After a lot of media hype around various cryptocurrencies last year, blockchain seems to have disappeared from the public imagination again. That said, in the background, it continues to shape the financial services spaces. Trade Finance Global explored the A-B-C of blockchain and some of the revolutions that are going on in the background.
Blockchain technology doesn’t just underpin cryptocurrencies: it has far wider applicability. The blockchain acts as a digital ledger of transactions – automatically created and agreed upon by all participants – and it’s easy to see how that could have huge benefits that go way beyond cryptocurrencies.
If blockchain technology were to be adopted more widely, it could mean that finance might look very different in twenty years time.
We took a look at the A-B-C of changes ahead:
Accountants …. Will Need a Stronger Understanding of Technology
If you thought that the CPA exam was tough already, it could be set to get a fair bit tougher. Accountants will increasingly need to understand blockchain technology and the role it can play in the financial world.
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This doesn’t just apply to new accountants, either: those who qualified years ago will also need to get to grips with blockchain to stay on top of things. If that’s you, don’t see blockchain as a threat to your career; instead, see it as an opportunity.
Bookkeeping … is Set to Change, Radically
The last really big innovation in accounting was the double-entry bookkeeping system … which has been around since the 11th century.
Traditional accounting requires manual entries and checks in a physical ledger; blockchain automates this, and ensures that all parties agree on the updates to the digital ledger.
If blockchain technologies are widely adopted, then the implications could be a lot broader than you might initially think. Audits, for instance, could become a thing of the past: the blockchain itself will act as a neutral third party, validating transaction records.
Cash … Will be Increasingly Eclipsed by Digital Payments
For years, physical cash payments have had one significant advantage over digital payments: if you hand someone a $10 bill, it instantly leaves your possession and enters theirs. With digital transactions, there’s always the risk of “double-spending” (where the same money token is used more than once, often in very quick succession), which can’t arise with physical currency.
While double-spending has been a recognised potential issue with blockchain technology (primarily with the 51% problem that has affected several lesser-known cryptocurrencies), the adoption of increasingly sophisticated – and increasingly trusted – blockchain technology looks set to help digital payments to continue to increasingly take over from cash.
What Does This Mean for You?
Amy Vetter writes, in Accounting Today:
“Whether you believe Bitcoin is a flash in the pan or the currency of the future, the validity of the technology underpinning it is not a matter of debate. Blockchain is here and it’s only going to get bigger. The earlier you start understanding its uses, and start your learning by using it yourself so you can better understand it, similar to the Big Four, the better off you’ll be as the rapid innovation starts taking hold.”
So, blockchain isn’t a fad that’s going to fade away: the potential of the technology is far too great for that.
Blockchain is here to stay, and while it’s certainly not going to do away with accountants (or even bookkeepers), it’s highly likely to change the face of finance during the upcoming years. What you do about that is up to you.