craze is nothing more than an economic bubble, but others herald this unprecedented technology as paving the way for the future’s one world global currency. While the long-term implications of this technology remain unclear, experts across the board are convinced that blockchain accounting technology will be utilized in the future to provide the tools necessary to get through massive amounts of data.
