Blockchain Technology: Benefits and Drawbacks in Accounting

This report provides a comprehensive overview of blockchain technology, explaining its core concepts, such as distributed ledger technology (DLT), public key encryption, and decentralized consensus. It explores how blockchain can benefit accountants through improved efficiency, reduced errors, fraud reduction, regulatory compliance, and enhanced auditing processes. The report also addresses the challenges of blockchain adoption, including software compatibility issues and the need for accountants to adapt to new methods. The study emphasizes the key advantages of blockchain for the accounting profession, such as immutability and transparency. The report concludes by highlighting the significant benefits blockchain offers to the accounting profession, making records easily accessible and utilizing smart contracts to accommodate different rules.

Running head: UNDERSTANDING BLOCKCHAIN TECHNOLOGY
Understanding Blockchain technology
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1UNDERSTANDING BLOCKCHAIN TECHNOLOGY
Discussion on the blockchain, its usefulness for accountants and drawbacks:
Blockchain technology commonly indicates to the trustless, transparent and publicly
accessible ledger permitting to transfer ownership of various value units securely. This is done with
the public key encryption and different proof of work methods. It utilizes the decentralized
consensus for maintaining the network. This indicates that it is never centrally maintained by
government, corporation and bank. Higher the system develops and turns more decentralized, it
becomes more secured (Dai and Vasarhelyi 2017). The following study evaluates the understanding
from research on the idea of blockchain technology. The concept is described in details. Further, the
way it can be useful for the accountants is demonstrated. Lastly, the issues of this new technology
are analysed.
Concept of blockchain:
Blockchain is sometimes known as DLT or Distributed Ledger Technology. This makes the
history of a digital asset to be transparent and unalterable with the usage of cryptographic and
decentralized hashing. The analogy of Google Doc can be taken to understand the concept. As one
create the document and then share that with some people, the document gets distributed rather than
transferred or copied. It generates the decentralized chain of distribution, providing everybody to
access the document simultaneously (Li et al. 2017). Here, none has been locked out anticipating
changes from others. Again, the other modifications to that document could be recorded in the real-
time that makes the changes totally transparent. Obviously, the blockchain is more complicated than
Google Doc. Nonetheless, the analogy is apt since this highlights the three critical concepts of
innovation.
 Firstly, digital assets have been distributed rather than transferred or copied.

2UNDERSTANDING BLOCKCHAIN TECHNOLOGY
 Secondly, the asset is decentralized, permitting total real-time access.
 Thirdly, the transparent ledger of the changes is able to preserve the document’s integrity that
generates the trust within the asset. As the block keeps the new data, it is included in the
blockchain.
As per the suggestion of the name, multiple blocks are strung together. The block to be added to
the blockchain the following things might occur. Firstly, the transaction must take place. For
instance in the case of Impulsive purchase of Amazon after hastily making the click-through
numerous checkout prompt, one might go against the effective judgment and continue with the
purchase (Notheisen, Cholewa and Shanmugam 2017). Those transactions should be verified. As the
purchase is made, the transaction should get verified. Having the other public records of data, such
as the local library, Securities Exchange Commission, there is somebody to be in charge of
scrutinizing the new data entries. However, with the blockchain, the task is left up to the computer
networks. As one purchase from the Amazon, the computer networks can rush to check the
transaction occurred in the way it is asked to be done. Thus they can confirm the purchase details
that involves the dollar amount, participants and time. The transaction should be stored in a block
and as the transaction is verified to be accurate, a green light is received (Ma et al. 2017). The dollar
amount of transaction, digital signature and the digital signature of Amazon get stored with the
block. At this lace, the transaction must likely join plenty of others like that. This block should be
provided with the hash. As all the transaction of bock is verified, this must be provided with an
identifying and unique code known as a hash. This block is also equipped with the hash of the recent
block included a blockchain. As it is hashed, the block could be included in the blockchain (De
Filippi 2017).

3UNDERSTANDING BLOCKCHAIN TECHNOLOGY
Ways it is helpful to accountants:
Firstly, it helps with improved efficiency with well-designed, powerful and fast databases. It
reduces errors as the greatest scope for failure is on data entry. It helps in easier reconciliation and
cost reduction. Then decrease the fraud and the immutability makes that highly complicated to
perpetrate the fraud through that platform. Apart from that, it has improved regulatory compliance
and reduced auditing. Above all, the inherent traceability developed to blockchain makes the
auditing easy and fast (Wüst and Gervais 2018).
Problems due to the technology:
In technical terms, maximum of accounting software is never seen to be compatible with the
technology. Hence, as one is ready to put the accounting for over the technology, the software
possibly might not be interested in playing along. Here, the adoption never needs the purchasing of
cloud-based services of accounting as they are there and probably hiring the blockchain developer
for creating custom user interfaces for the company. More and more the platforms are emerging to
fulfil the new market, the cost-efficient solutions must decrease the necessity for the blockchains that
are custom-designed (Xu, Weber and Staples 2019). Further, the non-technical effect would be
reduced the prolonged viability for the accounting firms that make a long wait in embracing DLT
technology. Indeed, the solutions of enterprise-ready blockchain for the accounting sector are never
available readily. This excuse must evaporate as the investors and innovators move to satisfy the
emerging market. Moreover, the disruption is out to happen. Here the abilities of the technology of
distributed ledger must be inevitably forcing the accountants to alter the method of how they
function and the ways one can never foresee (Abdellatif and Brousmiche 2018). However, the roles
or duties that the accountants should abandon due to the blockchain possibly include the error and
inefficient to the process somehow.

4UNDERSTANDING BLOCKCHAIN TECHNOLOGY
Though blockchain innovation is generated to serve as the backbone for the Bitcoin
cryptocurrency network and has implantation around a broad spectrum of sectors. Here, the bottom
line regarding the reason why the accountants must be caring about blockchain is the reason that it
delivers a couple of benefits that are vital for the accounting profession. These are immutability and
transparency. This is of tremendous benefit to the integrity of the accounting business that the record
can be simply accessible to the authorized persons. There are different rules that are governing how
the licensed entities can access the economic documents and the blockchain utilizes the smart
contracts for accommodating those rules. In the moment more on smart contracts, one should be
aware that transparent never indicate the security lack.

5UNDERSTANDING BLOCKCHAIN TECHNOLOGY
References:
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on users and blockchain behaviors models. In 2018 9th IFIP International Conference on New
Technologies, Mobility and Security (NTMS) (pp. 1-5). IEEE.
Dai, J. and Vasarhelyi, M.A., 2017. Toward blockchain-based accounting and assurance. Journal of
Information Systems, 31(3), pp.5-21.
De Filippi, P., 2017. What blockchain means for the sharing economy. Harvard Business Review,
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Li, X., Jiang, P., Chen, T., Luo, X. and Wen, Q., 2017. A survey on the security of blockchain
systems. Future Generation Computer Systems.
Ma, S., Deng, Y., He, D., Zhang, J. and Xie, X., 2017. An Efficient NIZK Scheme for Privacy-
Preserving Transactions over Account-Model Blockchain. IACR Cryptology ePrint Archive, 2017,
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Notheisen, B., Cholewa, J.B. and Shanmugam, A.P., 2017. Trading real-world assets on blockchain.
Business & Information Systems Engineering, 59(6), pp.425-440.
Wüst, K. and Gervais, A., 2018, June. Do you need a Blockchain?. In 2018 Crypto Valley
Conference on Blockchain Technology (CVCBT) (pp. 45-54). IEEE.
Xu, X., Weber, I. and Staples, M., 2019. Blockchain Patterns. In Architecture for Blockchain
Applications (pp. 113-148). Springer, Cham.