Blockchain

Introduction

There has been a sharp decline in demand for cryptocurrency by 20% in 2018 as opposed

to the past few years. The factor behind most companies opting to use the conventional

approaches for their initial stage projects as opposed to using the blockchain technology or

solutions (Garg et al., 2021). It is imperative to understand that a growing number of people hold

higher expectations depending on inferior views that are based on report outcomes and in several

years, the untruthful stories about this technology will be demystified and everyone can enjoy its

numerous benefits. Increased use of IoT devices implies a rise in cybersecurity issues that will

force firms to leverage Blockchain technology in expertly managing their private information,

ownership security, and growing volume of data held within these devices (Chang et al., 2019).

Thus, the use of blockchain technology is on the rise as a solution to security, fraud, and cost

issues in the financial sector despite many people perceiving the technology as less beneficial.

Blockchain Technology Description

Blockchain technology concerns a structure or framework that helps in storing

transactional reports perceived as blocks, of the public in different databases understood as the

chain, in a network connected via the peer-to-peer nodes (CGMA, 2018). Any transaction within

the digital ledger or storage is uniquely authorized by a digital signature of the owner that

authenticates the transaction and secures it from hackers. Thus, the data within the digital ledger

is heavily secure and this underpins why most companies seek to deploy blockchain technology

within their firms today (Chang et al., 2019). This implies a digital ledger could be seen as a

Google spreadsheet that can be shared among a wide array of computers within which the

transactional records are held based on the real purchases made. The most interesting fact about
blockchain technology is that although it allows everyone to see the information, none of these

people can interfere with it at any stage. Besides, the record of transactions is held within a peer-

to-peer network system which implies that the system has no central authority figure to aid with

approval of the transactions, which are instead verified by all the members in-network (CGMA,

2018). As such, there is no need for any leader or authority figure of any status to make a

business settlement, vote on pressing issues or offer financial transactions. Therefore, in the

world in which business is increasingly taking their operations through internet platforms,

blockchain technology offers an incredible way for people to transact without any fear of their

data being interfered by hackers or other unwanted parties.

Working Mechanisms of Blockchain Technology (BT)

Although the developments in the BT sector are limited, a considerable number of

organizations have begun adopting it, and its potential to revolutionize the business sector is very

high. BT system is made up of three unique technology including cryptographic keys, a peer-to-

peer network, and a computing system (CGMA, 2018). It is observed that the cryptography keys

comprise the private and public keys which help in executing successful transactions between

two business parties. Every group in the transaction has these two keys that they leverage in

generating a highly secure digital identity reference, which is the most essential factor in BT

(Iredaleon, 2017). Within the cryptocurrency environment, the secured identity is acknowledged

as a digital signature and is utilized in approving as well as management of transactions (CGMA,

2018). The storage is quickly merged with the network which often includes a massive number

of people that serve as authorities and utilize the digital signature to reach an agreement on the

transaction amongst many other key issues. When authorizing the transaction, the digital

signature is authenticated through an arithmetic verification that results in a successful

tend to utilize cryptography keys to execute a wide range of digital interactions through the peer-

to-peer network.

One thing that makes the BT system very unique is the approach it uses to confirm or

approve business deals between different groups. For instance, if two people seek to conduct a

transaction using their keys, the first individual will begin by attaching the transaction data to the

public key of the second person, which allows for the information to be collected into a block

(CGMA, 2018). It is worth realizing that the block has a digital signature as well as a timestamp

with relevant data but it does not have any data concerning the identity of those in the deal. The

block is quickly conveyed via the network nodes and when the right party utilizes his or her key

and matches with the block, the transaction gets finished precisely (Iredaleon, 2017). Other than

performing any financial transactions, the BT system can also be essential in holding vital

transactional information of certain properties and even cars.

The BT system utilizes hash encryption to secure information by depending heavily on

the SHA256 algorithm to protect the client’s data (CGMA, 2018). The encrypted data also

understood as hash encryption is shared widely in the world and later added to the BT network

after it has been verified. The SHA256 algorithm makes it very hard for external parties to

overpass the encryption, which in the end makes the sender and receiver authentication process

increasingly straightforward (Swan, 2017). The blockchain network has four headers namely

previous harsh, transaction data, the nonce, and the hash address of a certain block. Several

people in the world have tried guessing the perfect hash value to match the pre-ascertained

condition using a computational algorithm but this is a proof of work issue that whoever gets the

answer wins the reward. Lastly, in BT, the process of including transaction details to the extant
digital ledger is acknowledged as mining (Chang et al., 2019). While mining is broadly

associated with Bitcoin, it is equally applied to Blockchain digital solutions. The mining process

entails the generation of the hash of a certain block transaction which is almost impossible to

guess which ensures the safety of the BT system without having to use a centralized system

(Garg et al., 2021). Thus, the mining process is what helps in eliminating the need for a central

figure to either approve the transactions or oversee any issues between the contracting groups.

Important Opportunities of BT and its Application in Accounting

Security remains the leading challenge for all sorts of online operations as a significant

amount of private and sensitive data is breached in the online platforms. However, the

deployment of BT has offered companies and individuals a growing margin of security that

makes it very hard to breach for any group considering the decentralized state of the BT network

(Chang et al., 2019). It is noteworthy that by using a set of private and public keys unique to

every transaction and based on a highly advanced algorithm, which makes it hard for hackers to

bypass and steal valuable information on the network. The other opportunity offered by BT

entails an increased level of transparency between the transacting parties as everything is visible

to all the members from the very beginning until the completion of the deal (CGMA, 2018). A

person can easily see everything on the decentralized system that makes BT an increasingly

transparent technological solution. Besides, it has been established that the use of BT lowers the

possibility for any form of discrepancy within the network to be realized considering that no

single party can hide any information from their partners in the business. Thus, BT technology

has not only enhanced the safety of online transactions but also allowed for increased levels of

transparency between the transacting partners.

and thus it could easily be utilized by different groups within the world today. As opposed to

conventional financial models, blockchain technology is less costly and thus most organizations

are seeking to deploy it in their daily transactions as it could save them a lot of revenues,

especially in the banking sector (Ølnes et al., 2017). This technology has also helped in

shortening the duration of the transaction. As such, within several minutes a client could receive

as well as send critical financial documents or money to the target without any delays being

observed or having to endure extensive wait times of the conventional technology used in the

banking sector.BT has also enhanced the efficiency of the financial systems as there is no

engagement of the third-party groups in the network (Chang et al., 2019). This fact alone allows

saves the transacting parties a significant amount of resources that would have been spending on

brokers. In the past banking systems, the prices were often higher to help facilitate the processing

of any given financial transaction. However, in the BT system, financial institutions can enjoy a

great deal of efficiency as all the transactions occur directly from one party to the other (Garg et

al., 2021). Thus, BT is quickly transforming the way banks and other financial institutions are

providing services to their customers today.

As a result of high levels of transparency in internet transactions, the BT technology

allows for quicker detection of any fraudulent operations of activities. This implies that any fraud

that has been experienced within the open-source ledger of BT can never go unrealized, which

helps in protecting the companies from fraudulent actors. Besides, the use of a BT token helps in

the excellent representation of any invaluable piece of data including the identity of the IoT

device, precise instructions for a certain algorithm, original data concerning a patent, products

others. The use of BT has quickly eliminated the need for using middlemen or brokers in any
financial transaction, which aids in limiting the costs and improving the efficiency levels of such

systems (Ølnes et al., 2017). Lastly, the deployment of BT in the financial sector allows for

increased margins of financial privacy implying that data on economic ownership will be more

confidential and private. No person will be able to access the details of the financial holding of

another person by avoiding data leakages as well as hacking.

Accountants Concerns Regarding BT

The main disadvantage of utilizing the BT solutions in accounting is that it is a poorly

distributed computing system. Blockchain network relies on nodes for proper functioning and the

quality of these nodes determine its quality (Garg et al., 2021). For instance, Bitcoin's BT is

sturdy and props the nodes to quickly participate within the network but the same is not true for

the BT network that fails to incentivize its nodes. This implies that BT is not a well-distributed

computing system as the network does not rely on the engagement of the nodes (Swan, 2017). It

is imperative to understand that a well-distributed system ensures that they approve the

transaction based on the rules, record them, and ensure the history of the deal is kept. The

scalability of the BT network also remains a major issue for this solution as opposed to its

centralized counterpart systems (Garg et al., 2021). However, there has been a quick change in

the way BT systems operate, and with the appropriate evolution of this technology, scalability

alternatives are being included within the Bitcoin network at large. The solution to the scalability

concern is to conduct the transaction using off-blockchain and only utilize the technology for

storage of essential data and to quickly access it (Ølnes et al., 2017). While the proposed

solutions might not be matched with centralized systems, a comparison between VISA and

Bitcoin shows that the latter only allows for less than five transactions per second while the other

permits over one thousand seven hundred transactions every second.

(Chang et al., 2019). BT was first introduced with Bitcoin and leverages the Proof-of-Work

contractual algorithm that depends heavily on the efforts of miners to achieve its set targets. The

miners are motivated to solve challenging arithmetic problems and the high energy intake is what

makes these taxing mathematical issues not viable or worth applying in real-world scenarios

(Swan, 2017). It is worth understanding that every moment the ledger is updated with a fresh

transaction, the miners are required to solve math-based problems which consume a significant

amount of time and energy that some accountants perceive as its key shortcoming. Data

immutability is also another limitation of the BT system as the system cannot go back once a

certain operation has been completed and this brings about privacy concerns in accounting as

these professionals seek to use a system that grants them more opportunities to eliminate their

history at will and secure their privacy. Thus, these problems are best solved by conducting

further research studies to help improve the stability of the system and ensure it offers more

benefits as opposed to losses.

Conclusion

While myths are painting BT as an ineffective system, this technology is quickly

transforming the way companies are delivering financial services to their clients in a more secure

and fraud-free environment. By using a decentralized network, BT has eliminated the need for

brokers and thus lowered the number of income generated by the business. While the

decentralized system helps in ensuring increased levels of privacy, affordability of the system,

and management of fraud-based issues, it is making it hard for the technology to be applied in

accounting as it is poorly distributed and has scalability issues. Thus, further research is required
to help find lasting solutions to these concerns and ensure that financial organizations can

optimally gain from the BT solutions.

CGMA, C. (2018). Blockchain augmented audit–Benefits and challenges for accounting

professionals. The Journal of Theoretical Accounting Research, 14(1), 117-137.

Chang, S. E., Chen, Y. C., & Lu, M. F. (2019). Supply chain re-engineering using blockchain

technology: A case of the smart contract-based tracking process. Technological

Forecasting and Social Change, 144, 1-11.

https://doi.org/10.1016/j.techfore.2019.03.015.

Garg, P., Gupta, B., Chauhan, A. K., Sivarajah, U., Gupta, S., & Modgil, S. (2021). Measuring

the perceived benefits of implementing blockchain technology in the banking

sector. Technological Forecasting and Social Change, 163, 120407.

https://doi.org/10.1016/j.techfore.2020.120407.

Iredaleon, G. (2017). Top disadvantages of Blockchain technology. Retrieved from

https://101blockchains.com/disadvantages-of-blockchain/

Ølnes, S., Ubacht, J., & Janssen, M. (2017). Blockchain in Government: Benefits and

implications of distributed ledger technology for information sharing.

https://doi.org/10.1016/j.giq.2017.09.007.

Swan, M. (2017). Anticipating the economic benefits of blockchain. Technology innovation

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https://www.timreview.ca/sites/default/files/Issue_PDF/TIMReview_October2017.pdf#p

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