ACCT6007 Report: Blockchain Technology and Accounting Trends

This report provides a critical analysis of blockchain technology's impact on accounting and assurance, based on the academic article by Dai and Vasarhelyi (2017). It explores the three phases of blockchain development, emphasizing its evolution from cryptocurrency to broader applications like smart contracts and triple-entry accounting. The report discusses the arguments for blockchain technology, highlighting its security, transparency, and potential to revolutionize financial processes. It also addresses the problems associated with blockchain, such as pseudonymous nature and complexity, and examines its implications for both financial and non-financial sectors. The analysis includes a review of the triple-entry accounting system, smart contracts, and the technology's potential to enhance efficiency and security in financial systems, while also acknowledging the challenges of governmental regulations and public understanding. The report concludes by emphasizing the transformative potential of blockchain and its continued growth in various sectors.

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Table of Contents
Three Phases of Blockchain Technology........................................................................................2
Triple Entry Accounting..................................................................................................................3
Arguments for Blockchain Technology...........................................................................................4
Problems Associated with Blockchain technology..........................................................................5
Reference.........................................................................................................................................7

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Three Phases of Blockchain Technology
Blockchain technology is the recent development in the field of accounting and the same
has significantly grown over the years. It can be considered as a new form of database which can
be used either as an accounting module to the ERP system which is used or can be used in
conjunction with any other accounting information system (Crosby et al. 2016). The blockchain
technology has undergone significant changes since the idea was conceived and implemented by
Nakamoto (2008). The bitcoin technology initially provided a medium for a digital currency
system which was easily available to the public. In such a process, the bitcoin technology
provided new kind of database for recording transactions which was done as the transactions was
recorded in blocks.
It was in 2009 that rapid development took place in the new technology of bitcoin and the
blockchain technology developed into three phases which was blockchain 1.0, 2.0 and 3.0.
Blockchain 1.0 mainly focused on trading of cryptocurrency and using the same as a smart
medium of exchange. The development of Blockchain 1.0 opened the doors to digital money
transfer, remittance and several other facilities which can be referred to as internet of money. In
the blockchain 2.0, the main functions which was performed was similar to blockchain 1.0 which
was making use of the digital currency for trade (Pilkington 2016). However, the scale in which
blockchain 2.0 operated was much broader in nature as the same usually operated with derivates,
digital asset ownership, smart property ownership. In order to expand the usage of the
technology in various areas a form of application was developed which was known as smart
contracts and the same facilitated trade at a much broader scale than before. These smart
contracts were extensively used in the second generation and can be described as computer

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programs which was used on blockchains to verify, enforce, and execute the terms in contracts
(Zheng et al. 2017). The smart contracts could also be used for encoding terms of contract and
also executing tasks as per the requirement of the contract. The extensive use of such smart
contracts resulted in increase in complexity and automation of such smart contracts (Biswas and
Muthukkumarasamy 2016). In addition to this, research is being conducted on the future
application of the blockchain 2.0 and some of the application which can be made possible are
peer-to-peer ridesharing to self-issuing bonds or crowdfunding.
Blockchain 3.0 further enhanced the level and application of the technology which was
beyond business of financial applications. Some of the uses of Blockchain 3.0 was voting
system, cloud storage, attestation services, or even government administration. Further more the
technology was further developed as blockchain could be used in sensors, Radio-Frequency
IDentification (RFID) tags and mobile communications. Therefore, the three-phase development
of the blockchain technology has provided lot of promise and application of the same can bring
about advancement of societies towards a more automated, flexible and efficient society. It is
further anticipated that the blockchain technology would be further growing in future and
thereby contribute more towards the society.
Triple Entry Accounting
The accounting transactions of a business were initially recorded following single-entry
system which required businesses to maintain the books of accounts where each of the
transaction was recorded in one single account. However, the process had lot of problems and it
was susceptible to errors and fraud. Improvement in the accounting process was made in the
form of double entry system which provided the benefit of entering transactions twice and

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thereby also checking whether the transaction is correct or not. The accuracy of the financial
records even in such a system was considered by the auditors of the company (Beck et al. 2017).
The triple entry system is a recent development which was introduced for the purpose of
improving the quality of the financial statements which is prepared by a business. The process of
triple entry system required processing o transactions, authorization which needs to be provided
by a neutral party and a creation of records for the transaction (Meng et al. 2018). This process
resulted in generation of three entries in total which made the accounting process much more
secure. The intermediary party which would be verifying the transactions need to be independent
and reliable so that verification of the same is appropriately done.
There are certain risks which is faced by this process as well which are loss of records
due to cyber theft or malfunction of the computers. The triple accounting system can be made
more secure with the help of blockchain technology as the technology can act as an intermediary
for recording and verifying the transactions of a business and also ensuring that the same are
properly stored. The accounting record which is added in the blockchain technology cannot be
destroyed or damaged or even altered which means it provides security (Seebacher and Schüritz
2017). The triple entry system of accounting would be much better but the same is still in its
development phase.
Arguments for Blockchain Technology
The blockchain technology is considered to be the future due to the various options and
applications which the same provides along with the usage of the same as digital currency. The
application of the blockchain in terms of digital currency is immense and the major aspect of this
technology is that it provides safety and security from any sort of alteration of data or

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cybercrime. In addition to this, the digital assets and privacy of the parties which are involved are
considered by the development of blockchain technology (Treleaven, Brown and Yang 2017). In
addition to this, many researches also establish the widespread application of both in financial
fields and non-financial fields.
The journal article which is considered effectively points out the various phases of
development of the blockchain technology and the application of the same in different fields. In
addition to this, the blockchain technology can also be used in relation of the triple entry
accounting system and also ensures that proper security is maintained in the accounting records
which is maintained by different businesses (Cocco, Pinna and Marchesi 2017). The journal
further points out the different risks which is covered by the new blockchain technology and how
the same would be affecting the future generation to further develop efficiency in the work
process. The blockchain technology has not only implications in the financial sectors but also
has an impact on the non-financial sectors. An example can be given of the music industry which
has undergone significant growth due to the availability of internet as a medium of distribution.
However, one major problem which has arisen is related to the complexity which is associated
with royalty payments between the musician and the directors. This problem ca be effectively
solved with the help of Blockchain technology and further enhance the distribution system of the
music. Therefore, the discussion shows that blockchain technology effectively contributes not
only to the financial sectors but also to the non-financial sectors in a society (Scott 2016).
Problems Associated with Blockchain technology
The blockchain technology is no doubt ground breaking development for the future and
has widespread applications which effectively contributes to all the needs of the professions.

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However, there are certain risks which are associated with the technology which also needs to be
considered while making judgements regarding the technology (Wang et al. 2017). The
blockchain technology has a pseudonymous nature and it also provides ease in moving valuable,
therefore if in the wrong hands, it can be used for fraudulent activities. Some of the major
activities would be money tariffing. This would be happening in the sphere of accounting as well
if proper monitoring and supervision facilities are not implemented by the management of the
company.
In addition to the chances of fraud affecting the technology, there are various other
factors which can affect the effectiveness of the technology such as governmental regulations.
Due to the various applications of blockchain technology and also the introduction of the phase
3.0, governmental regulations are bound to be introduced which would be affecting the
effectiveness of the system if too rigid regulation is introduced (Gabison 2016). In addition to
this, one of the major challenges which is related to the blockchain technology is that the system
is quite complex and therefore, it would take a long period for the people to get used to the
technology which is associated with the blockchain. In simple words, most of the people do not
understand the concept of blockchain and digital currency which can affect the effectiveness of
the system.
Therefore, the discussion above shows that there are certain problems which is associated
with the blockchain technology which can be overcome in future. The future of blockchain looks
bright due to the various applications of the same and the development of the three phases of
blockchain technology.

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Reference
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information systems research.
Biswas, K. and Muthukkumarasamy, V., 2016, December. Securing smart cities using
blockchain technology. In 2016 IEEE 18th international conference on high performance
computing and communications; IEEE 14th international conference on smart city; IEEE 2nd
international conference on data science and systems (HPCC/SmartCity/DSS) (pp. 1392-1393).
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Cocco, L., Pinna, A. and Marchesi, M., 2017. Banking on blockchain: Costs savings thanks to
the blockchain technology. Future Internet, 9(3), p.25.
Crosby, M., Pattanayak, P., Verma, S. and Kalyanaraman, V., 2016. Blockchain technology:
Beyond bitcoin. Applied Innovation, 2(6-10), p.71.
Gabison, G., 2016. Policy considerations for the blockchain technology public and private
applications. SMU Sci. & Tech. L. Rev., 19, p.327.
Meng, W., Tischhauser, E.W., Wang, Q., Wang, Y. and Han, J., 2018. When intrusion detection
meets blockchain technology: a review. Ieee Access, 6, pp.10179-10188.
Pilkington, M., 2016. 11 Blockchain technology: principles and applications. Research
handbook on digital transformations, 225.

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Scott, B., 2016. How can cryptocurrency and blockchain technology Play a role in building
social and solidarity finance?(No. 2016-1). UNRISD Working Paper.
Seebacher, S. and Schüritz, R., 2017, May. Blockchain technology as an enabler of service
systems: A structured literature review. In International Conference on Exploring Services
Science (pp. 12-23). Springer, Cham.
Treleaven, P., Brown, R.G. and Yang, D., 2017. Blockchain technology in
finance. Computer, 50(9), pp.14-17.
Wang, J., Wu, P., Wang, X. and Shou, W., 2017. The outlook of blockchain technology for
construction engineering management. Frontiers of engineering management, 4(1), pp.67-75.
Zheng, Z., Xie, S., Dai, H., Chen, X. and Wang, H., 2017, June. An overview of blockchain
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Big Data (BigData Congress) (pp. 557-564). IEEE.

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