Blockchain is a distribution list or ledger of transactions. It is decentralized, transparent, and updated in real time. The blockchain is essentially impossible to hack or distort. A host of revolutionary financial practices emerges from that simple idea.
There is even the possibility that many financial roles and services currently provided by fee-charging firms will become obsolete. Blockchain promises speed, efficiency and security.
If you are a business owner, it is pertinent that you know the ins and outs of this new technology, so that you become better and able to leverage its benefits.
Here are some of the reasons that blockchain accounting will be relevant to financing.
#1 It is Safe, Traceable, and Unchangeable
The blockchain is a network technology. A large number of computers in different places all contribute to updating and maintaining the ledger, breaking into it to change records or secretly siphon funds would require that all these computers be hacked simultaneously.
Despite the growing sophistication of computer hackers, that is a nearly impossible feat. As the network grows, the system becomes even more secure. Any person on the network can trace any transaction.
#2 The Focus is on Transactions
By its nature, blockchain focuses not on the exchange of information (e.g. revenue and loss reports) but on the transactions themselves. The first area that blockchain will effect will likely be accounts payable and receivable.
This focus on transactions will build into the system a certain level of inherent trust. No longer will we need a third party to confirm the ledger, as both clients and customers have access to each other’s financial information.
#3 New Business Opportunities
With blockchain accounting, all accounting and auditing will take place at lightning speed, in real time with transactions. This will mean not only greater standards compliance but also the possibility for new firms to provide new services.
PayPie, for example, promises to help lenders and investors make better decisions by providing an automated risk assessment tool for decentralized accounting.
#4 Emerging Markets
From remittances to micro-loans, blockchain will have profound effects in the developing world and in developing financial markets. It will include to previously-ignored sectors of the financial world.
#5 Triple-Entry Accounting
Accounting today is double-entry (financial records are kept in duplicate, one at the client and another the customer).
Since the Renaissance, this has provided some measure of security to financial transactions.
Blockchain promises what can be called ‘triple entry’ accounting, with both sides of a transaction being automatically recorded at the same time.
#6 The Future Is Here!
Blockchain technology is already getting a lot of buzzes. There are countless books already in print about the potential of the technology. Militaries around the world are already using it to ensure the safety of their information.
The Big Four accounting firms have released their own white papers on the opportunities that blockchain will bring to finance.
Financial automation is the next big leap in the industry. Financial advisors and professionals would be well advised to begin reading up on this exciting new technology.