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What is Blockchain?

Some call blockchain a foundational technology with the ability to transform how many tasks are done, and predict that its adoption will spend the end of the audit profession, or even the whole of accounting. But beneath the hype, there is a complex and developing technology that has a long way to go before its true use cases and effects are identified.

Blockchain and the future of accountancy

IT Faculty's report on Blockchain describes the technology and its likely impact on business, in particular on the accounting profession.

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Blockchain has the potential to disrupt the work of accountants – particularly those focused on transactional tasks. It has the potential to increase the efficiency of the process of accounting for transactions and assets, operating as a system of universal entry bookkeeping.Undoubtedly, blockchain has to solve some technological and legal challenges before it can be fully bedded into the financial record-keeping systems of the world. However, the accountancy profession with its unique technical and business knowledge is well-positioned to help blockchain with these struggles.

Opportunities and challenges

Blockchain is a foundational change in how records are kept and updated. Rather than having one single owner, blockchain records are spread out among all their users. The genius of the blockchain approach is in using a complex system of consensus and verification to ensure that, even with no central owner and with time lags between all the users, there nevertheless remains a single, agreed-upon version of the truth.

Key features of blockchain

Blockchain is unusual for a hyped tech trend in that it is a back-office solution to how to transfer ownership of assets and record data online – in other words, it is a platform for accounting and business to be done on, rather than a novel application or business model. The technical details of how blockchain works and what makes it proof against attack and theft are outside of the scope of this paper; however, a brief overview is provided in the appendix of the report.

We split the most important facets of blockchain technology into the "three Ps" – three key terms that explain what makes blockchain different from the more familiar ledgers of today, which are databases owned and run by a single party.

Feature  Blockchain ledgers
Propagation New transactions originate with one user but propagate to a network of identical ledgers, without a central controller.
Permanence All transactions and records are permanent, unable to be tampered with or removed.
Programmability Many blockchains are programmable, allowing for automation of new transactions and controls via "smart contracts".

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